OPEC member suggesting that oil might be a bit too high

[Deacon]

It doesn't have to make economic sense, just political sense. In other words, it just has to pander to stupid people's baser instincts, pretty much the entire platform on which the Democratic party is based.

[StruckingFuggle]

At the same time, is it really a disincentive, or even the destruction of an incentive?

I guess it'd depend on how much the taxes were, eh? I mean, if I could make an extra two million dollars, and lose 25% to winfall taxes, I'd still be making One million, seven hundred and fifty thousand dollars. I'd still want to. I'd still be encouraged to, if I could. Wouldn't you?

[Deacon]

You've argued this point before, and I marvel.

[Nebet]

At the same time, is it really a disincentive, or even the destruction of an incentive?

I guess it'd depend on how much the taxes were, eh? I mean, if I could make an extra two million dollars, and lose 25% to winfall taxes, I'd still be making One million, seven hundred and fifty thousand dollars. I'd still want to. I'd still be encouraged to, if I could. Wouldn't you?

Yes, it is a disincentive, because it's a clear message from the government that those who are too successful are punished.


The extra two million dollars doesn't just appear. It requires a fair amount of investment and, y'know, work.

Think about it. Two scenarios:

A) You work at 75% of your effort level, and earn 75 credits.

B) You work at 100% of your effort level, and earn 100 credits, but then have a quarter of those taken away because you are earning too many credits per hour, leaving you at 75 credits.

So your choices are, put in that extra 25% effort and earn 75 credits, or slack off by 25% and still earn 75 credits. Which are you going to do? Which is a better application of time and energy? If the outcome is the same, aren't the majority of people going to operate at 75% capacity?

[Martin Blank]

if I could make an extra two million dollars, and lose 25% to winfall taxes, I'd still be making One million, seven hundred and fifty thousand dollars. I'd still want to. I'd still be encouraged to, if I could. Wouldn't you?

You fail at math.

A quarter of two million would leave you with $1.5 million, not $1.75 million.

In any case, some of the windfall tax rates being bandied about are not that low. Most are 50% or higher, and at least one proposes a 100% tax. 'You made $20 billion? Well, the windfall taxes set in at $10 billion, so... gimme everything over that.' That's a serious disincentive.

Back on the main topic, I caught a brief story on NPR this morning that Democrats in the Senate may be willing to entertain lifting the Congressional ban on coastal drilling -- leaving the decision to the states, where it mostly belongs in the first place -- if the White House is willing to accept increased federal powers to limit speculation in the oil market. All sides are playing it rather cagily, except Pelosi, who is joining other House Democrats saying that she will not accept any new areas for drilling whatsoever.

[Deacon]

Barbara Boxer is joining in and, in trying to take the spotlight as Queen Bitch from Pelosi, she's making herself look like a complete idiot with her continued rhetoric.

[StruckingFuggle]

Oh, wow... I do fail at math.

And hm. Okay, obviously, huge to full windfall taxes wouldn't work, but I would still maintain that there's a point you can tax people to where if you don't cross it, as long as more work = more money, people will do more work.

I mean, obviously this is the case - people still work their way up into the top income tax bracket.

[Martin Blank]

California members of Congress can have a tough spot to be in, I'll grant them that. I don't think anyone has the kind of politics that we do.

Environmentalism first, but don't touch our cars.

Reform the prisoners, but keep the death penalty and never grant parole.

Save the neighborhoods from the 1930s, but widen the freeways (without building decks).

And it kind of gets worse from there.

Still, Pelosi, Boxer, and Feinstein have a habit of saying/doing stupid things.

[Deacon]

And hm. Okay, obviously, huge to full windfall taxes wouldn't work, but I would still maintain that there's a point you can tax people to where if you don't cross it, as long as more work = more money, people will do more work.

I'm sure Louis XVI said the same thing in the late 18th century. Remember to keep your head about you when you start salivating over other people's success, Fuggle. It's a savage, vindictive, punitive, primitive, and unfair way to do business. When somebody swoops in after the fact to take by force what you've rightfully earned, it leaves you feeling violated and helpless. And who's to say where the line for these reactionary measures is drawn? You come from a life of privilege and a financially successful family. Imagine how your parents would feel if you went to them and said their total household income could only be up to $50k, and you would take from them 50% of anything over that, and if they decided to shoulder burden and strained all the way to $100k, then everything would be taxed at 75%. Oh yeah, and you told them this AFTER they made the money.

It discourages go-for-broke innovation and entrepreneurship and high-risk/high-reward gambles on the future. Once bitten, twice shy. They start dancing on the fine line between profitability and working only to shovel even more money into the bloated, jiggling government gullet. They grow distrustful and resentful of their government. Communism doesn't work. Taking disproportional amounts from the successful to throw away in the pit of bureaucracy that is the central government isn't the best policy.

[ShahinVahdat]

So, as I've said before I'm all for companies making money, that's fine. Taxes on profit just for the sake of taxing profit is not a good idea either. However, what there should be taxes on is profits from price gouging. Let's look at the companies that have all been brought up. Microsoft for one has maintained a 27% profit margin for the past two years, and actually FELL from 30% in its FY2005. Google has had shifty profits since it's IPO, going from 16 percent to 30 percent back down to 25 percent last year on very little revenue compared to the other companies I've cited. Walmart is another company that has maintained steady net profits over the past few years. In the 3 percent range for the past 3 years.

Now let's get to the oil companies. Exxon Mobil's net profits actually went up by 2 percent between 2004 and 2005. Chevron's net profit margin went up 3 percent between 2003 and 2004. How do you explain a rise in net profits unless they get more tax breaks or they have raised their prices past the point to compensate their increase in the cost of revenue.

[Deacon]

Have you never even heard someone else describe how they saw a headline about an article about a book about business? Do you have any clue about the oil industry at all? Your only explanation for a small net gain in profits a few years back is price gouging?

[ShahinVahdat]

Well, drop some knowledge on me, oh great one?

[Deacon]

No. Show us how you've arrived at the conclusion that any net increase in profit margin is due to price gouging. Also, define price gouging.

[ShahinVahdat]

I've said that the reasons could either be from price increases beyond compensation for increase in the cost of services or government tax breaks/help. Those are my two theories. What are yours?

Edit: As you can see from this post and my previous post, I only said "increase in price past compensation for..." I brought up price gouging as a valid reason to tax excess profits.

Further Edit: Deacon, are you trying to say that Louis XVI was not a friend of the rich? Nobles were excluded from taxes under the system of the French monarchy, so the rich were definitely allowed to prosper. The poor and middle class were the ones suffering, which at the time was not only a French phenomenon. If anything, the French Revolution was about how the rich were exempted from paying taxes and were able to live luxurious lives while everyone else starved to death. Maybe someone should tell you about a headline from an article about a book concerning HISTORY.

[spikegirl7]

I'm wondering, did the windfall tax pass? I heard that it had been attached to a bill, and I started screaming (literally, I was listening to NPR and I heard this and started yelling in rage at the radio). Or is it still being bandied about?

I hate the idea of windfall taxes. And I am not happy that everyone is blaming the oil companies for the high prices of gasoline. The percentage of profit that they make is rather low, and their profits climb because the demand for their product continues to rise. They are selling more, and so they make more money. Why should their profits be low when they are producing so much? If you produce more your profits go up, that is the way it works. If you are an EFFICIENT company, as you produce more the profit/cost ratio will rise too because there will be better ways to produce more.