The N.H. Union Leader
EDITORIAL
June 12, 2008

WHAT IS a "reasonable" corporate profiit? Is it 8 percent, 16 percent, 25 percent? What profit is unreasonable? Don't know? The Democratic majority in Congress thinks it does. And that should scare everyone.

Senate Republicans on Tuesday blocked a windfall profits tax proposal that would tax any "unreasonable" profit made by big oil companies. Yes, that word is actually in the bill. How is Congress to determine what level of profit is unreasonable? Well, that's the scary part. Would you let Congress determine what level of profit your business should make, and then confiscate the rest?
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Of course you wouldn't. But "Big Oil" is the bogeyman of the day, blamed by Democrats for high gas prices (when they aren't blaming Republicans in general and President Bush in particular). So the Democrats consider it fair game for unfair and unreasonable punishment by the government.

The truth, however, is that the case for this new tax is nonexistent.

First, oil company profits are not "unreasonable," however one might define that term. Oil and gas companies earn an average of 8.3 cents per dollar of revenue, compared to 7.8 cents for the Dow Jones average, the San Francisco Chronicle reported in April. And those huge oil company profits are big in dollar, but not percentage, terms.

Exxon-Mobil has earned more money than any other American company in the past five years. But last year, it's most profitable ever, its profit was only 10.9 percent of revenues, Fortune magazine reported last month. Bank of America's profits were 12.6 percent, Pfizer's were 16.8 percent, Coca-Cola's were 20.7 percent, Google's were 25.3 perccent, and Microsoft's were 27.5 percent. Whose profits are "unreasonable"?

While Exxon-Mobil was earning 10.9 percent profit last year, it paid 44 percent of its revenues in taxes, The Wall Street Journal's MarketWatch reported on Tuesday. Forty-four percent! The government took four times as much from Exxon-Mobil's revenues as shareholders did. "Big Oil" isn't paying its fair share? Hogwash.

You might also be interested to know that 52 percent of Exxon-Mobil's stock is owned by fund investors such as mutual and pension funds. That means you. If it is slapped with a windfall profits tax, your retirement plan might be the one paying the price.

And if all that weren't enough, there is the evidence from the 1980s. In 1980, President Jimmy Carter advocated and Congress imposed a windfall profits tax on oil companies. Guess what happened? Domestic oil exploration dropped, and the promised tax revenues did not materialize. It actually made us more dependent on foreign oil. Isn't that what Congress wants to prevent?

In their push to tax oil companies even more for the sole reasons that they have made record profits lately and the public wrongly suspects those profits of being responsible for high gas prices, Sen. Barack Obama and his Democratic Party are trying to move us back to the failed thinking of the late 1970s. That would be economically harmful, not helpful.

The idea that imposing confiscatory taxes on oil companies will somehow reduce the price of oil has no basis in fact. It shows the flawed economic thinking of a party that still assumes, despite all evidence to the contrary, that high taxes help the country, low taxes hurt, and the government can make everything better by asserting greater control.