Yesterday I expressed my disappointment at the Republican Senators’ mostly-silly “Gas Price Relief and Rebate Act” in a post titled Wasn’t There A Time When Republicans Knew Something About Economics?. One thing about the Democrats, though, is that they can always make the Republicans look good by comparison. The latest Democratic proposal is for a “windfall profits tax,” whereby they would steal the oil companies’ money and create a windfall for themselves. This might be the single stupidest thing that could be done in connection with the current shortage of gasoline. If we steal the oil companies’ money, the result will be less investment in drilling, pipelines and refineries, which means less supply of oil, which means higher prices indefinitely.
Are the Democrats too dumb to understand this? No. But they think the American people are too dumb to understand it, and they are happy to pursue destructive policies if it will help them win in November.
President Bush handled the issue quite well in his press conference today:
Q. So “no” to a tax on profits?
THE PRESIDENT: Look, the temptation in Washington is to tax everything, and they spend the money — “they” being the people in Washington. The answer is, is for there to be strong reinvestment to make this country more secure from an energy perspective.
Listen, these oil prices are a wake-up call. We’re dependent on oil and we need to get off oil. And the best way to do so is through technology. And I’ve been traveling the country talking about the need to develop alternative sources of energy, such as ethanol, and to spend money to advance technologies such as new battery technology that will enable us to have plug-in hybrid vehicles. ***
And the American people have got to understand that we’re living in a global economy, and so when China and India demand more oil, it affects the price of gasoline at the pump. And, therefore, it’s important for us to diversify away from oil.
But it’s also important for the people to understand that one of the reasons why the price is gasoline is up is there’s tight gasoline supplies. And one reason there’s tight gasoline supplies is because we haven’t built any new refineries since the 1970s. And, therefore, Congress needs to provide regulatory relief so people can expand their refineries.
So it’s a combination of people investing the cash flows, as well as regulatory relief to enhance the ability for people to achieve the objective, which is more gasoline on the market, which will help our consumers.
By the way, corporations already pay income taxes of around 35%, in addition to all of the property taxes, sales taxes, etc., that they also pay, and when they pay dividends to their shareholders, more taxes are collected. I can still recall my tax professor saying, when I was in law school, that there is no intellectually respectable argument for the existence of the corporate income tax, other than the fact that it provides employment for legions of accountants and lawyers. And endless opportunities, I would add, for mindless demagoguery by Democrats.
You can watch video of the President’s press conference today where he talks about oil prices here.