Rep. Kanjorski's Unreasonable, Unconscionably Ridiculous Idea

Profit Margins by Industry, Click to enlarge

"While Hillary Clinton may have failed ECON 101 along with John McCain, it appears as if Rep. Paul Kanjorski [D-PA] may have been enrolled in Marxism 450 at the time," according to The Tax Foundation. Reason? Exhibit A: Kanjorski's House Resolution 5800, the "Consumer Reasonable Energy Price Protection Act of 2008," which would:

• Tax the oil industries’ "windfall profits."
• Set up a "Reasonable Profits Board" to determine when the oil companies’ profits are in excess, and then tax them on those windfall profits.
• As oil and gas companies’ windfall profits increase, so would the tax rate for those companies.

In this news article, Kanjorski said his legislation will encourage oil companies to lower prices to prevent them from receiving higher tax rates.

A few Questions/Comments:

1. Oil companies don't set oil and gas prices, global market forces do. The fact that oil and gas prices change daily demonstrates very clearly that oil companies are at the mercy of market forces of supply and demand.

2. If you tax something [oil], you get less of it. If you get less of something [oil], prices go up, not down.

3. How does Rep. Kanjorski know what "reasonable profits" are? He might start by having Congress investigate the 57 industries listed above (click to enlarge, data available here) that already have higher profits than the average 9.6% profit margin of the "Major Integrated Oil and Gas Industry" (which includes Exxon (XOM), Chevron (CVX), ConocoPhillips (COP), BP (BP), Royal Dutch Shell (RDS.A), etc.).

Comments

[Jim Sack]

His reaction is exteme, but he reflects an anger among us that sees the stock holder clobbered and the board/CEO rewarded; that sees lakes and stream as the cheap sewer for industry, that allows power plants to spew into the air with impunity; that coddles the car companies producing guzzlers; that allows poisoning of our children; that encourages off-shore HQs at taxpayer expense; that encourages tax abatements to generate jobs (again at taxpayer/homewowner expense and you can go on and on and on. I would support his efforts only to put the fear of God into the jerks who run American companies.

[Jim Sack]

I would add to my previous comment (user 185549), that as long as the friends of industry allow their buddies to dump their trash in public space and rake in huge profits there will be people who fight back, some rationally, somone irrationally.

[The Fitzman]

If only there was one real statesmen in Congress that would realize the big picture problem here: peak oil.

Nothing Congress will or can do in the area of windfall profits taxes or similar efforts will be helpful in terms of what the US really needs: an acknowledgement that peak oil is here and a comprehensive energy policy that includes (among other things) encouragement of the design, production, and support infrastructure for an alternative(s) to the internal combustion gasoline powered automobile. here is a good start at an energy policy:

seekingalpha.com/article/71150-an-energy...

The US will pay a heavy price if our elected leaders continue their shortsighted policies simply to get votes and get reelected. Let their be no doubt about it, peak oil is THE biggest threat to America national security. Yet, the government, the media, and US citizenry in general is in complete denial. Very scary....

[daffy]

Jim,

Stop driving your vehicle.

and move to Venezuela.

And make sure all your buddies do to.

[Admiral F]

Hillary is still blaming the oil companies for the US not using more biofuels. Looks like she did not see the Journal of Science article detailing how BioFuels cause more greenhouse gases than hyrdrocarbons, and they drive up the price of food products. The inflated demand on Corn, Soy and other foodstuff has caused clearing of forests unlike anything we have seen before, including logging of the Amazon. America for the first time is a net importer of Wheat, since those fields have also been converted to BioFuel crops. Clearing land for BioFuels creates 3 times the greenhouse gases than hydrocarbon production. It is also driving inflation in the foods we consider staples.

[starlifter]

An update on what the screwballs we elect to congress are up to is always welcome. Its so sad that America can't seem to elect a governing body that is both intelligent and supportive of the nation as a whole.

[Hydrofiner]

Big Oil? We are all big oil, every one of us. When we consume products made from our hydrocarbon stores, from gasoline to plastics, to shampoo, we are the integral part of Big Oil that makes all the money earned and spent in the pursuit of a vanishing resource make sense. The politicians can give us cheap gas allright. You can get your ten gallons on Monday Wednesday or Friday, depending on your SSN.

[tntgators]

Keep the government out of it and it will turn out better. The government has already wasted billions of dollars since the early 70's pushing energy policies in certain directions. When gas gets high enough, and people are hurting enough over the high prices (no I'm not heartless just practical) then the market will head in the best direction with the best technology. Government can never do anything more efficiently then free market........how are your grocery prices lately since the latest stupid government intervention. Trees got scarce and whale oil was used. When whale oil got scarce coal and oil came on line......see where this is heading. Quoting Ronald the ten scariest words in the English language are "I'm here from the government and I'm here to help." True if the middle east cuts off oil completely we'd be in a big hurt, but can they afford to do that?

[adan]

i'm in favor of no windfall taxes if there's also no subsidies

[yourfilled]

The price of oil is part of a cartel. Meaning it is fixed. That would be called price fixing in America. But the free ride for cheap oil is coming to an end, but I still see those "giant cars" on the rode...No my friend, Americans must pay the price of ignoring the market.

[e-mail]

[mojotronic]

Ever since Standard Oil and Phillips Petroleum conspired with GM and Firestone to dismantle public transportation in 45 American cities via their front company National City Lines, big oil has managed to maintain their stranglehold on commuter transportation in the US, and to gouge them at every opportunity. Although free marketeers who wish to gorge themselves at the well of oil are entitled to their self-interested opinions, big oil deserves no sympathy from the American public.

[User 179505]

Crazy for people to think the only answer to any crisis is more government intervention, i.e. "There aught to be a law!", "We need a tax to control that!", "The government should provide (fill in the blank here) for everyone!", etc., etc. I don't need the government to protect or save me. The idea of a tax on excess profits is about as un-American as you can get. Good article.

[drmalaka]

I can not come close to expressing how depressing it is that the vast majority of our elected officials have absolutely no concept of how economics works. Some of these lame excuses for leaders go so far as to give they impression that they do not even have the means to balance their checkbooks.

How retarded is this gas tax moratorium for the summer? McCain says it will help the poor the most becuase they drive older cars and drive more. What? Hmm, let me see, if we lower gas prices these users are going to consumer more than they would right now, driving demand up. Economics 101 says if demand goes up something else does as well. What could that be? Maybe prices?

Plus a tax cut will induce fewer people to switch cars to more fuel efficient vehicles.

As for windfall taxes, what idiocy. Only complete morons don't understand these simple concepts. We want to tax Exxon because they are big, not extremely profitable. Google has windfall profits, 50%.

How funny, Obama is actually right on this one. And lets be serious, there is a guy who has had great schooling and I would put major money on the fact that in all his years at Ivy League universities the man never took an economics course. I can't even tell you how many of these progressive/socialist/liberals I met in college and law school that never even knew there was an economics department in these schools.

[Troyfan]

Windfall profits? How about windfall taxes? Exxon paid $9.2 billion in taxes for the first quarter which was 49% of their gross profit. We Americans like the high paying jobs these companies provide and the government likes the revenue it gets. Tax it any further and put these companies out of business and we all lose. That is not to say we should not focus on alternative energy sources, but why not be smart and work with the oil companies as partners rather than treat them as criminals? Encouraging companies research and development through tax subsidies and incentives provides more jobs and ultimately better solutions. I don't about anyone else, but our government does not spend our money wisely now, so I don't believe giving it more will result an anything more productive.

[unimpressedpragmatist]

Remember people, you are ultimately, responsible for what happens in Congress. You elect and continue to reelect the same idiots, election after election. So, you must live with the consequences of your poor decision-making. And, yes, your representative is as corrupt and clueless as the next person's. Either change it or live with it. Your call.

[A midwestern neighbor]

drmalaka - wrong about reduced price necessarily leading to higher demand. if demand was inelastic to begin with, the poor had to continue to buy at higher prices than they could afford. price reduction doesn't mean they will necessarily then buy more...they may be able to eat again, that's all. :)

as for obama being right on this...i haven't heard one thing that he's been right on yet. if any candidate is the uber-socialist it is him - he's all about wealth redistribution. and you can bet that isn't just in regards to personal wealth, he'll be all over that for corps too.

less incentive to go to hybrid vehicles? hmmm...if those enviro-whackos are only going there when its profitable for them to do so...how sincere are they? and then why should *i* pay more for a more efficient vehicle if they won't? let's call on Al "I own 5 houses" Gore to sell at least 3 of them and reduce *his* footprint before we have to start worrying about how to get to work! funny how their ideologies are always paid for on the backs of the poor and middle class!!

fitzman - i don't know about peak oil...or should i say...i'm not convinced. we're simply not allowed to produce here. we ought to be operating in anwar...not to mention the already-approved Thompson shelf.

[jackooo]

Rep. Kanjorski might investigate congress and the boondoogles that screw the taxpayers out of billions of dollars first.
There is nothing you can do to oil. If the excess profits were taxed where would our EXCESS MONIES go? Not back to us. Congress would up their perks and the oil companies would charge us more because they are making less.
Must be an election year but we put them in congress!!!

[iThinkBig]

There is only a hand-full or politicians on the hill that actually understand that to reduce the cost of a good or service, a competing good or service must be developed.

Instead of bailing out investment banks, perhaps Washington can heavily subsidize energy creation using Treasuries. This would create a competing product, increase investment back into America and create millions of jobs. Eventually, exporting the raw materials would create trillions in wealth as lower energy costs allow for a ton more exporting of agriculture and metals. The Democrats are the fools of the hill. What have they done in the last two years? Investigate steroid use in baseball and craft 'we hate Bush' legislation. Great. Actually, the President has been the only one calling from the rooftops that we need energy independence but one man alone cannot legislate our government.

[jackooo]

The Democrats told us they would end the war when they were elected in January as the majority. More lies.

[Dikidikido]

Windfall profit taxes were enacted in the mid 1970's during the last "oil crisis". How'd that work out?

[Onlooker]

Taxes should be raised so that people understand that driving is not a God given right, but a privilege. Gas prices are still too low to modify behavior.

[wayneS]

I like Troyfan's "Windfall Taxes."
In 2007, the combined net income for ExxonMobil, Chevron and ConocoPhillips was $71.19 billion. Their combined taxes were $168.66 billion.

[Wingman]

Two Questions?
1. What would the government do with all of that tax money? Right?
2. Worried about the price of oil? Whay aren't we drilling off the Atlantic Ocean like the Canadians are? Why aren't we drilling off the Florida Coast like Cuba want to do? Why aren't we drilling off the Pacific Ocean? It can be done safely. WHY????

[jjason]

When I read that the former CEO of Exxon Mobile gets a 400 million dollar retirement package I say WTF. With the OPEC cartel, Big oil being complicit and profits bigger than most other companies ( in dollars, not in net margins), I can see the reasons for taxing the hell out of big oil.

In Alberta, Canada, oil companies pay royalties to the provincial government then the federal government gets 15 percent from US residents. I get a decent dividend which is now 14 percent. Big oil comes no where near a five percent dividend. So, lets stop criticizing Congressman Kanjorski for trying to reduce the costs to us.

[Brian Pursley]

If Big Oil's 10% profit margins are too high then what is Big Government's 33% tax rate?

[bdglfr]

Determine when a profit is "excess"??? Hahahaha...you gotta be kidding. You mean give politicians the ability to generate funds to play with by simply telling corporations they made "too much" money??? Hahahaha......... Is this gonna work for all other industries or just the oil industry? What about pharmaceuticals,
banking and insurance companies???

Why are the Democrats fooling around with these halfway measures when you know what they'd really love to do is simply follow another Socialist's lead (Hugo Chavez) and just go ahead and nationalize all our oil companies now?

[User 191389]

Our elected officials are not idiots - they were smart enough to fool the majority of the people at least the one time it counted. They're like juries - lacking the expertise in the areas they need to make informed decisions.
Add to that the change in priorities in the last 40 years - no longer town, state or country first- me first, party second (they can keep me in place), family last (scandals show disregard for impact on them), and community or country - only considered as it relates to re-electing me.
Recompence for CEOs , etc. is every bit as rediculous as pay for athletes and entertainers.
Oil companies are currently wasting money locating sources of crude - NIMBY.
Don't feel sorry for shareholders-we're sitting at year highs - fair share? You can trade according to your feelings on that.
And driving a privilege not a
right? you have a better shot getting people to recognize the difference between a "need" and a "want".
Lot of people sitting with flat screen TVs and the cable to run them that call that an entitlement.
Our legislature has chosen oil as the scapegoat - it resounds with us because we feel our costs every week. This translates into votes.
The pharmaceuticals in our country who develop drugs and make Americans pay a premium for their use - as opposed to Canadians, Europeans, etc. (not third world countries) -they have not received the same scrutiny- not yet translating into votes.

[socialismSUCKS]

I was going to give a nice, long explanation about why socialism is a complete joke and never works...I can think of a few examples....how about the Soviet Union, Vietnam and Cuba. Everyone there is doing great....oh wait, everyone is poor as dirt except for the leaders. That's how you reduce the wealth gap, make everyone poor. These socialist liberals seem to forget that companies re-invest profits into their business, distribute to shareholders and generally spend money in the economy. Ironically, people who make a lot of money spend a lot of money and create A LOT of jobs. I would go on, but unfortunately, after reading the actual legislative proposal by this congressman (retarded?) I cannot stop throwing up in my own mouth. Please put a stop to this non-sense and write your Senators/Congressman and tell them to KNOCK IT OFF...also, join DOWNSIZEDC.ORG

[ACD60]

This guy is an utter moron!!!!