I really wanted to say Moron in the title. How great is the Internet? Some random guy living in a fly-over state can call a syndicated columnist a moron on a medium that most everyone in America can read.
PowerLine linked to a Kinsley article on taxing excessive oil pofits. I really didn't believe some of their comments. I mean the article couldn't be that bad could it?
Boy, was I ever wrong! This thing is nuts. Where to start.
This hunt for a smoking gun misses the point. Taxes are not a form of punishment. And you don't need to find wrongdoing to justify a special tax on their profits.
Taxes can be a form of punishment if they're used that way. Liquor and tobacco taxes are commonly called sin taxes. Why are the taxes on these products higher than on other products if not to punish the people who use them and produce them?
Ordinarily, and wisely, the U.S. government doesn't try to guess what is or is not a reasonable profit and doesn't try to tax away profit that is unreasonable. As a general principle, the government tries to tax all business profits at a rate that will produce enough revenue to help cover the cost of government without unduly destroying the incentive to produce. Under Republican administrations, the government usually goes further and gives business a bunch of absurd tax breaks. The oil industry has been a special pet over the years.
I like the absurd tax breaks quote. I'm still looking for a list of tax breaks. I wonder how many new refinerys have been built in America over the last few years. The articles I've read say none because of tax and environmental issues. I haven't found the raw data yet to post though. And notice the assumption that all Republican tax breaks are absurd.
Ordinarily, we shouldn't want the government to decide when profits become "excess." But the case of huge profits from the run-up in oil prices is different for two reasons. First, it is unusually clear that these profits have nothing to do with productivity. Diverting them to the U.S. Treasury would have no effect on the incentive to extract more oil from American ground. Second, some or all of these profits are directly related to a situation that is imposing huge sacrifices—financial and otherwise—from others; that is, the Iraq war.
I wonder how you define excess profits? Are Google's profits excessive? Should we create a government agency to monitor profits? If the profit comes from increased demand rather then increased productivity then you don't get taxed. When 3M invented the Post-It Note they created an entirely new product. Their profits didn't come from increased productivity they came from creating demand where none existed. Should they be taxed on their excess profits?
But that's not the stupidest arguement in that paragraph. It's this whopper: "Diverting them to the U.S. Treasury would have no effect on the incentive to extract more oil from American ground." Does he really believe that? Does he really believe that reducing the profits a business can make on an activity will have no effect on how much they invest in the activity?
Because of the war, the government is adding hundreds of billions of dollars to the burden of debt that all taxpayers, including other businesses, will have to pay off. Because of the war, American soldiers by the hundreds, and Iraqis by the thousands, are paying the ultimate tax of death by government policy. And because of the war, American oil companies are raking in extra billions of dollars of profits.
I think he just put this quote in here so he could rail against the war. I'd like to see an honest analysis of exactly how much the Iraqi war increased oil profits compared to increased Chinese demand, overall Middle East instability, Venzualen instabilty, etc.
The oil companies, like other big corporations, are mostly owned by ordinary citizens, either directly or through mutual and retirement funds. Presumably some of them support the war and others don't. Do any of these shareholders, pro-war or anti-war, want to pocket $45 billion (or whatever number you choose) from a war that is costing others so much?
Yes! I do! I did actually. I bought some energy related mutual funds and did quite well for myself thank you very much. He did hit on a key truth here. If you tax the oil companies you are really taxing the people that own their stock. You're really punishing people that have retirement account that own energy companies.
I'm not sure if he wants higher gas prices or lower gas prices. I am pretty sure he hates oil companies though. And he wouldn't make a good economist.