Dems Fail to Place Cap on Profits

Like I was sayin… you can’t put a ceiling on success.  Today, the Dem run congress failed to get enough votes to push forward a tax on oil company profits that go above a certain level.

According to Dick Durbin the No. 2 Dem in the Senate, “The oil companies need to know that there is a limit on how much profit they can take in this economy”.  My question is, who sets that limit?  The government?  Aside from the obvious issues, there are several things that need to be considered with this effort.

First, the cost of taxes are passed on to the consumer.  The tax would not take away from the oil companies, but take away from the gas buying public.  Do we really need to pay more for gas?

Secondly, the taxes wouldn’t lower oil company profits (which the government doesn’t have the right to do), but rather would most likely lower production which would also increase prices.  A basic tenet of economics is that when demand goes up and supply goes down, price goes up.

The other scary thing about this thinking is who is the next target?  Do I make too much profit?  Can my excess money somehow help the economy if they take it away from me?  The congress does have the right to levee taxes, but does not have the right to determine how much profit a company can make.

The Dems do have one thing right in this fight.  Durbin indicated that if something isn’t done to bring down prices, “we’re going to find ourselves in a deep recession.”  Perhaps he should consider increasing supply by allowing domestic drilling and expanding processing capacity.  Going back to economics 101, if supply goes up, the price goes down. 

With all the push to bring down prices, you would think that they would stop blocking efforts to increase supply.  We haven’t substantially expanded a refinery or built a new one in decades due to government interference.  It has gotten to the point that foreign countries have started drilling off of our coasts since we won’t.

America does need to have a long term strategy to move away from oil and other fossil fuels.  But taxing oil companies doesn’t move us in this direction.