George Will
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The Senate, having flirted with this loopy idea of oil companies tithing themselves, then contemplated a worse idea -- Dorgan's "windfall profits" tax. A "windfall profit" is a technical term denoting a profit made by someone else. Americans do not say there was anything windfall-like about this year's $2.5 trillion increase in the value of their houses.

This year the six largest oil companies will disperse 34 percent of their cash flow -- $31 billion -- in dividends to shareholders. But such flows can be shrunk by "windfall profit" taxes. That is explained, with a clarity sufficient even for the dimmest 35 senators, in a study -- "The Economic Impact of a Windfall Profits Tax for Savers and Shareholders" -- by Robert J. Shapiro, former undersecretary of commerce in the Clinton administration, and Nam D. Pham, an economist.

Although the real rationale for a windfall profits tax is to allow legislators to strike a histrionic pose, Dorgan's tax, say Shapiro and Pham, would have produced gross revenue -- depending on where the price of oil is in the range between $45 and $60 a barrel -- of $18.5 billion to $104.9 billion over five years. But because the windfall profits tax payments would have reduced corporate income tax payments, the government's net, say Shapiro and Pham, would have been only $8.6 billion to $48.7 billion.

They calculate that 41 percent of oil company stocks are owned by pension plans and individuals' retirement accounts. Hence much of the tax's burden would have fallen on current and future retirees, reducing both the market value of, and dividends paid by, those stocks. The cost to all the oil companies' shareholders, in forgone stock appreciation and dividends, would have ranged -- depending on oil prices and inflation -- from $21.3 billion to $121.8 billion per year. Shapiro and Pham also conclude that the windfall profits tax would have discouraged domestic oil production and increased U.S. dependence on imports from the Persian Gulf. And from Venezuela, thereby funding the left-wing fascism of Hugo Chavez.

Because the average price of a gallon of gasoline has swiftly plunged from the post-Katrina high of $3.07 to $2.15 (compared with $185.60 for a gallon of Starbucks espresso), the recurring populist fever that always follows oil price spikes has broken. It will be back. Too bad the Locrians' rule will not be.

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George Will

George F. Will is a 1976 Pulitzer Prize winner whose columns are syndicated in more than 400 magazines and newspapers worldwide.
 
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