Talk of tax “fairness” may be all the rage today, but it takes me back to 1980 and Jimmy Carter’s “windfall profits tax.”
In the previous year, then-President Carter had delivered his infamous “Malaise Speech,” in which he had addressed concerns about the energy crisis, going on and on about this program and that, and the need for “energy independence,” but not mentioning the one good thing done during his administration regarding energy: the beginning of energy market deregulation.
Carter’s Democratic Party was, like today’s Democrats, concerned about “fairness.” Because of the deregulation, they expected energy companies to reap “windfall profits.” Which those businesses somehow didn’t “deserve.”
Arguable, that.
But skip morality for a moment, and look at it from an economic point of view. The new, extra profits from a deregulated market would have enticed more investment into the areas where the “windfalls” were being made, thus increasing production, reducing prices. To the benefit of all.
Instead, Congress enacted the tax, and Carter signed it 33 years ago yesterday. And for six years, domestic production of oil produced “negative” profits. All Congress really did was delay and diminish the economic recovery to be expected from deregulation.
Congress also got much less revenue from the tax than projected.
The Crude Oil Windfall Profits Tax was repealed in 1988, and we experienced great growth in the 1990s.
A word of caution, I think, to those who bandy about “fairness” to the exclusion of sense, or worry overmuch about energy company profits, today.
This is Common Sense. I’m Paul Jacob.
4 replies on “The “Fair” Tax That Wasn’t”
Taxing profits mean that there will be less of them, and higher prices on gas, since businesses do not pay taxes. Their customers do. How on earth did they convince people that Americans wanted to pay higher prices on their gas?
Is the current Administration doing exactly the same thing to domestic production of oil and coal, by requiring all drilling on Federal lands to be taxed for an alternative energy slush fund?
The alternative energy the DOE favors is all intermittent and is an add-on expense to existing power plants. It does one thing: raise rates.
And as for alternative car technology, it looks like the government is going to be getting into the car business and selling cars to we the people. Why do I get the feeling that the alternative technology will need a few legislative coercions?
http://finance.townhall.com/columnists/maritanoon/2013/03/17/beware-the-carbon-tax-n1536514/page/2
Talking about fairness, how about UNFAIRNESS in taxation?
Anyone on Soicial secuity ( which was paid for over years of working) up to (I beleive age 70-not sure of that) who makes MORE THEN JUST UNDER $15,000, LOSES $1 OF SOCIAL SECURITY FOR EVERY 42 EARNED. THAT IS 50% PLUS THE EARNIGNS ARE TAXED.
I personally believe that there is no “fair” tax (the Fair Tax proponents will protest I’m sure), simply because government forcibly takes it from people. Which begs the question, what is the least un-fair tax?
We can exclude user fees, such as the gas tax which pays for the roads. Certainly it’s fair that those who use a resource pay for it, and proportionally to it’s use.
I say the least un-fair tax is no tax, in the sense that we don’t have to have government do anything beyond protecting our liberties. Thus minimizing government is the first step to fairness.
Then there’s still the question of how to fund a very small, limited government. From 1776 thru about 1910, ALL levels of government in the US consumed only 8% of GDP (less than 1/4 of what we pay today).
If we got government down to this size, the question of what’s least un-fair, isn’t so important.