National tax pirates arm the ships of state around the world and clean up their regulatory cannons as high oil and gas prices invite another raid on corporate treasure chests.
The situation is simple. Government always needs more money because citizens always have more needs. The solution is simple, too. Government looks for ways to squeeze a little more milk out of its cash cows.
Too often, the technique is oversimplified. Today, politicians look at oil and gas companies from the United States to Mexico to the United Kingdom to Russia and see companies making record profits. "Aha," they say. "Oil and gas can afford to give a little more. Let's take a little more."
The technique ignores the monetary amount of taxes already paid by the industry, and it ignores the potential consequences of the new levy on employment, business growth and long-term benefits to the economy.
The pressure to achieve perceived benefits for constituents grows stronger as elections draw near.
More often than not, the result of this economically punitive legislation is far from simple. To a layman, or a Congressman, it may come as a surprise. To an economist or corporate financial officer, it's all too predictable. And, sooner or later, it's the consumer who pays.
The opinion article below, written by Jonathan Williams, explains the situation in the United States pretty well.
Crude economics: Taxes hurt consumers
by Jonathan Williams, economist, Tax Foundation
As gasoline prices top US $3 per gallon, politicians are cashing in big - by throwing bombs at the US oil industry.
As in every crisis, Washington is suffering from a predictable case of "do something" disease. Products of the ready-to-eat microwave culture, Americans want an instant solution to high energy costs, and this lends itself to grandstanding and election-year maneuvering by politicians of all stripes.
Numerous lawmakers, from Senate Minority Leader Harry Reid (D-Nev.) to Sen. Arlen Specter (R-Pa.), are lining up to support a new federal windfall profits tax, with the aim of redistributing profits from "greedy" oil companies.
But lawmakers could benefit from a history lesson. The last time this country experimented with such a tax was the Crude Oil Windfall Profit Tax Act of 1980. According to a 1990 Congressional Research Service study, the tax depressed the domestic oil industry, increased foreign imports and raised only a tiny fraction of the revenue forecasted. It stunted domestic production of oil by 3% to 6% and created a surge in foreign imports, from 8% to 16%.
Politicians calling oil companies "greedy" is more than a little ironic. Tax Foundation studies have shown that state and federal treasuries profit handsomely from oil industry sales. The average American motorist pays taxes of 46 cents a gallon on gasoline, of which 18.4 cents a gallon goes to the federal government. States and localities pocket the rest.
The nation's energy companies are already providing a "windfall" of taxes. According to Department of Energy data, from 1977 to 2004, federal and state governments extracted $397 billion by taxing the profits of the largest oil companies and an additional $1.1 trillion in taxes at the pump. In today's dollars, that's $2.2 trillion - enough to buy a Toyota Prius for every household in the nation.
In fact, oil companies have paid in taxes more than three times what they earned in profits during those 28 years.
As the oil industry brings in record profits, it also pays record taxes that average 39% worldwide, even after accounting for special deductions and credits. That compares with a 33% average tax rate for other industries.
In 2005, Chevron, ConocoPhillips and Exxon Mobil paid more than $158 billion in total worldwide taxes. This gargantuan tax bill nearly equals the entire economic output of Iran and surpasses the total gross domestic product of 150 of the 184 countries ranked by the World Bank.
It would be unfair and absurd to tax workers at different rates, based merely on the industry they work in. Similarly, it makes no sense to tax an industry punitively based on the volatility of its profits. Oil will always be a boom-or-bust business.
The US debate over which group of people - workers, shareholders or consumers - ends up paying the bulk of these corporate taxes will go on forever. But the undisputed and most important point is that individuals pay taxes, not corporations. Therefore, attempts to punish oil companies for "obscene" profits by instituting additional taxes ultimately cause all of us to pay the price. Consumers will pay more at the pumps, and the five oil-producing states that suffered in the oil bust, including hard-hit Louisiana, won't benefit from the boom.
In Washington, politicians are acting as if "profit" is a dirty word, and they've painted a bull's-eye on the backs of the oil companies. With the midterm election season coming, we can expect more charges of "oil profiteering" from the profiteers on Capitol Hill.
New taxes will be no solution to high prices at the pump. President Ronald Reagan's axiom seems apt: "Government is not a solution to our problem; government is the problem."

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