President Bush said Friday that taxing enormous oil industry profits is not the way to calm Americans’ anxieties about pain at the gas pump. This should send the McChimpyHalliburtonBushCo crowd into its normal feeding frenzy of bluster and bloviating. And LIES!
Just such a plan was introduced by Sen. Byron Dorgan [D-ND] last year and matches H.R. 4203 introduced By Rep. Rosa DeLauro [D-CT]. It’s purpose was to amend the Internal Revenue Code of 1986 to impose a temporary windfall profit tax on crude oil and to rebate the tax collected back to the American consumer, and for other purposes.
Cosponsors of the Senate bill are Sen. Barbara Boxer [D-CA], Sen. Christopher Dodd [D-CT], Sen. Herbert Kohl [D-WI], Sen. Patrick Leahy [D-VT], Sen. Joseph Lieberman [D-CT], Sen. John Reed [D-RI], Sen. Harry Reid [D-NV] The bill still sits in committee.
Not unsurprisingly all are from the tax and spend Democratic Party. And note the “and for other purposes” ref above. Can you spell PORK!
As a response to this bill a study was conducted by Dr. Robert Shapiro and Dr. Nam Pham.
Dr. Shapiro is chairman of Sonecon and former Undersecretary of Commerce under President Bill Clinton. Dr. Pham is an economic consultant to NDP Group and former Chief Economist of the Asia Region for Standard & Poor’s.
The picture they paint isn’t rosy. They looked at the bills potential over a five year period if it were enacted. Here are some of the findings.
The tax will cost pension and retirement savings holdings an average of $8.7 billion to $50 billion per year in foregone gains and dividends depending on the price of oil.
Individual accounts could lose as much as $287 per year. Pension accounts for public state and local employees could lose as much as $886 per year.
The data in this study shows that a substantial share of the cost of a Windfall Profits Tax would be borne by retirees and those saving for retirement. This paper is the first to break down the economic impact and the conclusions are not good. Drs. Shapiro and Pham argue that:
“This analysis demonstrates that a windfall profits tax on US domestic oil companies would have a series of unexpected or adverse effects… revenues would be offset by reduced corporate income revenues…(the windfall profits tax will) reduce domestic oil production by an average of 100 million barrels per year.
The entire report can be read here.
And BTW they also looked at the results of the Crude Oil Windfall Profit Tax Act of 1980. To say it was ineffective and a boondoggle of the first order is a vast under statement.
The record of the Crude Oil Windfall Profit Tax Act of 1980, which applied a special tax on U.S. oil producers from 1980 to 1988, provides a guide for measuring the likely impact of a similar tax today. As with current proposals, the 1980 Act applied a new excise tax to the difference between the world market price of oil and a 1979 base price, adjusted annually for inflation.
The 1980 Act generated less than $40 billion in net revenues from 1980 to 1988, a fraction of the original projection of $279 billion (Table 1, below). (9) Several factors explain this result. First, windfall profit taxes paid were deductible under the corporate income tax, reducing the additional revenues collected from oil companies by about half.
Second, the new tax reduced U.S. domestic oil production by an estimated 3 percent to 6 percent, further reducing the foregone revenues as well as increasing U.S. oil imports by 8 percent to 16 percent. (10) The tax also generated much less revenue than originally projected, because oil prices in 1981-1988 were significantly lower than projected in 1980.
Note the section in boldface. The new bill by Sen. Byron Dorgan doesn’t close that loophole.
Sorry… Bush is correct. A windfall tax is nonsense.