Barack Obama wants to give $1000 handouts to families that will be funded by a windfall profits tax on oil companies. Obama has been talking about this kind of tax for quite a while but it is worth emphasizing anew just how bad the idea is. A windfall profits tax will cut into the profit structure of oil companies–which isn’t nearly as large as people think and which is further cramped by an extremely volatile pricing structure–and will only encourage oil companies to pass the price increase down to consumers. The application of windfall profits taxes are utterly selective and utterly hypocritical. And the imposition of such a tax will only serve to encourage oil companies to cut back on their operations so as to save money. This will necessarily impact supply and production for the worse and will help increase prices in the long run.
But hey, anything in order to allow government to get its hands on private money, no? Recall that while teaching law, Barack Obama would “refer to case law one moment and ‘The Godfather’ the next.” I guess it should come as no surprise, then, that he wants to wet his beak a little. And make no mistake, this is all Obama’s windfall profits tax amounts to.