Just What is a “Windfall Profits Tax”?
August 5th, 2008 at 01:49am Mark Noonan
The Wall Street Journal wonders:
The “windfall profits” tax is back, with Barack Obama stumping again to apply it to a handful of big oil companies. Which raises a few questions: What is a “windfall” profit anyway? How does it differ from your everyday, run of the mill profit? Is it some absolute number, a matter of return on equity or sales — or does it merely depend on who earns it?
Enquiring entrepreneurs want to know. Unfortunately, Mr. Obama’s “emergency” plan, announced on Friday, doesn’t offer any clarity. To pay for “stimulus” checks of $1,000 for families and $500 for individuals, the Senator says government would take “a reasonable share” of oil company profits.
Mr. Obama didn’t bother to define “reasonable,” and neither did Dick Durbin, the second-ranking Senate Democrat, when he recently declared that “The oil companies need to know that there is a limit on how much profit they can take in this economy.” Really? This extraordinary redefinition of free-market success could use some parsing.
Take Exxon Mobil, which on Thursday reported the highest quarterly profit ever and is the main target of any “windfall” tax surcharge. Yet if its profits are at record highs, its tax bills are already at record highs too. Between 2003 and 2007, Exxon paid $64.7 billion in U.S. taxes, exceeding its after-tax U.S. earnings by more than $19 billion. That sounds like a government windfall to us, but perhaps we’re missing some Obama-Durbin business subtlety.
Why are Obama and his Democrats calling for a windfall profits tax on oil companies?
1. Because they still believe that class warfare works at the voting booth.
2. Because, quite honestly, they don’t know what else they should do.
Suppose Obama and his Democrats get their wish and soak Exxon for $100 billion. So what? By my rough calculation that works out to a figure equal to 3.33% of the annual Federal budget…and as that would be an increase of $35-odd billion, we’re really talking about increasing revenues by 1%…and that, of course, is to ignore the fact that if we tax away most of Exxon’s profits, we swiftly won’t have anymore Exxon profits to tax. As most, we’d realise about, say, $50 billion in additional revenue over a two or three year period. What is that supposed to accomplish? Especially as Exxon lays off workers and oil suppliers start to refuse to sell to America because they can make more profit selling elsewhere? As you stand in line to buy rationed gasoline in order to drive to the unemployment office, are you really going to feel better thinking that at least Obama “got” those greedy SOBs in Big Oil?
Keep in mind that I’m no fan of corporate America - after working for the past 7+ years in corporate America I can say with certainty that there’s nothing quite so contemptible as a large corporation…in fact, so bad are they that the only thing worse than Big Corporation is Big Government. Corporations at least produce some useful product or service - Big Government merely produces more government. Once I figure out a way to break up the large corporations without dislocating the economy, I’m on it for all I’m worth - but, meanwhile, the cretinous corporate behemoths are just part of the landscape (sort of like landfills on the otherwise pristine landscape of free market economics), and if you think they will behave in an irrationally self-destructive manner to please a President Obama, then you’ve got rocks in your head (they will, of course, continue to be irrationally self-destructive on their own hook, but that won’t help Obama and his Democrats).
The fairy tale world of Obama and his Democrats in on display here - they live in a world where Evil Corporations make life miserable for Little Workers and what is needed is Selfless Liberals to save the day. Thing is, you’re just as likely to find a pinhead on the production line as in the corporate boardroom - or in the Executive Branch of the United States government. People are people and a certain percentage of them, at any given time, are being complete boneheads (yes, yours truly, included). To assign to a class of people virtue or vice is as stupid as assigning to various skin colors certain advantages or disadvantages - we have to take things as they are and judge each person’s actions on the merits of their case. If a corporate boss is being a rapacious, greedy SOB, then we should point that out and work to thwart him - but because one creep is a CEO it doesn’t follow that all CEO’s are creeps. Nor should we think that being poor automatically means being virtuous - some poor people are poor because they are shiftless, ya know? Given this reality, the last thing we need is a bunch of liberals coming to save the day - by punishing corporations they will be taking a stripe off the good and the bad, and by pouring out funds on the poor indiscriminately they’ll be benefiting both the hard worker and the layabout.
Leave off schemes to tax corporations - it serves no useful purpose. Heck, any addtional taxation will just be passed on to the consumer, anyways in the form of lower wages, higher prices, lower employment or a combination of all three. Leave aside the nursery-room fairy tales from the Marxist-Leninist view of economics. Deal with things as they are - if you really want to do something to make oil companies less profitible, invest your efforts in finding larger sources of oil and alternatives to same. That will cut into Exxon’s profits more usefully than any windfall profits scheme, as well as doing something good for everyone.
Entry Filed under: Campaign 2008, Democrats, Economy, Energy Issues, Republicans
35 Comments
1. Danish Artist | August 5th, 2008 at 6:58 am
Windfall profits - a pile of money that is the sole property of the company and their stockholders who earned it, whereby the liberal party wants to steal it using the power of government for the wealth redistribution.
Speaking of stockholders, just who are they? At most 5% are the “officers”, other board members and executives of the company. The rest are the employees of the company and many participants in mutual retirement funds for police officers, fire fighters, teachers and thousands of other average Americans who participate in 401k plans at their work.
So liberals will be stealing from the fire fighters, police officers, teachers and other average Americans all in the name of FAIRNESS!
Just what we need more fairness created by the liberal party - another mortgage debacle in the making.
2. OhioOrrin | August 5th, 2008 at 11:21 am
exxon mobile outta buy all those Tbills our govt is selling to the chinese communists.
then exxon could truthfully say that they’re reinvesting profits for the walfare of our govt.
3. Magnum Serpentine | August 5th, 2008 at 12:39 pm
A Windfall Profits tax is needed to break the back of the greedy big wig oil. We have now seen that the disasterous george administration has brokered deals with big oil to raise the price of Gas to 4 bucks by the time he left office in 2009. What does big oil do with its’ profits? buy back stock so the company can become even more filthy rich.
Big greed big wig oil’s profits are higher than ever in this nation. They make more profit than half the other businesses.
Also on top of a Wind fall Profit tax, Price gouging criminal investigations need to be started. After they are started gas will plunge down to 1.30 a gallon similar to what they did when President Ronald Reagan mused about price gouging (never did it) but the mere fact that he was thinking about them was enough for big oil to cave in and lower gas prices. (After 1983 gas went down to where it would soon be 10 dollars a barrow you can thank President Ronald Reagan for that!)
A vote for McSame, is a vote for a third term for george.
PS if the republics are so interested in calling congress back into session, why did they block all the major energy bills in their continual obstruction feast.
4. Kahn | August 5th, 2008 at 12:58 pm
Magnum, break the back of big oil> That would mean no oil. You do get that right?
Why not start your own oil company? Looks like there’s money in it.
5. phnx | August 5th, 2008 at 1:03 pm
“A Windfall Profits tax is needed to break the back of the greedy big wig oil.” MS
Thanks for this bit of wisdom Magnum, it is just the logic that we would expect from a communist.
6. Rana Quijotesca | August 5th, 2008 at 1:08 pm
Oh MS… I’m going to have to side with the righties on this because, well, I know how economics work… All that is going to happen with a “windfall profits tax” is that the oil companies raise their prices to coincide with the increase of taxes. (Here’s a hint, corporations don’t pay taxes–consumers pay their taxes for them). As for their profits–that’s how supply and demand works for inelastic products. Mainly, people can’t reduce their consumption enough to offset higher prices, so the firms selling the product make bank. Sorry, that’s just how economics works.
Mark-
The tax would have to be absolutely monumental to tax the oil companies out of existence… Not enough balls exist on this planet for someone to pass taxes like that…
7. Brian (Boston) | August 5th, 2008 at 1:19 pm
I cringe every time I hear about windfall profit taxes.
8. Bull | August 5th, 2008 at 2:08 pm
MS, is the stupidest person i’ve ever come across in my life. i may not agree with the lefties on here but at least they come with some sort of argument. but MS…OMG!!!!!!
9. Eric T | August 5th, 2008 at 3:17 pm
Barack Obama supports imposing a windfall profits penalty on oil selling at or over $80 per barrel.
This is like throwing a boat anchor around the neck of American Oil companies. I think Exxon after its expenses and taxes made 8% profit.
The Obama plan is hostile to business, it will scare out investors and probably turn the company unprofitable. Because a new tax will increases the expense of getting product to consumers, it will very likely increase the costs that we pay at the pump. Obama says the tax will help American families but it will more likely hurt them along with the company that provides jobs, and stock performance that affects 401k and retirement plans of many Americans.
Obama should maybe try a windfall profit tax on pro-sports, entertainers, movie stars. This would not effect jobs and families struggling with high energy costs.
10. Eric T | August 5th, 2008 at 3:24 pm
Exxon Mobil paid $32.361 billion in taxes in the second quarter, which works out to $4,114 in taxes per second.
Exxon has got to be the pride of the U.S Treasury!!
11. Nevada Pundit | August 5th, 2008 at 3:30 pm
Wow with the exception of MS, who is our resident dissident (who says we don’t believe in quota’s :) ) everyone agrees. I just hope that Mark realizes with bulletproof arguments such as this he is really going to stymie the debate portion of this blog. I’m pretty sure that everyone here is not an economics major and yet all see, with the exception of the afore mentioned, that this windfall tax is not a reliable part of an energy plan. Common sense is common sense.
Now releasing the democrat friends in the audience from any further tie to the topic I would just like to say that this, once again, shows the inexperience of Obama. To date I still can not find one Obama policy that shows any prospect of being good for the country. Every economic, health care, and social security plan of his is based on taking from a select group of people and industry and spreading it to the poor via enlarged government programs. His energy policy is flawed as we have seen and more so than for just this reason. On foreign policy I will say little because I think all of us will agree it is mainly a partisan policy and would be beating a dead horse.
12. Eric T | August 5th, 2008 at 3:30 pm
32 billion in taxes
11 billion in profit
What if our paychecks looked like that, your check
$1,100 but $3,200 in taxes, it looks like for about every dollar they make the governments are getting three
13. Eric T | August 5th, 2008 at 3:44 pm
Ohio Orrin- #2
or they could bring some work to Ohio, and Michigan by some kind of joint venture with GM, Ford, Chrysler who can build anything with all these fab shops+ tool and die shops that are sitting empty from outsourcing. They could put these people to work building oil rigs for offshore drilling. It would be a great project, steel mills and railroads would get work out of it to.
14. Rasmus | August 5th, 2008 at 6:35 pm
I agree with MS
8 years ago all of you who are now sooooo anti Obama votet for someone who had sold his soul to the Oil industry. George W. Bush has been doing them way to many favors on the expense of alternative energy. I’m not saying you should close down Exxon but stop doing them favors when they don’t even need it. surely you can see that the way forward in the long run is solar, wind etc. otherwise how will you break your addiction?
8 years ago you all hated Gore and in the end you won
4 years after that it was Kerry who was the big nasty socialist and once again you won.
how did it turn out for you? are you happy?
Republicans have been holding the only map for too long now. You have taken 100 wrong turns in a row, tricked, manipulated, started 1 totally unnecessary war, trying to start another one, shown nothing but utter contempt for the environment, close to ruined your own economy and been arrogant about it the whole time. its time to hand over the map and let someone more responsible give it a try.
kind regards,
Rasmus
15. phnx | August 5th, 2008 at 7:35 pm
Rasmus, you must be confused, Obama voted for ‘the Bush/Cheney energy package. McCain voted against it. So Obama supported oil companies and McCain opposed them. Try educating yourself on US politics before you spout eurosocialist views.
16. Retired Spook | August 5th, 2008 at 7:51 pm
I agree with MS
Color me shocked, shocked I tell you!
surely you can see that the way forward in the long run is solar, wind etc. otherwise how will you break your addiction?
Yeah, I hear those solar and wind-powered cars and SUV’s are just flying off dealer’s lots.
8 years ago you all hated Gore and in the end you won
I didn’t know a single person who hated Algore. We just all thought he was a dumbass, and he hasn’t done a single thing in the last 8 years to alter that impression.
4 years after that it was Kerry who was the big nasty socialist
Not a socialist, just a gigolo who tried to run on a hollow military record, and kept saying things like “I voted for it before I voted against it”, and stressing that our foreign policies needed to pass a global test.
how did it turn out for you? are you happy?
Certainly happier than if Gore or Kerry had been elected, or was that a rhetorical question?
You have taken 100 wrong turns in a row,
A little hyperbole there, Ras, or do you have a comprehensive list?
shown nothing but utter contempt for the environment
Yeah, see, that’s the thing about us Republicans — we love breathing dirty air and drinking dirty water.
and been arrogant about it the whole time.
Aw, come on now, Obama has set a whole new standard for “arrogant.
its time to hand over the map and let someone more responsible give it a try.
Sorry but I just don’t have much confidence in Obama’s map-reading skills. Besides, his map contains too many left turns.
17. Eric T | August 5th, 2008 at 8:33 pm
Rasmus
“shown nothing but utter contempt for the environment”
Bush is actually very green, if we put a collection together of how much he has done for alternative energy, protecting wetlands ect… You would be amazed. Nixon created the EPA.
18. New Conservative | August 5th, 2008 at 8:38 pm
To a Democrat any tax is a good tax
http://thenewconservatives.blogspot.com/
19. FmrMarine | August 5th, 2008 at 9:47 pm
rasmus
you have been to the cotton gin to many times……go sober up before coming here making such nonsensical statements and showing your self to be a dumb ass…Semper Fi - bro!
20. Rasmus | August 6th, 2008 at 4:54 am
FmrMarine,
“you have been to the cotton gin to many times……go sober up before coming here making such nonsensical statements and showing your self to be a dumb ass…Semper Fi - bro!”
Your right bro….I’m like an open book to you….thank you for putting me in my place with your wisdom.
EricT,
“Bush is actually very green, if we put a collection together of how much he has done for alternative energy, protecting wetlands ect… You would be amazed. Nixon created the EPA.”
Would you please humor me with some more specifics about just how much Bush has done for alternative energy?
Retired Spook,
“Yeah, I hear those solar and wind-powered cars and SUV’s are just flying off dealer’s lots.”
No need to be deliberately stupid Spook. If the world had only ever be populated with people like you we would have never achieved anything. The technology is there, we just need to help it a bit the way we have been helping the oil industry. Would you like us to succeed or are you just per definition and nay sayer?
“I didn’t know a single person who hated Algore. We just all thought he was a dumbass, and he hasn’t done a single thing in the last 8 years to alter that impression”.
How can you think Gore is a dumbass and then think Bush is not? How exactly does that work? give me a bit of Spook logic.
“Not a socialist, just a gigolo who tried to run on a hollow military record, and kept saying things like “I voted for it before I voted against it”, and stressing that our foreign policies needed to pass a global test.”
You sound like one of those 30 second attack adds masterminded by Carl Rove. So Kerry’s military record was hollow? And I suppose Bush was better? Spook, at this point I’m beginning to think that you are actually just trying to be funny because surely you know this is BS.
“Certainly happier than if Gore or Kerry had been elected, or was that a rhetorical question?”
Spook, here’s a question for you: if you could choose to vote for either Gore, Kerry, Obama or Hillary….or you could choose to vote for Bush again, who would you vote for and who would be your second choice? (I would seriously like to know).
“A little hyperbole there, Ras, or do you have a comprehensive list?”
Didn’t you understand my Metaphor? The Bush administration has been suffering from fuckup-fatigue the last 8 years.
“Yeah, see, that’s the thing about us Republicans — we love breathing dirty air and drinking dirty water.”
Well Spook, you guys act like you don’t care at all. When I started voicing my humble opinion this blog (thank you Noonan) 2 years ago most of you we denying global warming. You were writing if off as a left wing conspiracy. Am I wrong?
“Aw, come on now, Obama has set a whole new standard for “arrogant.”
Black man acting like he knows better than you! Yes Spook, Obama should know his place right?
Phnx,
“Rasmus, you must be confused, Obama voted for ‘the Bush/Cheney energy package. McCain voted against it. So Obama supported oil companies and McCain opposed them. Try educating yourself on US politics before you spout eurosocialist views.”
First of all, which package are you referring to? So, I should try educating myself before I spout my eurosocialist views? You’re a funny guy Phnx. Does everything that’s slightly different to what you’re used to have to have anything to do with socialism? Has that word been beaten into your stupid head so much that you now think everyone who is different is a socialist? I think it is you who needs to educate yourself.”
kind regards,
Rasmus
21. Retired Spook | August 6th, 2008 at 8:23 am
I’ve got a busy morning, Rasmus, so I’ll try to briefly address your convoluted response.
Please link to information about solar and/or wind powered vehicles (or any other power technology) that’s estimated to represent more than a small fraction of the power for America’s cars, trucks and SUV’s in the foreseeable future.
You BDS is clouding the fact that, unlike Gore, Bush never flunked out of college and has an MBA from Harvard. MBA’s are not something Harvard hands out lightly, even to a Congressman’s son. Educate YOURSELF and look up “Harvard MBA”. Also Bush’s SAT’s were higher than Kerry’s and, unlike Kerry, Bush didn’t make his Military service the cornerstone of his campaign.
Global warming IS basically a left-wing conspiracy. If you followed the climate news closely, you’d know that it’s all starting to come unraveled.
Sorry, gotta run.
22. neocon | August 6th, 2008 at 8:59 am
Dear Rasmus,
You need to learn the first rule of holes. Eric T, phnx and Spook countered your rhetoric with specifics and you rebutted with more propaganda.
Sadly, I am not sure you can discern the difference.
Warm Regards
neocon
23. Danish Artist | August 6th, 2008 at 12:25 pm
Assmus,
Answering in hyperbole and metaphor does nothng for your argument and makes you look foolish.
Once we have unravelled the BDS, rhetoric and liberal talking points, you are as empty as Obama’s suit.
Any non-liberal knows that any taxes placed on any business is passed to the consumer. Obama’s gimmick is nothing more than more hot air from a candidate phishing for votes. Those that are educated in government schools will fall for them every time. Count yourself among them.
Unkind regards.
24. Eric T | August 6th, 2008 at 1:44 pm
Rasmus-
http://www.democratandchronicle.com/apps/pbcs.dll/article?AID=/20080731/OPINION02/807310332/1039/OPINION
25. Rasmus | August 6th, 2008 at 1:47 pm
danish artist,
put down the crack pipe
26. Eric T | August 6th, 2008 at 1:55 pm
http://www.aaenvironment.com/PresidentBush.htm
27. Rasmus | August 6th, 2008 at 2:10 pm
Eric T
http://www.guardian.co.uk/environment/2004/apr/04/usnews.theobserver
there is about a million more where that came from
28. Retired Spook | August 6th, 2008 at 2:34 pm
Rasmus,
LOL!! A “million” articles and the best you can come up with is a 4-1/2-year-old Guardian article? You’re the one that needs to put down the crack pipe. But, hey, you know 5 languages, right? Sheesh!
29. Rasmus | August 6th, 2008 at 3:37 pm
Eric you moppet, the whole idea was to find an old article to show you that your administration has been up to no good for way too long.
30. Rasmus | August 6th, 2008 at 3:40 pm
Sorry Eric, I meant SPOOOKSTER
31. Retired Spook | August 6th, 2008 at 4:36 pm
the whole idea was to find an old article to show you that your administration has been up to no good for way too long.
Weak, Rasmus, really weak.
32. Rasmus | August 6th, 2008 at 5:28 pm
here is some spook logic…
Rasmus included an old article related to Bush and the environment
this most mean that there were no new articles to choose from
and since no new articles have been written about the subject we can therefore conclude that Bush is a true friend of the environment
does that sound about right Spookey?
33. Rasmus | August 6th, 2008 at 5:47 pm
Spookmeister,
just use “the”Google:
bush environment
I’m getting over 5 million hits and from the looks of it almost all of them are very negative.
but how can that be? I was under the impression that Bush had done so many nice things for the environment.
34. Danish Artist | August 6th, 2008 at 8:30 pm
Yep, if you don’t pass the leftist agenda on the environment, you’ve done nothing.
Meanwhile, leftists continue to drive their SUVs, ride in their limos, private jets, use more that 12x the energy the average American uses, pay themselves carbon credits, stop wind, solar, hydro, clean coal, nuclear energies, etc. etc. etc.
but it’s bush’s fault.
Another leftist obamaton regurgitating the liberal talking points.
Assmus, pull your head out of your……..
35. FmrMarine | August 6th, 2008 at 8:39 pm
rASSmus
are you related to BO?
or just a dumb ass with a computer spouting DA HOODS talking points?
which BANNED, poster is rASSmus?
lets have a survey………
I say either black racist, brett michaels….OR yiddish, racist, vicoden & cocain.