Jan 192012

Dems propose ‘Reasonable Profits Board’ to regulate oil company profits

Oh, goodie. The short form: a “windfall profit tax” would tax at a rate of 100% any profit that was considered to be “unreasonable.” “Reasonable” and “unreasonable” are left undefined, thus leaving it up to politicians and bureaucrats to decide when someone is making too much profit.

Regardless of what you think about oil companies, this sort of thing is so wrong headed as to be indistinguishable from “stupid and/or evil.” For starters, if selling a bunch of oil will merit a 100% tax, then the oil company will have no incentive to sell that oil. Since the demand for oil will not be decreased at the same time that the government is driving down supply… the price of oil (and its derivatives, such as gasoline and plastics) will necessarily skyrocket.  There will be an intricate dance of oil companies driving down supply while making more per gallon, and still trying to avoid the 100% tax. “Death spiral” is the term that comes to mind. If this is the unintended consequence of this sort of law, that means that those behind it are “stupid.”

But since it seems pretty likely that those who have crafted this bill can figure out that this will be the result, they are more likely to be “evil.” Obama has said that he wants the price of energy to skyrocket; this would certainly aid that goal, while at the same time demonizing oil companies. Why would anyone do this? The claims has often been made that jacking up the cost of fossil fuels will lead people to buy into “alternate fuels.” But… while electric cars are almost as old as the internal combustion engine, IC cars have gotten far better, while electric cars remain either terribly expensive, ridiculously impractical… or both. A century of development doesn’t really seem to have helped here. Why would jacking up the price of oil help all of a sudden? The only things that this will help are cronyism and anti-energy, anti-growth ideologies.

And there’s another concern: once it has been established that the government can take 100% of the “unreasonable” profits of one industry… they can do it to any and all industries. While I’d find it schadenfreudalicious if Congress decided that actors, athletes, singers and such were good for up to $400,000 per year, and any income above that would be taxed at 100%, it’s clear that such a power would be a power no government should have.

 Posted by at 1:44 pm
  • Glen

    Do ya’all remember when price of gas to $5 gallon? Do you remember what also
    when up in price? Like, well, just about everything. The ones that hurt
    poor people the most were food (growing and transport) and clothing (mostly

    Remember that when you look at things that will cause the price of fuel to
    go up.

  • Peter Hanely

    I can see the democrat idea now: 100% income tax, oodles of social engineering deductions, and every registered US resident getting an allowance from the government to live on.

    Contrast what many conservatives want, a flat rate (15-20%, or lower) tax, few if any deductions to exploit as tax shelters.

    Also, +1 to Glen.

  • “Unreasonable” profits are defined as “profits made by people who aren’t large Democratic Party donors.”

  • SMSgt Mac

    Ah. More of the same mentality that prompted me to post “Congress Causing High Gas Prices: Asks Oil Companies Why”. OIl Companies tend to be consistent ‘mid-performing’ operations. the dollars they make are only to the same scale of their operations and overhead.


  • I’d like to see sports stars and Hollywood playactors be the first to find regulation under “reasonable profit”. Is a million dollars a picture reasonable? Of course the logical defense is that the market sets the value of players and actors. But for some reason, oil companies don’t get the same consideration?

    Also what you’d see is this legislation used as a weapon. To enforce polities, to benefit allies (by attacking their competitors) or to go after any organization the government is ideologically opposed to. I can see “unreasonable profit” designated as “any remainder left after daily operations” for churches of faiths opposed to those in oil soaked nations. Sicc’ed on some companies but not others, like the whole Gibson Guitar “illegal” wood fiasco.
    Another bad idea from a congress chock full of bad ideas.