Some time ago I was in my car listening to John Williams on WGN, something I don't do regularly, but no matter. On that particular day, JW interviewed Sen. Dick Durbin on dicussing Politics, Sudoku, and his proposal to create a Windfall Tax on Oil companies. Mr. Williams is neither conservative nor liberal, a fairly level headed guy, and he was gracious to Senator Durbin's proposal but made good opposing points. Despite being regarded by TIME as one of the 10 Best Senators in America, Senator Dick Durbin did a lousy job of making his case justifying the Windfall Tax Profit bill. Keep in mind this is more than 6 months ago, before $3.00 a gallon.
What Durbin should have brought to make his case is discuss the fact that we give somewhere in the neighborhood of $2 billion in tax incentives to oil companies, and our beloved Congress not all that long ago gave Big Oil additional tax breaks. And even with these arguments I still have reservations about his proposal.
While I'm a liberal, it has always rankled me when someone on my side of the political spectrum decides to tax something that people do a lot of in order to generate revenue. A good example of such foolishness is Initiative 77, the law that would tax coffee in Seattle (fyi - the law was shot down). I'm in favor of more funds for education, but getting those streams of revenue by arbitrarily selecting an activity that has no relationship with the beneficiaries of those funds is horrible way to decide government policy.
Well, leave it to Daniel Gross of Slate to make the case better than anyone else in this brilliant artcile right here. The cost to pull oil out of the ground has not increased dramatically. Oil companies record profits have little to do with increased cost but rather decreased supply and increased demand. The war in Iraq has a direct relationship with the rise in oil prices. We are also running a deficit to conduct this war. Some people have been hurt by the financial effects of the war, such as the American Consumer. Some people have benefited from the war such as the oil companies.
"Ordinarily, we shouldn't want the government to decide when profits become "excess." But the case of huge profits from the run-up in oil prices is different for two reasons. First, it is unusually clear that these profits have nothing to do with productivity. Diverting them to the U.S. Treasury would have no effect on the incentive to extract more oil from American ground. Second, some or all of these profits are directly related to a situation that is imposing huge sacrifices—financial and otherwise—from others; that is, the Iraq war.
"Because of the war, the government is adding hundreds of billions of dollars to the burden of debt that all taxpayers, including other businesses, will have to pay off. Because of the war, American soldiers by the hundreds, and Iraqis by the thousands, are paying the ultimate tax of death by government policy. And because of the war, American oil companies are raking in extra billions of dollars of profits."
Support the Windwall Tax on Oil Companies. It's the right thing to do.