Those Who Do Not Learn from the Past

By May 8, 2008Energy, Taxation

From the AP:

WASHINGTON (AP) — Senate Democrats on Wednesday called for a temporary special tax on oil companies’ profits and a rollback of $17 billion in oil industry tax breaks as part of an energy package. The Democrats are also seeking federal penalties on energy price gouging and a suspension of oil deliveries into the government’s emergency reserve.

Senate Republicans strongly oppose any additional oil industry taxes, which are widely viewed as unlikely to be enacted and would almost certainly prompt a veto by President Bush.

The proposed 25 percent profits tax would apply just to oil company earnings above what would be considered “reasonable” and only if those profits are not reinvested in expanding refinery capacity or renewable energy sources, according to a summary of the proposals.

The proposals for windfall profits taxes show a willful disregard for history. We commend to you a 2006 Congressional Research Service report, “The Crude Oil Windfall Profit Tax of the 1980s: Implications for Current Energy Policy“. Start with the executive summary, page 2.

  • “From 1980 to 1988, the WPT may have reduced domestic oil production anywhere from 1.2% to 8.0% (320 to 1,269 million barrels). Dependence on imported oil grew from between 3% and 13%.”
  • “Reinstating the windfall profit tax would reduce recent oil industry windfalls due to high crude and petroleum prices but could have several adverse economic effects. If imposed as an excise tax, the WPT would increase marginal production costs and be expected to reduce domestic oil production and increase the level of oil imports, which today is at nearly 60% of demand.”
  • The NAM issued a news release yesterday on competing energy measures in the Senate.

    UPDATE (11:30 a.m.): Senator Reid’s statement and summary sheet on the Consumer First Energy Act.

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