The Politico has a story about how some on the left are upset at Pres.-Elect Barack Obama’s “policy” positions and cabinet choices to date, particularly on the economic side. This includes his position to abandon a windfall profits taxA windfall profits tax is a one-time surtax levied on a company or industry when economic conditions result in large and unexpected profits. Inheritance taxes and taxes levied on lottery winnings can also be considered windfall taxes on individual profits. on oil companies.
Of course, the liberal writers like those on Campaign for America’s Future quoted in the Politico piece use the term “wealthiest corporations,” which appeals to readers who are ignorant of the fact that people pay all taxes. You can argue for as progressive a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. system as you want, but taxing corporations that have a high dollar in profit more than a corporation with a lower dollar amount in profit doesn’t make the tax system more progressive. Progressivity depends upon the income of the owner of the capital (or the worker): those who actually bear the burden of the tax. This is intro public finance, which Obama’s economic team (which is filled with very, very bright people) probably told him.
Furthermore, a windfall profits tax on oil companies isn’t going to raise much money when oil is at $50 a barrel. It’s probably not even worth the administrative effort. Now if there is some supply shock event in the Middle East (say military action between Israel and Iran), the oil drilled by domestic producers (like Exxon and Shell) would increase in value and the profits would rise again. But until the global economy rebounds, oil demand isn’t going anywhere.
By the way, on this issue of oil company profits. To Bill O’Reilly and the other economic illiterates out there who believe that a bunch of oil company CEOs get together each weekend and determine whether gas prices will go up or down that week and that price is merely a transfer from consumer to profit: why would these greedy people be allowing the price to drop so fast? Are they just in a giving mood in this holiday season?
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