Law Students

Why ?Wind Fall? Profits Are a Good Thing

With both Democrat candidates trying to make corporations and especially the oil companies the boogie man in our economy, Investors Business Daily gives a healthy dose of perspective regarding ?obscene? profits by oil companies:

Our free-market economy is built on profit. Higher profits mean more jobs, higher incomes, more investment in equipment and people, higher standards of living. Yes, profits are the engine for all of this ? and that includes the profits of "Big Oil." By signaling that supply is scarce, higher profits encourage more production. Except, that is, when Congress through its inept lawmaking stands in the way. And that's the case now with the oil industry.
Truth is, oil industry profits are in line with the rest of American industry. In 2007, a record year, they earned 8.3 cents per dollar of sales. Beverage companies and cigarette makers, by contrast, earned 19.1 cents. Drug makers, 18.4 cents. Indeed, all manufacturers, 8.9 cents on average, made more than "Big Oil." Besides, we've tried windfall profits taxes before, in the early 1980s, and they were an utter failure?Remember: Oil companies don't really pay "windfall profit" taxes, anyway. You do.

What they mean by that last sentence is that when the government makes it more expensive to produce a product, the increase cost is passed down to the consumer. According to IBD, Big Oil paid $90 billion in taxes in 2006, an increase of 334% in four years so it?s not likely that they are anxious to pay more taxes.

The economy was looking dour for a while, but we shouldn?t let that be an excuse to implement demonstrably loser policies, especially with signs of a rebound. With the jobless rate dropping to 5%, the Dow back over 13,000, the dollar increasing in value and an increased sense of optimism among investors, why would we put someone in the White House who has the intention of taking more money out of the pockets of the most productive parts of our society that are the most responsible for creating jobs and increasing wages?

Full post as published by SoapBox Law on May 02, 2008 (boomark / email).