Talk of tax “fairness” may be all the rage today, but it takes me back to 1980 and Jimmy Carter’s “windfall profits tax.”
In the previous year, then-President Carter had delivered his infamous “Malaise Speech,” in which he had addressed concerns about the energy crisis, going on and on about this program and that, and the need for “energy independence,” but not mentioning the one good thing done during his administration regarding energy: the beginning of energy market deregulation.
Carter’s Democratic Party was, like today’s Democrats, concerned about “fairness.” Because of the deregulation, they expected energy companies to reap “windfall profits.” Which those businesses somehow didn’t “deserve.”
Arguable, that.
But skip morality for a moment, and look at it from an economic point of view. The new, extra profits from a deregulated market would have enticed more investment into the areas where the “windfalls” were being made, thus increasing production, reducing prices. To the benefit of all.
Instead, Congress enacted the tax, and Carter signed it 33 years ago yesterday. And for six years, domestic production of oil produced “negative” profits. All Congress really did was delay and diminish the economic recovery to be expected from deregulation.
Congress also got much less revenue from the tax than projected.
The Crude Oil Windfall Profits Tax was repealed in 1988, and we experienced great growth in the 1990s.
A word of caution, I think, to those who bandy about “fairness” to the exclusion of sense, or worry overmuch about energy company profits, today.
This is Common Sense. I’m Paul Jacob.