Posted on 05/28/2008 12:27:02 PM PDT by K-oneTexas
Hillary Clinton and Barack Obama want to raise the price of oil, as well as most everything else, and lower the value of the pension and mutual funds that union members and retirees depend on.
Of course, they don't describe their plan that way. Instead, they call for a windfall-profits tax on the oil companies.
But it's the same thing.
Taxing a "windfall" sounds appealing, but stock prices are based on expected profits. Throw a new tax on profits, and retirement portfolios of regular people take a hit.
"Hillary will impose a windfall profits tax on oil companies and use the money to temporarily suspend the 18.4 cent per gallon federal gas tax and the 24.4 cent per gallon diesel tax during the upcoming peak summer driving months," says her website (http://tinyurl.com/3jtlfp).
"They sure can afford it," she told an audience in Indianapolis.
Whom does she think "they" are?
Obama says: "It isn't right that oil companies are making record profits at a time when ordinary Americans are going into debt. ... That's why we'll put a windfall profits tax on oil companies...".
Taxing "windfalls" is politically rewarding, but in the final analysis, only people pay taxes. When a corporation is taxed, the burden falls on workers (through smaller raises), consumers (through higher prices) and shareholders (through lower stock prices).
Do Clinton and Obama really want to tax these innocent people just to spite oil executives for high profits?
Anyway, what is a "windfall"? Any answer is arbitrary. Obama says it's the profit made off oil that's priced above $80 a barrel. Why not $70? Or $90? Did he pull that number out of a hat?
At least he's honest enough to call his tax a windfall profits "penalty." But why do the companies deserve to be penalized? Have they behaved badly?
It's not their fault that demand for oil skyrocketed because of booming economies in China and India, and that tensions in the Middle East pushed prices up. It's not their fault government regulation keeps them from drilling in promising locations like Alaska and offshore, and harasses them when they want to build new refineries or expand old ones. It's not their fault the dollar has deteriorated dramatically.
Being in the oil business is profitable, but not as profitable as you may think. Last year, average earnings in the industry (net income divided by sales) were 8.3 percent. (They are lower this year.) Other industries have done better. Beverage and tobacco firms had returns of over 19 percent.
Yes, oil company profits have surged as the price of oil rose, but bigger profits are good for America. The vast majority of the money goes not to the pockets of oil executives, but to exploration for new oil. If you take the money away, who is hurt?
We don't have to speculate because we have experience to draw on. "We tried this windfall profits scheme in 1980," The Wall Street Journal writes. "It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3 (percent) to 6 (percent) ...".
Repeating that would not be a good thing for the harried working families Clinton and Obama claim to champion.
Spiking prices and profits encourage investors to take risks to find more oil, develop oil substitutes and increase efficiency. We don't need a "national energy policy" because we already have one. It's called the free market. When oil prices rose a few years ago, old fields with hard-to-reach oil in Oklahoma were suddenly worth operating (http://tinyurl.com/5bqmog).
Economics 101: incentives matter. Now that the price of oil has reached a new high, oil companies and other entrepreneurs have more incentive to find new sources of energy.
Only that -- letting the profit-motive work -- will bring the price of oil down.
Interfering with markets may be good for politicians, but it's bad for everyone else.
Obama says: “It isn’t right that oil companies are making record profits at a time when ordinary Americans are going into debt. ... That’s why we’ll put a windfall profits tax on oil companies...”.
Obama apparently doesn’t understand that a large reason why the oil companies are making such high profits is that the government has not formulated an effective energy policy. It’s Congress’ fault that we are in this mess, and that the oil companies are making so much money at our expense.
Perhaps they should go after trial lawyers, whose 40% take amounts to “windfall” profits.
How about we cut their salaries. It’s not fair that they make all that money when ordinary citizens are struggling.
Good Idea.
Stossell makes too much sense for the average American (FReepers excluded) to understand...this will just confuse them
They’ll go after the Kulaks next. Whoops, wrong country, same politics.
Here is Maxine Waters saying last week she wants to the govt to take over the oil companies
http://www.youtube.com/watch?v=PUaY3LhJ-IQ
These people are our ‘leaders’?
They are so Ph***ing clueless it makes me worry for the entire future of America...wake up people
turn the oil companies loose. find more oil, prices come down, sell more gasoline, more sales tax revenue.
A Kulak is anyone with one more cow than you.
Death to the Kulaks!
Ping
-PJ
That’s an absolutely priceless video clip of Maxine Waters.
She should be airdropped over P’yongyang.
No fan of John Stossel....who really doesnt understand economics....nutty free trader
Why no one ever brings up simple math to refute this Windfall Profit stuff? Beats using failed economic theories no one understands anyway
Here is the simple math: Where is the profit for oil companies....when oil goes for 120-130 bucks a barrell....and gas runs from 3.80-4.00 bucks per gallon?
Lets not forget....that is the price for crude...not including the cost of shipping, refining, and distributing
I wonder how oil companies are even making money...when the cost to supply gas seems to be more than what they are charging
Jaw dropping Maxine Waters.
She would have go thorugh several intelligence upgrades just to get to “stupid”. I don’t know if there is even a word to describe such blithering ignorance.
I beg to disagree. Exactly what evidence do you have of Stossel’s lack of understanding of economics?
There was a thread awhile back where it said the oil companies make very little on gasoline (it was like 1% or something dumb). But, they make up for it in plastics, etc. where the profit is more like 30%.
On the news last week they were talking about drive-offs at the gas station. They were saying how a guy with an SUV taking off with $60 of gas (small SUV!) wipes out the station owner’s profit in gas for that day!? (Again, they make up for the lack of profit on the gas by charging $1.85 for a small bag of chips inside the store).
Surprised they missed these ones too:
Archer-Daniels-Midland 42%
Cargill 86%
Bunge 1,964%
Deere & Co - machinery 55%
Mosaic - fertilizer 1,134%
Monsanto - seed $1.13 billion in profits for the latest quarter, more than doubling profits of the preceding quarter.
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