Wednesday, November 09, 2005

Justifying the Windfall Tax

Properly structured, a windfall tax would generate money for mass transit and alternative fuels, for helping carmakers move from sport utility vehicles to energy-efficient models, and for other ways to cut demand. It would bring in so much money - more than $24 billion this year, if it was set at 50 percent of the profits on oil sales above $40 a barrel in 2005 - that some could also be used to help consumers cope with the current high prices, including providing a few billion dollars for home heating aid for the poor...But using all of the revenue to provide consumer rebates - as some lawmakers propose - would be counterproductive because that would foster only more consumption.

Should anyone tell this NY Times editorialist that if you have a massive tax on oil that costs over $40/barrel that you will be unlikely to have any oil cost over $40/barrel?  The resulting de facto price cap will result in supply shortages?  The resulting supply shortages will bring about lines at the pump that will make you think it is the 70s all over again?  Kinda makes you want to make 4 years of economic a requirement to graduate high school

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