‘Big Oil’ & the Fallacy Of A Windfall Profits Tax
16th March 2022
Higher energy prices worrying you? Be afraid because Congress is coming to the rescue. Legislators are introducing a new bill called the “Big Oil Windfall Profits Tax Act.” The bill’s objective is to reduce the price of oil. The bill pans to tax the windfall profits of large energy companies at a 50% rate. They define windfall profits as profits above and beyond those in the year before Covid. The proceeds from the tax would be returned to consumers earning less than $75k through direct payments.
If Congresses goal is to inflate oil prices further and generate more inflation in the process, the bill, as currently written, is right on track. This article walks through the proposed legislation to better understand why it is grossly flawed. As we will discuss, the bill will not only generate higher prices at the gas pump, but the premise behind the bill, windfall oil profits, is dubious.
But first, it is worth looking beyond Russia’s effect on energy prices and reviewing another reason oil prices have been rising.
‘Windfall profits” is the term Democrats use when they want to pick somebody’s pockets.