As Barack Obama flails to find an energy policy that stops his drop in the polls in middle America without completely alienating his Envirowhacko base, he’s offered a solution of providing a $1,000 per family energy credit/refund. He plans to fund this rebate by increasing the taxes on the major oil companies.
The US has approximately 111Million Households (maybe a few less but what’s a few million when you’re trying to save the planet?). $1,000 per household would be $111B of rebates.
The net income of the major oil companies was reported to be $51.5B in the most recently completed quarter. Their average tax rate is about 42%. That means they paid about $37B in taxes for the quarter. The most recent quarter was a 40% increase over the previous year’s earnings so that would mean that last year they earned a pretax income of about $63B and taxes of $27B
Let’s assume for the moment that the “Nasty” oil companies are able to maintain their most recent profit levels for the next year (oil prices have already declined so the assumption isn’t in line with reality but then, what’s reality when you’re taking on the “nasty” oil companies). That would mean that over the next year, the “nasty” oil companies would have net income of $206B and pay taxes of $149B.
Assuming Barack imposes a windfall profits tax to cover his $111B payout, the oil companies would now pay $260B in taxes and net $95B.
No doubt that $95B is a lot of money. Funny thing though, $95B is over 1/3 less than the annualized net income of $147B that the same oil companies made a year ago.
Huh? I thought Barack was after “windfall profits?” Even if Barack finds a way to cut his plan in half he would still need to take every single incremental penny that the oil companies had made this year versus last year to pay for his program. Is every penny of additional profit a windfall?
And that’s the problem with “Windfall” taxes….One man’s “windfall” is another man’s confiscation.
