President Joe Biden is considering a windfall tax on oil and gas profits, presumably to fight inflation. It’s like pouring gasoline on a fire to extinguish it.
After weeks of rebuking energy companies for making money, the president is again floating a “windfall” tax on their corporate profits while at the same time blaming a spike in prices on Russia’s war in Ukraine. “Record profits today are not because they’re doing something new or innovative,” Biden said. “The profits are a windfall of war.”
t is a misguided populist trope, which, if enacted, would curtail innovation and exploration and have no impact on lowering fuel prices for consumers. Biden also warned that if companies don’t invest in America by increasing production and refining capacity, then “they’re going to pay a higher tax on their excess profits and face higher restrictions.”
Biden said the administration would “work with Congress to look at these options that are available to us and others,” without adding specifics. That alone signals that the president has no appreciation of history.
Faced with inflation, the Nixon administration dabbled with price controls and the Carter administration enacted excess profits taxes to the detriment of an economy wracked by high oil prices from the OPEC cartel’s oil embargo. Inflation in the late 1960s became stagflation when wages stalled and prices rose, and didn’t abate until the early 1980s. Those dalliances with windfall profit taxes, along with the Federal Reserve’s decision to hike interest rates, hit the economy with more body blows. Inflation declined but not before the nation endured two deep, back-to-back recessions in the early 1980s that brought unacceptably high unemployment rates with them.
Aside from the lack of a clear definition of excess, these windfall tax measures amount to a disguised corporate income tax for a particular segment of the economy. Essentially this is a tax on oil, either on the barrel or on corporate bottom lines. Production costs and oil imports would increase and domestic oil production would decrease. Is that what this nation needs?
Any proposal to tax energy company profits would require congressional passage, which is highly unlikely in the upcoming lame-duck Congress and even less likely in the next Congress if Republicans win the majority in the House.
It is impossible to see this proposal as anything other than naked populist clamor in the days before the midterms. After the president’s failed overture to Saudi Arabia to increase oil production, Biden cynically has picked the American oil companies as the new political foil.
Learn from past failures and don’t repeat them.
— The Dallas Morning News via TNS
