The Pandering Goes On
Just when you think that one of the presidential candidates has a good idea, they keep talking and ruin the momentary connection with reality.
Recently Mrs. Clinton proposed a summer holiday from the gasoline tax. That sounds pretty reasonable. Most Americans would appreciate a 18.4 cent drop in gasoline or a 24.4 cent drop in diesel prices. Now the rub, Clinton has proposed that the oil companies will pay the tax out of their record profits. Lets assume for a moment that Clinton can accomplish this legally - what would be the effect.
The average profit margin for the oil companies is currently running about 7 percent of revenues. Clinton's plan would require the oil companies to pay the gas tax (5.5 percent of revenues). For diesel it would be about 6 percent. This leaves the oil companies with a profit rate of 1 to 1.5 percent. Do you know many businesses who would agree to operate on that kind of profit margin.
Of course, the oil companies have an alternative. India and China are hungry for oil. Europe would be happy to get more. If you sell the oil oversees, you do not have to pay the U.S. gas tax.
Some day the American people are going to realize that if you keep punishing people for success, they will simply stop succeeding or they will take their ideas, businesses, etc. elsewhere. Why do you think we have so many skilled engineers and scientists from India? Could it be India's historically anti-business laws (which are rapidly changing and are drawing talent back home). Why is business booming in Utah and other states that are business friendly and suffering in business unfriendly states like Michigan?
Perhaps we should make ATLAS SHRUGGED mandatory reading for all politicians.
Recently Mrs. Clinton proposed a summer holiday from the gasoline tax. That sounds pretty reasonable. Most Americans would appreciate a 18.4 cent drop in gasoline or a 24.4 cent drop in diesel prices. Now the rub, Clinton has proposed that the oil companies will pay the tax out of their record profits. Lets assume for a moment that Clinton can accomplish this legally - what would be the effect.
The average profit margin for the oil companies is currently running about 7 percent of revenues. Clinton's plan would require the oil companies to pay the gas tax (5.5 percent of revenues). For diesel it would be about 6 percent. This leaves the oil companies with a profit rate of 1 to 1.5 percent. Do you know many businesses who would agree to operate on that kind of profit margin.
Of course, the oil companies have an alternative. India and China are hungry for oil. Europe would be happy to get more. If you sell the oil oversees, you do not have to pay the U.S. gas tax.
Some day the American people are going to realize that if you keep punishing people for success, they will simply stop succeeding or they will take their ideas, businesses, etc. elsewhere. Why do you think we have so many skilled engineers and scientists from India? Could it be India's historically anti-business laws (which are rapidly changing and are drawing talent back home). Why is business booming in Utah and other states that are business friendly and suffering in business unfriendly states like Michigan?
Perhaps we should make ATLAS SHRUGGED mandatory reading for all politicians.
Add common sense to the list of essential requirements.
People need to stop thinking that making money is evil. It is not. Success is not bad.
Reply to this
I agree. Unfortunately, there is a substantial minority out there who believe that the world is a zero sum game and that people having things means that they have taken away from other people. In reality, most people and businesses who are successful have obtained success by doing things better than others. Usually it means providing a better product or service or providing the product or service more efficiently. That benefits everyone.
Punishing people or businesses for "windfall" profits is merely punishing people for doing something better than their competition. Eventually, that which you tax you discourage. This means that people will focus on other activities or simply take their activities to other places. Do we really want to export talent? In the 1970s the auto companies refused to listen to those advocating methods for improved efficiency and quality. They went to Japan. Now Toyota is taking over as the largest car company in the world and the U.S. auto industry is in serious trouble.
Reply to this
Hi Rand,
I thought readers of this article might enjoy the most recent edition of Ron Paul's "Texas Straight Talk" newsletter entitled "Big Government Responsible for High Gas Prices":
http://www.house.gov/paul/tst/tst2008/tst050408.htm
Thanks for the great post.
Reply to this
Jordy,
Thanks. Unfortunately, most people who are younger than their early 30s do not remember the gas lines from the 1970s. They do not remember when an airline flight was more expensive than many middle class families could afford. They also do not remember when a long distance telephone call for even 5 minutes was expensive.
Reagan's deregulation and the break up of AT&T's monopoly had paid dividends that we are still enjoying. Unfortunately, the American people seem to be falling into the mode of wanting the government to solve our problems. Unfortunately, a majority of the time government intervention just makes things worse - which creates even more problems for the government to "fix."
Isn't it interesting that those who object most to the oil company profits are those who created the problem in the first place by repeatedly interfering with attempts to develop new sources of energy. At least its great job security. The more Congress messes things up the more people want them to fix things.
Reply to this