Thursday, May 04, 2006

History Lesson - Windfall Profits Tax

Angry at high gas prices, Americans are currently considering a windfall profits tax on "greedy" oil companies. In a Los Angeles Times column, Jonathan Williams reminds us of what happened the last time this situation arose.

But lawmakers could benefit from a history lesson. The last time this country experimented with such a tax was the Crude Oil Windfall Profit Tax Act of 1980. According to a 1990 Congressional Research Service study, the tax depressed the domestic oil industry, increased foreign imports and raised only a tiny fraction of the revenue forecasted. It stunted domestic production of oil by 3% to 6% and created a surge in foreign imports, from 8% to 16%.

A windfall profits tax will make the problem of high gas prices worse. The tax will increase costs and will therefore reduce supply. Less gas at higher prices is not what American consumers want.

2 Comments:

Anonymous Kelly Walsh said...

I'm hoping that this recent history will ultimately save us from the short-sightedness of those in Congress. Hopefully these facts about the last windfall profit tax will keep us from making the same mistake again.

5/06/2006 10:41:00 PM  
Anonymous hocket said...

Amen to that! Big government already "makes" 40 cents on the dollar of pump price--they certainly shouldn't take more, especially when that cost would be passed on to the consumer!

5/07/2006 07:19:00 AM  

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