President-elect Barack Obama is not planning to implement a windfall profit tax on oil companies because prices have dropped below $80 a barrel, an aide said on Tuesday.
Obama, who signaled early in his campaign for the White House that he would take an active approach to oil markets as president, had planned to use the revenue from a windfall profits tax to fund a tax rebate for low- and middle-income families struggling with high energy prices.
Taxes on so-called windfall profits are always a bad idea: The are based on the premise that market forces will not intervene and affect a company’s profits.
And intervene they did:
Oil prices have fallen from a record $147 a barrel in July to under $50 this week.
As of the writing of this post, $47.58, to be exact.
A $100 drop.
Punishment enough for a scapegoat industry, Obama?
The Obama campaign had set an $80 threshold,
“President-elect Obama announced the policy during the campaign because oil prices were above $80 per barrel,” an aide on Obama’s transition team said.
I can’t figure out why $80/barrel is such a magic number, but last month Hugo Chavez was also saying that $80/barrel was a “fair price”, too. At least Hugo’s $80 makes sense, since Venezuelan oil is of poor quality, expensive to produce ($29/barrel), must be refined in the US, and Hugo knows how much money he needs per barrel to maintain his prolific spending.
Never mind. Arbitrary thresholds for punitive taxes on business profits have never, and will never, work.