Sunday, December 04, 2005

Of course, he's abolutely correct . . .

but that won't keep our elected representatives, in their lunacy, from trying to do the wrong thing.
By blocking much drilling in Alaska and offshore, Congress does nothing to lower the price of oil. Then Congress spends taxpayer dollars to soften the impact of the price, thereby encouraging consumption that raises the price. Then Grassley asks oil executives to join the moral grandstanding by squandering their shareholders' wealth -- diverting it to protect oil consumers from some consequences of their representatives' irrationality.


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.
As they say, read the whole thing.