Friday, February 03, 2006

On Taxing Oil Profits

The president is right again.

President Bush rejected criticism of U.S. oil companies over their record profits due to high oil prices:

NASHVILLE, Tenn. (AP) - President Bush defended the huge profits of Exxon Mobil Corp. (XOM) Wednesday, saying they are simply the result of the marketplace and that consumers socked with soaring energy costs should not expect price breaks.
In an interview with The Associated Press, Bush also addressed oil's future, offering a more ambitious hope than in his State of the Union speech for cutting imports from the volatile Mideast.
Those who suggest we should tax oil companies over their profits are basically saying that companies should not profit in circumstances where people are experiencing hardship.

Should we tax defense contractors more heavily in times of war for their record profits when military families experience hardship? Should we tax home builders along the gulf coast who are making a post-hurricane fortune while their customers are living in such hardship?

This is another very misguided energy policy, because it leaves no burden of responsibility on the individual. Remember that people choose which homes they buy, so the best thing to do right now is allow the housing market to drive down the values of homes that require expensive heating oil. It would be best if government did not try to intervene, because many of these companies would simply respond by decreasing their profits through more capital expenditures or bonuses on the payroll. And they would have every right to.


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