Rep. Kanjorski's Unreasonable, Unconscionably Ridiculous Idea

Includes: BP, CVX, RDS.A, XOM
by: Mark J. Perry

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 (NYSE:XOM), Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP), BP (NYSE:BP), Royal Dutch Shell (NYSE:RDS.A), etc.).

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Tagged: , Major Integrated Oil & Gas
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