Obama May Want to Rethink Windfall Profit Tax

Senator Obama has proposed a windfall profit tax on “Big Oil.”  I have seen commercials in which he calls it a penalty.  That struck me as a socialist message.  A Penalty?  The government will penalize a company for it’s success?  Who determines what is too much?  As a percentage the oil companies have made between 6 % and 11% but the numbers are huge.  Do you really want the government to determine who makes too much money?  And if oil is “penalized” for a 10% profit, why not the pharmaceuticals or media companies that often make over 20%?   Where does it stop?  Here is a recent story.

Boston Globe Obama Windfall Profit Tax

Now, here’s the kicker.  ExxonMobil paid $30 Billion in taxes in 2007 and $28 Billion in 2006!  Bet you never read that or heard that in the news.  Why?  In 2006 that was a 41% tax rate!  Is that not enough?  Is not more tax a risk of killing the golden goose?  If you tax too much, then you risk hurting the business and your tax revnue actually decreases.  This happened when under President Carter we tried a windfall profit tax on oil companies.  Is it justified in a supposed free market economy that the government take more than 40%?  Would you want to pay 40% taxes?  Here is the story:

Mark J, Perry, PhD article


2 Responses

  1. I agree, a “penalty tax” is not the answer….although I have to admit that the outrageous profits that the oil company’s are making these days leaves me with a bad taste in my mouth! I just wish the big oil folks would put forth a little effort to show that they are doing all they can to ease the pain we are all feeling at the pumps…..because with those record profits, they are obviously not feeling the same pain.

    of course, we all know that the real solution is to kick our oil habit

  2. Rick, the oil companies do not set the price of oil. Nor does OPEC or any other entity. The open market does. The major oil companies generally do not own the gas stations either. They got out of the retail business about 30 or 40 years ago because the only way to make a profit is to run a convenience store and they didn’t want to be in grocery business. The business in general became disintegrated, moving away from the vertically integrated model of John D. Rockefeller. The large monetary profits of the oil companies have come from the spread of the cost of reserves found years ago and the current selling price.

    Do you really think that a 10% profit is outrageous? If so, then you will be really outraged if you look at other businesses.

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