Should There be a "Windfall Tax" on the Excess Profits of Oil Companies?

In a Nutshell



  1. Record prices for gas have been accompanies by record profits for the oil companies, punishing the little guy instead of billionaires.
  2. Rich oil executives are making millions in options and bonuses, even if their companies aren't very profitable.
  3. Money brought in could be put into an energy trust fund or alternative fuel research; it also could be put into other areas where we need funds such as defense, education, social security, etc.
  4. It ensures there won't be price gouging since unreasonable profits are taken.
  5. It provides a disincentive to the use of oil as an energy source, which may be a good thing since there are more environmentally-friendly sources, and you have less chance of problems such as the BP oil spill in 2010.
  1. Gas prices will likely increase since oil companies will factor the tax into their prices.
  2. Less potential for large profit means less incentive to invest in exploration, drilling, and refinery development; thus, it will lead to supply problems and greater foreign oil dependence.
  3. Companies shouldn't be punished just because they are successful.
  4. Oil stocks, which are owned by many Americans in 401(k)'s and other critical investment portfolios, would likely plunge in value.
  5. Since almost all companies have transportation-related costs or purchase items that have to be transported, the tax would increase inflation, leading to higher prices on items unrelated to oil.
  6. Corporate profits of non-oil-related companies would tax a hit; thus, the decrease in corporate tax revenues would offset the money brought in by oil taxes.

Related Links

Do You Know What Taxes You're Paying?
Pros and Cons of Taxing the Rich
Should Oil Companies a Windfall Profits Tax?
Wikipedia - Windfall Profits Tax
Congressional Budget Office Testimony on Windfall Tax

Is anything missing? Is any of the material inaccurate? Please let me know.

Written by:
Joe Messerli
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