Windfall
Senate Republicans defeat oil windfall-profits tax [Bloomberg].
I don't know enough economics to be able to understand the positions--specifically, what the Republicans are saying doesn't make any sense to me. Does anyone have any insight?
It sounds like they're saying increasing taxes on oil industry profits will lower production and thus raise prices, but I can't see how that would work if the tax were well-designed. If the tax rate were linear with the profit, for example, there'd still be incentive to produce more oil. The only to take away incentive would be to limit profits completely, or make it so that the prospective change-in-profit was not worth it for the amount of effort.
Or perhaps they're arguing that increasing taxes on oil profits will simply lead the oil industry to increase the price of gasoline. On the other hand, that would put more money in the hands of the government.
--but then again, more cash-on-hand for the government is anathema for Republicans right now. That's why we've been allowed to run up this huge deficit. If there's a deficit, Republicans can rightfully say, "We can't afford all of these social services! We have a deficit! We'll just have to cut them."
On the other hand, we just gave out this useless economic stimulus package--which is a social service, the very thing Republicans supposedly stand against. Perhaps the oil tax could be used to fund another such economic stimulus package, or be put directly into alternative energy.
I don't know enough economics to be able to understand the positions--specifically, what the Republicans are saying doesn't make any sense to me. Does anyone have any insight?
It sounds like they're saying increasing taxes on oil industry profits will lower production and thus raise prices, but I can't see how that would work if the tax were well-designed. If the tax rate were linear with the profit, for example, there'd still be incentive to produce more oil. The only to take away incentive would be to limit profits completely, or make it so that the prospective change-in-profit was not worth it for the amount of effort.
Or perhaps they're arguing that increasing taxes on oil profits will simply lead the oil industry to increase the price of gasoline. On the other hand, that would put more money in the hands of the government.
--but then again, more cash-on-hand for the government is anathema for Republicans right now. That's why we've been allowed to run up this huge deficit. If there's a deficit, Republicans can rightfully say, "We can't afford all of these social services! We have a deficit! We'll just have to cut them."
On the other hand, we just gave out this useless economic stimulus package--which is a social service, the very thing Republicans supposedly stand against. Perhaps the oil tax could be used to fund another such economic stimulus package, or be put directly into alternative energy.