Why are most Republicans against the "windfall profits" tax ?

[kentuck]

It's socialistic, they say. What's wrong with a company making profits? But they never seem to equate the oil companies with monopolies or price gouging? Did raising the prices of gas give them more money to find more oil? Or did it give more money to their executives and stock-holders?

It never ceases to amaze me that some poor Republican slob is scratching to get enough money to feed his kids and he falls for the bullshit everytime. There is no proof whatsoever that windfall profits stop oil companies from looking for more oil, as far as I can find? They don't even know what "socialist" is but whatever it is , it must be bad.

No doubt, you will find a Democrat here and there that are against windfall profits taxes also, and their reasons are always very interesting.

[Chico Man]

1. It may do more to hurt the consumer in the long run

Based on simple Macro Economic principles

[kentuck]

2. How?

Since they are hurting the consumer in the present?

[Chico Man]

9. Several reasons

Higher unemployment
Potentially higher prices at the pump
Less money for exploration / research
Greater dependance on foreign sources of oil
Less incentive to research alternative sources of energy
Greater beaurocracy neccecary to administer new tax (who pays the salaries?)

I'm all for an investigation into price gouging. If a crime was committed, lets prosecute.

I know this is such a juicy political issue, and we will see the politicians squeeze as much political capital out of it, but in economics, there are two sides to every action taken.

[napi21]

13. I gotta disagree with ya Chico Man.

I haven't hear the oil cos crying about not having the $$ for further exploration. Tey're crying because the Gov't won't let them explore where they WANT to...Anwar, the ocean, etc.

Why would it be less incentive to research alternative energe sources? I think they're limiting their research because oil has been very good to them for many years! They don't WANT to give it up!

Greater dependance on foreigh oil doesn't make sense to me either.

Neither is the cost to administer the new tax. The same administrators who do all the other tax admin would just add in a line!

Naw, the reason anyone is against a windfall profits tax is because it would cut into the pocket of the folks who are collecting the big bucks, and that would make them very unhappy!

[Chico Man]

15. Higher energy prices will open up a whole slew of alternative energy

Sources. Once gas prices reach a certain level, many more sources of oil and energy suddenly become cost effective. If gas prices are low, who would ever want to invest in newer technologies, if people will just continue to use oil, because it is the cleanest, and the simplest? Because they want to help the planet? Yeah right.

I think tax policy is a bit more complicated than just adding in a line. How many small to medium sized companies have closed shop as a result of Sarbanes Oxley, for example? Nothing is ever simple in our govt, particularly when it comes to tax policy. In the end, the corps tax attorneys etc. will probably just find loopholes to get them out of paying the tax in the first place.

Windfall tax or no windfall tax, the simple fact of the matter is these people making the big bucks will make the big buck regardless. Politicians are simply capitalizing on the anger of the average american comsumer, using propaganda to try to get them to think they are actually doing something to hurt the CEO's. We all know that in reality, behind closed doors, they are both busy washing each other hands.

I believe it is the politicians screaming "windfall profits tax" that we really need to be watching out for, they are the ones most likely to try to capitalize politically from events like these, and are the ones that are probably doing the most disservice to our country through simple dishonesty.

[DUHandle]

19. Agreed, but

once the Alternative Engery sources are established, who will be buying them?

Big oil, I would think.

[BootinUp]

25. If they reinvested the money

I believe they would be exempt from a windfall profit tax. Or at least thats the type of plan I would favor. I agree we don't want to remove incentives that would result in increased costs to the consumer. THere should also be tax breaks (incentives) for R&D spending on alternative sources of energy.

[sui generis]

4. nothing about economics concerns the economic safety of

the consumer.

Short term debt on high interest credit cards harms the consumer too, and that's just where those gas bills will end up.

Anyway, socialism is control of manufacturing, not resources. Fuel is a resource. That's the answer.

[Chico Man]

11. Perhaps the result of higher consumer prices

Will be a demand for higher wages? Or have we entered a society where people don't even have the right to choose what they do for a living? Sounds like communism to me.

Not everyone can be happy all of the time. At least we have the freedom in this country to choose what we do for a living. We have the freedom to look for another job that pays higher wages. We have the freedom to drive less, to move to a more cost effective location, etc. I know it's not that easy for a lot of people, but I'm sure it wasn't easy for the pilgrims that first settled this country either. Or those that went west looking for a better life.

We have the freedom to stand up to the politicians and the govt, to let them know who is boss. Does the collevtive citizenry of this country have the courage to do this? I guess we will soon find out. A windfall prifits tax seems like the worst ducted taped jimmy rigged solution in the world to me. Anyone who falls for that is a political tool.

[sui generis]

20. the result of higher wages is lower employment

come on. Unless you've started printing money? In which case we're double dipping into inflation.

You put a whole bunch of words in my mouth up there. A totally free market still requires government regulation of shared finite resources. That's not communism or even technically socialism.

Your rant is bonkers, by the way. There are two ways to impact short term profit takers: 1. incentivize them to take those profits by deregulating the market in which they profit, or 2. disincentivize them by keeping them from profiting from their profit.

You haven't qualified your statement anyway. Not doing anything encourages more of the same. What's your solution?

[Chico Man]

23. Is there a solution?

Is a windfall profits tax a solution, or simple political opportunism?

In my mind, the solution to the problem is radical change in they way we operate in this country. There is no way to sustain our current lifestyle minus tremendous technological innovation. We cannot simply try to apply duct tape, we must reinvent ourselves. The gap between the citizens and the corporate / government duo is frightenly wide.

Think about what the citizens in France would be up to if this were their country. Who is boss? The upcoming election will be a great indication of what is to come. If we continue down status quo avenue, expect much more of the same, without anyone willing to muster the courage to stop it.

[sui generis]

29. Yes. A windfall profits tax is a deterrant and a short term solution.

It is a necessary evil, it won't throw us into a recession, although it might hurt your energy portfolio, I'm sorry to say. You'll either have to hedge that or change your investment strategy.

It is a short term solution. Why is that bad? This is not just political grandstanding - it is a real solution that will drive down those gas prices in the short term.

I would also add regulation that wouldn't allow regional refinery supply chain service outages to impact pricing by creating artificial demand. Even with a windfall profit tax, all an energy company has to do is show that their costs are higher by artificially reallocating their margin to "new energy research" (i.e. 99% new domestic drilling lobbying budget) or "escrow" or whatever profit exempt category their lobbyists invent and pass.

I think the downside is that if you get a windfall profit tax in it won't take effect until 4th quarter profits, and they'll grandfather the first three quarters and run the gouging as hard as they can to maximize their pre-legislation profits, which means that we could potentially end up paying $5/gallon until September or October before the prices drop back.

[kentuck]

31. We're not taking it from the oil companies...

We're only keeping them from taking it from the consumers and keeping it. It's still the people's money we are talking about. It's not the oil companies money. We, the people, can find better ways to spend the profits than the oil companies.

[Chico Man]

35. I don't own energy stocks

The price of oil is subject to many factors. I highly doubt the windfall tax will have any drastic, long lasting effect on oil prices. Plus, any reduction in corporate profits will also mean a reduction in the state and federal taxes already heavily weighed on the oil industry. One tax will replace another. The bottom line will remain the same.

[RaleighNCDUer]

7. Try thinking of it as a

"You guys gouged the public for obscene profits by orchestrating the high prices" tax.

[Chico Man]

10. Lets focus on the gouging accusations first

Lets prove the oil industry has price gouged, and then take appropriate action.

The windfall tax is purely political. Don't fall into the politicians trap, they are looking for the votes, plain and simple.

[RaleighNCDUer]

17. All right.

If the oil companies are not gouging, then please explain how they can be making record profits? If the price at the pump is going up because of production costs, those costs would be included in the rising prices -- the profit margin would remain flat, or nearly so.

They have been doing this since the day * took office -- since before that, in fact, having manipulated the market to create a much ballyhooed oil crisis that worked in *'s favor in 2000. Remember the "Clinton should do something about gas prices" stuff? The oil men moved into the white house, and know they will not be investigated by this administration that they put in power.

Or do you really think the oil company profits is just a coincidence?

[kentuck]

18. These are prices that are paid for gas already in the pumps...

and has already been paid for.? Gouging is the only explanation.

[Chico Man]

21. No, it's not a coincidence.

I do know that, although oil company profits are all all time highs, so is the amount currently paid to state and federal governments in taxes. So, that is a good thing.

Look, I hate greed as much as the next guy. It is obvious there is something fishy going on with the sudden surge in gas prices. We know there are world supply issues that do make up some of the cause for this. China and India are demanding more oil than ever. And there is probably some gouging going on, although I'm sure it will be very difficult to prove given the power vested in the oil corps at the moment. If we think it is bad right now, I'm sure we have only seen the tip of the iceberg.

The thing that gets me roiled about the issue is the bandwagon syndrom revolving aroung the windfall profit taxes. This is not the solution to the problem. This is the most politically efficient, cowardly answer to the problem. We need to look beyond windfall profit taxes, and take real action. It starts with cleaning up the govt. It involves getting on par with the rest of the world and becoming responsible with out use of fossil fuels. It involves changing the lifestyle of the American Citizen. I'm afraid we are going to pay dearly for those who made the the decisions in the past to build communities around the use of the automobile. Either we figure out a technology to get us around without using gasoline, we change the way we live, work, and play, or we stand at the mercy of the government and corporations.

[sui generis]

22. are you in the same reality I am?

all your proposals there are going to take decades. What are you proposing to do about the issues today to keep gas prices from hitting $5/gallon on crude oil futures speculation? Because it just might.

The windfall tax is a short term solution that should be used in conjunction with the longer term solutions you are talking about.

What other short term solutions do you see? There is already back office talk in the credit markets of buying up discounted distressed revolving consumer debt in anticipation of people increasing their credit balances on higher fuel purchases at the pump.

Why are we feeding that with planned inaction? That's moonbattery.

[Chico Man]

24. I don't know about you

But there is an election right around the corner. Hence we see so many politician saying "I support the windfall profit tax!" We have to watch out for these people.

There is no magic bullet. Not even the revered windfall profit tax is going to do much in the short run. It may just throw us into a recession.. who knows.

It will not take decades. I'm afraid people are going to change because they are going to be forced to.

[kentuck]

30. I think you will see prices go down overnight...

if the oil companies think they are going to have a windfall profits tax on them. Some people have been in a recession for several years. Do you think this economy is going great guns right now? Do you own oil stocks? Also, we need revenues to pay for the war and the tax giveaways for the rich. Our country depends on a certain level of revenues to maintain something other than a Third World economy. I think this is a great place to start to ask people to pay their fair share. Either way, we are paying the taxes when we pay for the higher gas...we just prefer to pay it to the government rather than a few wealthy oil executives. It's coming out of our pockets anyway. It's not coming from the oil companies.

[Chico Man]

34. Either way, the oil execs will still get paid too much, winfall tax or

No windfall tax.

I doubt we'll see oil prices go down overnight. There is still a world market, subject to the fluxuations of supply and demand. Centainly the oil companies have some say, but what if we put the tax on, and the next day there is a supply shock?

Oil companies pay far more in taxes already then they make in profits. One tax will replace another.

[kentuck]

36. So you would prefer to give the profits to the oil companies...

rather than give it to the government, the same dollars, in the form of a "windfall" tax...
The consumer pays it either to the oil companies or they pay it to the government. Which would you prefer? If you think the oil companies will re-invest these profits, I think that is naive. Yes, just mentioning windfall taxes will probably bring the prices down. The oil companies do not wish to see the people conserve or use other energy. They are after the profits.

[Chico Man]

37. I don't think it is a good idea to penalize investors for taking risks

If someone gets a "windfall" by investing in a property, and selling it for a handy profit a few years later, should they be penalized additionally for that?

Most of the price at the pump is determined by the world oil markets.

[kentuck]

38. Yes. Monopolies are such a risk...

Seven sisters with the same qualities. Windfall taxes is a means of regulation. They must be regulated or they will rob us blind. I really don't buy into all this "free market" or "God" choices...the bottom line is that the consumers are paying more money for the price of gasoline and there is no known shortage at this time? Do we say it's OK if the market will bear it? Or do we say we have an obligation to protect the people, the consumers, from price gouging, and that the profits will be transferred to the hands of our government, via windfall profits tax, rather than the pockets of the executives and stockholders in the big oil companies? With the present shortfall in revenues in our Treasury, I think I would prefer it go to our government in the form of a tax, just as a beginning.

[Chico Man]

39. Paying more money compared to whom?

The Europeans? Or the Venezuelans? And yes, oil companies are profiting in Europe too.. and the govt places a tax on top of those profits.

The profits of the oil companies are not coming from the price at the pump. The price at the pump is largely determined by world oil markets and the price of crude. The profits of the oil companies were because of forward looking contracts and inventory issues. If the price of crude were to fall, those locking in todays prices would stand to lose a lot of money!

[kentuck]

40. The "world oil markets" ?

are probably determined a large extent by the regional politics of the oil-rich nations moreson than anything else. If people buy oil stocks at $75 per barrel, they deserve to lose their greedy asses, in my humble opinion. Yes, oil companies are profitting all around the world but the oil companies have no right to put many of our citizens into hardship just so they can soak up a few more profits in the "marketplace". They could have their profits cut in half and they would still be gouging.

[Chico Man]

42. The problem is the price of crude is on its way up for good

Demand will drive the price eventually to a point where drilling becomes cost effective in more difficult drilling areas. When this happens, prices will again stabilize as the new supply catches up with the demand. However, we'll probably never see $2.00 gasoline for the remainder of our lives. Once the new "more expensive" crude becomes the mainstream, the new plateau is reached. Hopefully we have a viable alternative to gasoline at that point. Maybe then prices will fall.

Unfortunately, we are in the midst of a huge increase in the demand for oil on the planet. We are going to feel the ramifications of this one way or another as we are part of the global community.

[kentuck]

44. I think we will have to find some alternatives but....

I don't think they will come from the oil companies - no matter how much of our hard-earned dollars we give them.

[Chico Man]

45. I completely agree

They need $$ to drill in new places so that the supply can keep up with the demand. But as far as alternative competition to oil.. we need something and we need it bad. Hopefully the high price of gas will light a fire under some engineers to figure out the solution.

[RaleighNCDUer]

26. Well, I can't disagree with any of that.

I still maintain, though, that a punative tax on the oil companies would be a message that they will not be allowed to set the energy policies of this country to best suit their bottom line.

But maybe that's just me being vindictive.

No. Me being vindictive would see those guys strung up by their heels, like Mussolini. So a little windfall profits tax would be letting them off light.

[Chico Man]

28. Now that's more like it

I can picture them sitting in their golden offices saying "windfall profits tax? thats all you can come up with? Are you kidding me?" (insert evil laugh here)

:evilgrin:

[Warpy]

3. They're watching the money roll in, of course

as are the wealthy Democrats in Congress.

[Wetzelbill]

6. yup, that doesn't hurt either

:)

Look at the Senate. It's practically a Millionaire's Club. Are you going to tell me those guys understand what it's like to be a regular person struggling with regular economic problems? Hell no they don't. You hit it right on.

[Wetzelbill]

5. pure ideology I think

they just have miscontrued their principles so much over the years that they oppose any tax, even a rational one. They reject the concept of a fair tax system as part of their ideology, it freaks them out that wealthy people may have to pay a higher percentage and take a higher burden than someone who is middle class or poor. After a while political aspects, such as a permanent majority etc, have hyped up the idea of "low taxes" so much that for political reasons they knee jerk at the slightest hint of a tax increase, no matter what it is. They are pretty delusional about it too.

[DBoon]

8. It is the very essence of capitalism

The tax code has always been used to reward "good" behavior and punish "bad" behavior. Why should charitable gifts be deductible? To encourage people with money to give to charities. Why should windfall profits be taxed? To discourage oil companies from raising prices too quickly and by too much.

Sudden price increases of essential commodities are extremely disruptive of businesses and people who depend on them. Capitalism requires the ability to plan for the long run. By moderating price increases, a windfall profits tax helps capitalism thrive by giving people and business the ability to plan for more expensive fuel for the long run - instead of being shocked with sudden price increases.

It is the function of governments to ensure markets run smoothly. This means moderating the effects of panic and short-term speculation (e.g. greed) so that prices do not part ways with the reality of supply and demand.

So why do republicans hate capitalism?

[Bridget Burke]

12. The same reason the Republicans are against any tax....

Unless it's the latest "Fair Tax" plan.....

[Ganja Ninja]

14. In a sense it's really kind of gutless.

While I agree with the idea the proper thing to do would have been to put the tax on right at the pump years ago.
Oil companies wouldn't have as much opportunity to fleece the American people if our consumption habit was more in-line with the rest of the world. Yea they're making money hand over fist but it's money other countries are collecting directly from the consumers as tax revenues. Money that would allow us to lower other taxes.
As long as politicians refuse to curb consumption we'll have to keep going back year after year to get our money from the oil companies. I'd rather they didn't get it in the first place. Windfall profits is nothing more than a gas tax. Why not be up front and consistent about it instead of of going after them one year and letting them off the hook the next.

[underpants]

16. Tax bad

9/11 good

Sorry let me restart that good chap 9/11 has been very good for them.

[kentuck]

27. A point to remember is that the oil companies shut down refineries..

several of them. Why? It wasn't because of environmentalist pressure? Must be another reason??

[Jacobin]

32. Why single out the oil companies?

How about a windfall profits tax on investment bankers who make a bazillion dollars a year pushing mergers and acquisitions, which take a toll on retirement accounts and stock portfolios.

Or Halliburton war profits tax?

Choose the company you happen to be hacked off at at the moment.....

It smacks of regional prejudice, quite frankly.

[kentuck]

33. Why not just call it a progressive tax ?

And the price that is paid to do live and do business in this great country?

[Walt Disney]

41. Any Democrat who cares about this country is against a windfall tax.

Windfall taxes would only serve to drive gas prices higher still as any new taxes would just be passed on to the consumer.

Moreover, it would harm IRA's, 401k's and other investments. It's a bad idea.

[BootinUp]

43. Are you sure you know what a windfall profit is?

[Chico Man]

46. Like when you invest in real estate and the price appreciates rapidly

If you sell high, that's a windfall profit. What happens if you invest in that same real estate, and the price suddenly drops? I guess they would call that a windfall loss. And yes, oil companies do experience these as well. What happens when the price of inventories catches up with the price at the pumps? Suddenly, no more windfall profits. What happens if the price of inventories is much higher than the price at the pumps? A windfall loss.

Oil company profits are not tied to increased prices at the pumps. The price at the pump is largely determined by the price of crude, plus the price of refining, plus a few other expenses rolled in. Oil companies make contracts to buy crude at certain prices. If they buy crude at 50, and the price goes to 70, then they have a windfall profit when they sell that refined oil. When the oil company bought the crude at 50, our prices at the pump reflected that - they were lower. It would not make sense to force the oil companies to fix prices at a low point when they are buying crude on the world markets, would it?

[BootinUp]

47. You paint an interesting picture

Sure the oil companies have had leaner years. Been awhile since that was the case though.

[RaleighNCDUer]

49. The thing is, the gouging is not at the pump.

It is as you describe, where the oil companies bought at 50, then (having their seat in the White House) whip up wars and rumors of wars which drives the prices up for no other reason than the wars and rumors of wars. That is as blatant a manipulation of the market as when those guys (Hunt brothers?) tried to corner silver back in the 70s, and went to prison for it.

This is what Cheney's energy task force was all about - how to manipulate the world oil markets with the combined resources of major US oil companies and US military power. This is insider trading at its worst, and if we looked at it honestly Cheney and a half dozen of the top oil execs would go to prison.

[Chico Man]

51. Its not just the wars

There is only so much oil being pumped out of the ground, only so much refining capacity, and incredible demand coming from all corners of the globe. Of course prices are going to go up. As they go up, more areas of drilling open up, and the price will once again stabilize, albeit at a higher rate.

It's far more complicated than the conspiracy approach with the most political weight and propaganda value that you believe. It's far more complicated than the supply and demand approach that I describe.

Our situation is unfortunate.. however, as they say you reap what you sew. If we decide to build communities around a non renewable source of energy, elect oil men as presidents, allow our govt to wage wars when unprovoked, and let the corps and govt get away with it, trust me, they will take advantage of us until the cows come home.

[kentuck]

52. Someone on C-SPAN this AM was blaming it on the Energy Bill....

from last year. Supposedly, it required a certain percentage of ethanol to used in this years supply of gasoline and the oil companies were not equipped to mix it "properly"? So that is why there are shortages at this time, rather than of gasoline itself, but a shortage of the technology to mix the ethanol as required by Congress in the last Energy Bill. Heard anything about that?

[Chico Man]

53. Yes that is part of it

That is what is causing some of the shortages on the east coast. We import most of our ethanol I believe.. from places like Brazil, that have found ways to generate ethanol from their sugar refining processes. We can get it from corn, but I don't think we have done much investment in that area?

[brindis_desala]

50. two factors are being overlooked here

1. is oil really as cheap an energy source as current wisdom suggests if we consider the "collateral" cost to the environment. The Chinese fully understand this which is why they are seriously investigating alternatives. Why are they more proactive? because they don't have oil or run Exxon Mobil.

2. the price is high because demand is exceeding supply. Why now? The oil companies know there is a whole lot of untapped oil out there, the problem is- it is not all "sweet" and near the surface of the Saudi desert. By holding reserves off market they get to drive the price to where the expense of future exploration and refining becomes profitable. But in fact we the public are screwed twice, first with higher prices and then more wars and the ultimate destruction of the planet. Seen in that light I think a windfall tax that is geared to a alternate paradigm is in order. Call it the start of a treatment to wean us from a fatal addiction.

[Walt Disney]

56. Yes, and I know what a windfall profit tax is as well.

It's another term for changing the rules in the middle of the game.

[sui generis]

48. ha haha hahahahaaha

sorry. You're too "young" on DU to say stuff like that. Still recovering from the dark side?

Any Democrat who cares about his country . . . :rofl:

It would not harm IRAs and managed 401K's, because they continuously hedge and realign their investment strategies. In fact it would shift away from reliance on energy stocks and funds, which is actually a good thing in the long term.

Anyway, what do YOU propose is the short term solution to reining in gas prices? Do nothing is not an option.

[Walt Disney]

55. Well, I suppose I could have said "any Republican who cares..."

...but this thread is about why Democrats could/should be against this tax.

It would most definitely harm IRA's and 401k's due to the fact that a windfall tax is in essence changing the rules in the middle of the game. And that creates uncertainty...and uncertainty creates instability...and that is not good for the markets.

Moreover, your contention that a shift of capital away from the energy sector would be a good thing is preposterous. For that would only create more shortages and higher prices.

It is difficult to find short term solutions to problems that have been a long, long time in the making. Thus, there are only a few above-board things that can be done to alleviate the problem in the short term.

1. Loosen ethanol standards
2. Cut gasoline taxes (the government’s take is (5) times that of the oil companies)

[McCamy Taylor]

54. It has the letters T-A-X in it.