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Monday, April 24, 2006

Son of the Windfall Profits Tax

The dinosaurs in the US Senate have predictably stumbled into the windfall profits tax tar pit. Many of it's members have been in congress since the last time this tax was used. They at least should know better, but they are politicians so the learning curve it quite steep. The last time this idea surfaced was in the Carter Administration. If it had any effect it was to deepen the crisis rather that relieve the price at the pump. Such ancient history is irrelevant when politicians see an opportunity to exploit an issue to gain a bump in the polls.

Sen. Arlen Specter fresh from his effort to give amnesty to illegal immigrants has jumped on the anti oil company band wagon. He laments the mergers of oil companies blaming the consolidation as the culprit behind the cost of fuel. He fails to mention the consolidation of oil companies happened when oil was $10 a barrel and oil companies were loosing money. He makes no mention of government's windfall profits in the form of taxes. Just counting the tax on gas at the pump government at all levels take 3 to 4 times the amount per gallon as tax than the oil companies do in profit. This is not taking into account the tax on oil rigs, transportation refining and the income tax on all the people working to do these things. Government gets a piece of the action every step of the process. You can bet the lowering of the tax rate on fuel will never see the light of day

Unhindered by the facts he and others in congress want to start waving the magic wand of regulation and require more use of ethanol. No matter that the infrastructure for producing and delivering large amounts of ethanol do not exist and forcing the use of it beforehand would just increase the cost at the pump. They can just blame the villain of choice at that time for their failures. Not so long ago special accommodations were made to people who bought hybrid automobiles. They got tax incentives, commuter lane exceptions and such, but when the tax revenues fell because of better fuel economy governments started looking to rescind of modify these exceptions. Any such offers coming out of congress now should be viewed with healthy skepticism.

The marketplace is an aggravating system because it is fluid. It is also very efficient at solving problems when properly regulated. Congress has a talent for regulating it to death. Or worse mandating specific outcomes. The only benefit that a windfall profits tax will produce is a windfall of tax money for politicians to throw away on their next vote buying scheme while we sit in gas lines

1 Comments:

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Anonymous brokengun said...

I recently learned that if one burns vegetable oil instead of on-road diesel fuel, the Commonwealth of Virginia demands that 16 cents per gallon be remitted to the State as tax.

8:10 PM  

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