I must have missed the memo in which it was announced that every socioeconomic problem that comes down the pike awaits only a regressive tax scheme to solve it. But I would like to think that even if the memo appeared in my inbox, I would have had the good sense to throw it away.
Alas, too many people buy into the memo’s findings, hook, line and sinker. One of them happens to be running for President of the United States and is more than happy to try to magically cure our energy problems by taxing oil companies like it’s going out of style.
. . . Mr. Obama’s proposal to take some of this money from Big Oil and distribute it, like Robin Hood, to hard-pressed American families doesn’t make economic sense. To be sure, Mr. Obama would not copy the tax enacted under President Jimmy Carter in 1980, which netted $40 billion before its repeal in 1988 while imposing huge administrative burdens — and retarding domestic oil production. Mr. Carter’s tax was levied per-barrel, so it directly increased the marginal cost of producing crude — and made figuring out which barrels to tax ridiculously complicated. Mr. Obama wants a surtax on net oil company profits above a “reasonable” level. The tax would be set high enough to raise $65 billion over the next five years, and the revenue would fund a one-shot tax rebate that Mr. Obama would like to give to families and individuals this year.
Making Exxon surrender money that is now falling into its lap would not necessarily affect its longer-term plans or incentives. Indeed, some of Big Oil’s “windfall” already will go to the government: The more profit the companies earn, the more corporate income tax they pay. But to add a five-year tax increase on top of that to pay for a one-year gift to voters would, indeed, increase the cost of doing business. That cost would be passed along in forgone investment in new production, lower dividends for pension funds and other shareholders, and higher prices at the pump — thus socking it to the consumers whom the plan is supposed to help. If oil prices fall, there might be no windfall profits to tax. Then the Obama rebate would have to be paid for through spending cuts, taxes on something else or borrowing.
For properly calling shenanigans, the Washington Post will likely be sneered at by members of the self-annointed “reality-based community.” In this way, the newspaper will be subjected to what we can term a “windfall honesty tax” in which truth-telling itself is penalized by any means necessary. The windfall honesty tax takes no money out of your pocket directly, of course. But by robbing the political discourse of the necessary realism with which to intelligently fashion and implement policy, the windfall honesty tax, when applied against clear and logical economic thinking, is infinitely better at lightening your wallet as any pickpocket could ever hope to be.