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Tuesday, June 10, 2008

The Windfall Profits Tax: The New Class Warfare

A while back I wrote about how the Democrats have mastered the art of class warfare. In their latest installment comes the windfall profits tax on oil companies.

With gasoline prices topping $4 a gallon, Senate Democrats want the government to grab some of the billions of dollars in profits being taken in by the major oil companies.

Senators were to vote Tuesday on whether to consider a windfall profits tax against the five largest U.S. oil companies and rescind $17 billion in tax breaks the companiesexpect to enjoy over the next decade.

I am no fan of the oil companies but I am even less of a fan of taxes, especially punitive taxes. A so called windfall profits tax is frankly nothing less than fascist. Furthermore, such a tax is not only non productive but likely counter productive. Most companies treat taxes like any other expenses. Raise their taxes and they pass that increase in expenses onto their consumers. Such a tax would almost certainly produce even higher oil prices.

Some of the quotes I have found are just stunning.

The oil companies need to know that there is a limit on how much profit they can take in this economy," said Sen. Richard Durbin of Illinois, the Senate's No. 2 Democrat, warning that if energy prices are not reined in "we're going to find ourselves in a deep recession."

Last I checked we live in a country that still values CAPITALISM not SOCIALISM or COMMUNISM. Last I checked, the object of any business, oil companies included, is to maximize profits. That isn't the way my Senator, Dick Durbin, sees it. He thinks they are making too much money.

Now, I have long supposed that oil companies are not competing in a market but rather in an oligopoly. As such, I find their profits obscene, however a windfall profits tax does absolutely nothing to change the dynamic of the corrupted sphere they occupy. Rather, what this does is make a political statement.

The Democrats want to wholly put themselves on the side of the middle class that is struggling to pay for ever rising fuel costs. They want to stick it to the oil companies and say to the middle class

see we are with you and against those greedy SOB's

While that may even work as a political statement, what it really says is that the Democratic party is bankrupt of substantive ideas. Political statements are all well and good but they solve absolutely NO problems. While the Democrats try and punish the oil companies for making too much money, they also refuse to allow drilling in ANWR and several other places loaded with untapped oil. They get into bed with enviromentalist to stop building new refineries and limit the production of nuclear energy. All of these would be tangible steps toward reducing the price of gas in the short term, and making our country energy independent in the long term.

Rather than doing the difficult work of standing up to one of their constituencies, the environmentalists, to make tangible progress on an issue that is now not only economic but a matter of national security, the Democrats have decided to engage in one of the oldest political stunts, class warfare.

The Republicans, for their part, are against this travesty. Mitch McConnell even pointed out its futility in the seventies when Carter tried it. They have also pushed drilling all around this country for untapped oil. On the other hand, the Republicans have been protecting the oil companies like they are relatives. While a small group of companies continues to consistently make obscene amounts of money all at the same time with absolutely no price war, no one in Congress asks any serious questions or does any serious investigations. That would require real work, and it would require challenging serious donor constituencies.

This latest stunt is a prime example of why, America, the lone superpower continues to treat oil like crack rock while Brazil, a third world nation, has become nearly energy independent.


Anonymous said...

Yes, I am worried for our country when the government starts trying to determine what a reasonable profit is. They also don't take into account that exxon's profit margin is roughly only 11%. Then they give 20% of the 11% to shareholders. The price of gas stinks, but taxing companies and reducing supply isn't the way to lower the prices.

Anonymous said...

wmuaimsYou stated that the Windfall Profits Tax is "nothing less than fascist". Wrong! Fascism is when a government and big business are in bed together [kind of like what we have now]. When Corporate Fat Cats merge with their competition, squash their competition by their sheer size, or participate in rigged markets, I say to Hell with them! It is the Fat Cats and speculators who have declared class warfare on the Middle Class!

Anonymous said...

Brazil's energy status has more to do with its climate and place near the equator than with anything else. You cannot grow sugercane so well here in the United States. The climate, the soil and the amount of sunlight needed are just wrong.