Economists are skeptical of Barack Obama’s proposal to impose a windfall profits tax on oil companies in order to pay for a $1,000 rebate to consumers squeezed by high energy prices.
“I am proposing that we pay for this rebate by taxing the windfall profits of oil companies like Exxon Mobil — a company that announced yesterday that it made nearly $12 billion last quarter, more than any U.S. corporation has ever made in a single quarter,” Obama told an audience in Florida on Friday. “It’s time we used some of their record profits to help you pay record prices.”
The proposal did not impress Lee Sheppard, a tax lawyer with Tax Analysts in Falls Church, Va.
“He is pandering,” Sheppard told The Examiner. “He’s just doing a symbolic thing so that, in the great words of Bill Clinton, he can ‘feel their pain.’"
“People like to hate the oil companies when the gasoline price gets high,” he added. “And politicians have to be seen to be doing something. Tax law is how politicians communicate with the middle class.”
Gus Faucher, director of macroeconomics for Moody’s Web site Economy.com, had a mixed reaction to Obama’s proposal.
“The rebate is not necessarily a bad idea because it will stimulate spending by consumers at a time when they’re getting hit by falling house prices and rising energy prices,” Faucher told The Examiner.
“I’m less impressed by the idea of a windfall profits tax,” he added. “Exxon Mobil would normally invest their profits or pay them out as dividends, so if that money is instead going to the federal government, it’s being taken out of the economy. So you’re taking with one hand and giving with the other.”
Jason Furman, director of economic policy for the Obama campaign, said the proposed windfall tax “would apply to some of the excess profits that oil companies have made, not because of their investments, not because of their ingenuity and skill, but simply because of the high oil prices that we’re facing today.”
John McCain spokesman Taylor Griffin disagreed.
“The higher taxes that Barack Obama supports are one of the surest ways to kill jobs and exactly the wrong approach to a slowing economy,” Griffin said. “While American jobs and families suffer from high gas prices, Barack Obama stubbornly opposes additional oil drilling, more nuclear power and the gas tax relief we need.”
President Bush was asked about the wisdom of Obama’s proposal to raise taxes on oil companies.
“What we ought to be doing is encouraging oil companies to find oil, and that’s the best way to take the pressure off the gasoline prices,” he told radio host Rush Limbaugh.