Just when you think Congress can%u2019t possibly be more destructive, the Members surprise you again. Their latest doozy is a backdoor windfall profits tax on oil companies that was stuffed into the Senate budget reconciliation before Thanksgiving.
[...] A windfall profits tax is the ultimate act of economic masochism because it taxes only domestic production, while imports and foreign oil subsidiaries bear almost none of the cost. But wait, this time it%u2019s worse. [...] The Senate bill would require the companies to revalue their inventories by $18.75 a barrel%u2014an arbitrary number if there ever was one. In effect, this means that Congress is creating the illusion of higher oil profits, and thus raising the tax liability of oil companies by an estimated $5 billion next year. This would be on top of the 35% tax rate they already pay on their actual profits.
[...] Senators want to create phony corporate profits, so they can grab them to spend. [...] What%u2019s even more reprehensible about this revenue grab is its retroactive nature. In a sense this is less a tax than it is an ex post facto confiscation of private property.
Like I've been saying all along, this push for "windfall profits" taxation is nothing but a stone meant to kill two birds cast by a bunch of big-state, tax-and-spend politicians (North Dakota's own Byron Dorgan and Kent Conrad, to a lesser extent, chief among them).
The first "bird" to be killed is a public opinion bird. None of us like high gas prices, so these politicians can posture and make it look like they're "doing something" to help us out. Its political pandering at its worst, and it won't work because higher tax burden on oil companies will only translate into higher costs for citizens.
The second "bird" is a money bird. Windfall profit taxes means more income for our government to spend. Sure they say they'll redistribute it back to Americans, but how long do you think that will last? Our politicians have proved themselves, time and again, incapable to resist the temptation of spending our tax dollars even when those dollars are earmarked for something else. You know, like all those hundreds of millions that have been taken out of the Social Security trust fund for expenditure the pet projects of various congressmen?
Americans need to worry any time our legislators start talking about new taxes. Regardless of who is to be the target of the tax, we all end up paying it. This talk of taxing "excess profits" is no exception. Americans pay enough in taxes, Congress needs to leave the oil industry alone.