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« How to have fun with somebody who advocates higher taxes . . . | Main | Weird science »

May 19, 2008

How to have a little fun with a Congressperson . . .

. . . who supports a "windfall" profits tax on oil companies. Ask 'em if they support a windfall profits tax on corn and soybean farmers, and if not, why not.

In the last two years (as of 5/15), crude oil on the Nymex has increased just about 75%, while corn and soybeans have each almost doubled. (Corn, which for many years sold for approximately $2/bushel, has recent been as high as $6/bushel.)

Conceptually, what's the difference between the oil companies' "windfall" and those of the corn and soybean farmers?

It might be possible to find an unusual Congressperson who would reply that there's no difference. But given the incredible--still--hold farmers seems to have over the U. S. Congress, I doubt it. (Link is to a post by Jim Lindgren, from whom I'm stealing the idea of a windfall profits tax on farmers.)

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cactus

I'd be willing to start with a simple ending of subsidies and give-aways to both farmers and oil and gas companies. Of course, apparently for some reason it would be anti-free market for oil and gas companies to be monitored in the same way and pay the same royalties when they're drilling on public land than when they are doing the same on private land.

kyle N

Cactus, that's all fine and good, but only if it is consistent, we have companies mining on public land, raising cattle on public land, and god knows what else. And they do not pay fair market value for this use, not at all.

I would be fine with the elimination of all subsidies, and placing all federal business regulation subject to a cost/benefit analysis. But while I am at it, I might as well wish for superpowers.

cactus

kyle n,

I believe in capitalism. Which means no subsidies or windfall taxes for anyone except under very rare circumstances. But if its kosher to chuck the free market out the window when it comes to subsidies, which benefit the companies at the expense of the public, why isn't it also kosher to to throw on a windfall tax which benefits the public at the expense of the companies? Is it really only OK to ignore the free market when its the taxpayer that gets hosed?

JorgXMcKie

cactus, I think I agree with you (a scary enough thought on its own), but if we don't have subsidies (and I grew up on a farm and still think farm subsidies hurt the small farmer more than they help) then how do taxpayers get hosed by the market? I presume you mean that subsidized oil production on public land (?) should mean an equal opportunity to impose a windfall profits tax (when the taxpayer gets hosed?), but I thought the windfall profits tax was going to be applied across the board.

I would do away with all subsidies for producers at least in the agriculture and energy production arenas (maybe others as well-- I haven't really thought about them much), but doing so would seem to obviate opportunity for windfall profits taxes, no? Possibly I could accept limited subsidies for some very limited situations, provided that there were clear phaseout and/or cutoffs when they were no longer useful to the taxpayers, but I'd have to think on that more.

And perhaps someone should explain to me more about an oil producers windfalls profit taxes. Who pays? The Saudis? The Iranians? And how, exactly, does that help the hosed taxpayers? Is there to be no tax on oil produced from private land?

Christopher Rasch

A great thought experiment. Thanks!

cactus

JorgXMcKie,

I didn't write that taxpayers get hosed by the free market. I noted that they get hosed when we ignore the free market in this way, namely by providing the subsidies.

And whether or not farmers benefit or are hurt by these movement away from free market outcomes, there is no question that subsidies impose a cost on taxpayers who foot the bill.

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