What percent of economists support this type of tax?
Well, I thought this thread was about lowering gas prices. If you’re going to make a policy that may increase gas prices, at least you’re honest about it.
Oh, come on. Operating under the assumption that a tax once existed isn’t going to be different than if the tax actually is implemented? Well, let’s bring back the 90% income tax, then. Everyone must’ve already factored in that possibility since it wasn’t long ago that we had it.
No, it’s not the same at all. With something like future profits, you’re dealing with risk. Anything you do to make those future profits more at risk are going to reduce that activity.
Luminous ones! This unworthy makes so bold to suggest that this should be moved to GD. The main guys want to conduct the discussion on a level of formality that forbids rock 'n roll. Even **The Nameless One ** has resurfaced, and in entirely correct GD protocol! If not miraculous, at least extraordinary, and a positive development.
Sometimes the energy goes in reverse. Acknowledge this, move to GD. On probation, or course.
Heh. I have no idea. If I had to hazard a guess, I’d say the same number that support a minimum wage. A distinct minority to be sure, but they make arguments from within their discipline that merit sober consideration–or at least something more than a dismissive insult.
That’s an unfair analogy. The windfall tax is by definition a temporary tax, revived from time to time based on windfalls. The fact that it existed the last time we faced this scenario creates a likelihood of its revival quite above the likelihood of seeing 90% income taxes any time soon.
Explain that to me. A windfall tax places profits gained as a result of the windfall (some margin Congress deems to be the windfall margin) at risk. This makes the companies less profitable, true, but they remain an incredibly good investment and will still be taking in absolute profits well in excess of any other industry. What activity is reduced?
I’m operating under an assumption that whatever it is you tax, you marginally discourage. I’d rather marginally discourage reaping the benefits of luck than marginally discourage labor or innovation.
Yeah, but that simply isn’t possible at this point.
I think the only real answer for America in the immediate future would be to cut our oil import by half and replace the difference with oil extracted locally until we can find realistic means of eliminating our dependency on oil altogether. This biofuel idea simply isn’t an answer, as it takes as much corn to fill an SUV once as a single person’s annual consumption, and the deforestation that is occurring to make way for the biofuel industry is causing more harm to the environment than it’s probably worth.
Thanks for defending the highway robbers. When they come to take the food out of your mouth, be sure to keep smiling, now! The price of oil is a joke, and the laugh’s on us. Now, I understand what Steely Dan meant about a Royal Scam.
Why should Atlanta scream of drought on a planet 3/4 water? Mankind is a joke.
Maybe. But economists are human, too, and are subject to human emotions. See below for further comments.
How often is “from time to time”. I only remember once.
How do you know they remain an incredibly good investment? You’re assuming that after the “windfall” is gone, that things return to the point they were before hand. No one knows if that is going to be true or not. All companies operate on the principle that bad times will come at some point. This just means that with the bad times, the good times will be less good.
But why? Isn’t a sense that profits earned from what you consider to be “luck” are someone unfair? And isn’t that born out of a sense of resentment? Economists can sometimes have a political agenda as well, trying to enforce some sense of social fairness along with understanding how the economy actually works.
And how is it, exactly, do you determine what is “luck” and what is prudent investment in the future? If AMD stumbles, Intel’s profits go up through no actions of its own (except being ready to take advantage of that stumble). And vice versa is true (actually, even more so for AMD since it is smaller and gets a bigger relative boost). Should that be subject to a windfall profits tax? Seems to me this whole “luck” thing is entirely subjective.
Remember, profits aren’t locked away in vault to be admired by greedy capitalists as the use $100 bills to light their cigars. They are pumped back into the business to make it grow.
True. No man is a computer. But since that applies equally well to both sides of the argument, I fail to see the import.
I was talking about the very nature of a windfall tax. It comes about and then is taken off when the windfall ends.
I meant that the tax itself cannot make them a bad investment. The tax is calibrated to the profit level they were making before whatever Congress defines as the windfall. At that time they were a good investment. If the market should change such that there is no longer a windfall, the tax goes away. The company is exactly as vulnerable to downturn as it was before the windfall–which is to say, not very.
Economists generally leave decisions about fairness to the politicians, preferring to discuss that which is quantifiable. In this case, what is quantifiable is the expected revenue of the tax and the expected impact on the oil companies. It is up to us to consider whether that is fair. And the argument I am making for its fairness is based on principles, not envy. It isn’t a bright line, but the principle is clear, whether you agree or not, or whether we call it luck or not. We all agree that the record profits–and we’re talking about the highest profits in the history of the United States–are not the result of Exxon’s hard work or innovation. At best, they are the result of Exxon’s “prudent investment,” by which we mean their mere presence in the market. We can distinguish that kind of profit, in principle and absent emotion, from profit earned as a result of decisions made by an individual or firm.
I think a company benefitting from the failure of another company sometimes reflects the company’s good management when faced with the same market pressures as the other company and sometimes not. Not every instance of luck is a windfall. There is a difference of degree. And no one advocates that we tax all that falls into our definition of windfall. What they advocate is that taxing windfalls in extreme scenarios is sometimes a good idea. And that this is one such extreme.
I’m only going to address this part because I think it is the key flaw in your argument. Companies like oil companies count on these “windfalls” in their planning. They use the extra cash to make investments that make them more profitable during downturns. If you take that away, they are not just as good an investment as they were before hand unless they act differently beforehand to make sure they have to capital available during those downturns. The only way they can do that is to either raise prices or lower future investments. Now, they could also look for efficiencies, but they can do that without the tax, too.
Also, we can only tax US corporations. What this sort of thing does is to drive the activity you are taxing out of the country, or give an advantage to those companies which already operate outside the country.
But the key is you cannot expect a company to lower its pricing if you increase the taxes. The premise of this thread is that some people think gas prices are high because oil companies are “price gouging”. So, if that’s the problem we’re trying to address, then doing something that would raise the price of gas I can’t see how that can be considered a solution.
Anyway, maybe we should take this debate to GD where we’d get participation from a wider audience. It’s an interesting subject and one that might very well be an important issue in the general election. Let me think about crafting an OP.
Fair enough. Hopefully we can actually get a forceful advocate of windfall taxes to play my part. Ideally a devilishly handsome Milton Friedman meets Robert Reich type.
I’m not sure Reich can be considered an economist, although he does play one on TV. He has a law degree (Yale, with Bill Clinton) and although he has written popular books that touch on economics, does he have a record of publishing peer review economic articles?
His name is on a few works of academic economics, but I imagine as the policy member of the research team. I didn’t mean to apply with my above joke that he is an economist by training.
Can I ask a question about something basic that I’m just not understanding? What is the purported purpose of a windfall tax? Because it just doesn’t make any sense to me unless that purpose is to punish successful businesses; “You made a lot of money so it’s OK for us to fuck you for every dime we can”.
The purpose is to raise revenue to cover our massive deficit–a deficit we’ve accumulated paying for one of the causes of oil company profit. The question is whether this tax is preferable to some other tax.
OK, thanks for clearing that up. It is just a money grab then. I understand that, I was afraid there was some deeper supposed meaning that I was missing. In that case, I oppose any type of windfall tax, it’s nothing more than legalized theft. You want to cut the deficit? Cut spending. Don’t tax success.
At the risk of drifting off-topic, that’s easier said than done. Just where do you propose we cut spending? I know you could say we should eliminate all the ear marks and other “pork” projects but even after doing that, you’ll still have a large deficit. Perhaps the Bush Administration and the Republicans who were running Congress at time should’ve thought about this when they cut taxes during a time of war but it’s obvious they didn’t think their cunning plan all the way through.
The price of oil is a joke, and the laugh’s on us. Now, I understand what Steely Dan meant about a Royal Scam.