T Nation

Government Price Gouging


I find it somewhat apalling to hear politicians and all the haters of "big oil" call for windfall taxes on the profits of these companies. They routinely call them excessive, as if they were in business to only make a certain amount of money (let's all say it together folks, SUPPLY AND DEMAND!).

Yet everyone seems to give the government (or shall we call it big government?) a pass on the windfall taxes they are taking in lately.

First big government rakes in a shitload of cash directly at the pumps in excessive taxation. Then big government goes after the oil companies and rakes in cash from the profits that the oil companies produce. Talk about the ultimate parasite!

The article below states it very well, "like any parasite, if it eats too much it will kill the host."

Who Profits at the Pump?

by Jonathan Williams and Scott A. Hodge

[u]Over the past quarter century, oil companies directly sent more than $2.2 trillion in taxes, adjusted for inflation, to state and federal governments - three times what they collectively earned in profits over the same time period.[/u] Yet some politicians say this is not enough and are proposing a new "windfall profits" tax to raise billions more for federal coffers.

Gas Taxes Exceed Oil Companies' Profits

[i]With BP, Exxon-Mobil, and Shell reporting record profits, the Tax Foundation reminds us in its latest Fiscal Fact that the biggest beneficiaries of gasoline sales are federal and state governments, not the oil industry

High gas prices and strong oil company earnings have generated a rash of new tax proposals in recent months. Some lawmakers have called for new "windfall profits" taxes?similar to the one signed into federal law in 1980 by President Jimmy Carter?that would tax the profits of major oil companies at a rate of 50%. Meanwhile, many commentators have voiced support for the idea of increasing gas taxes to keep the price of gasoline at post-Katrina highs, thereby reducing gas consumption. However, often ignored in this debate is the fact that oil industry profits are highly cyclical, making them just as prone to "busts" as to "booms." Additionally, tax collections on the production and import of gasoline by state and federal governments are already near historic highs. In fact, in recent decades governments have collected far more revenue from gasoline taxes than the largest U.S. oil companies have collectively earned in domestic profits....

Federal and state taxes on gasoline production and imports have been climbing steadily since the late 1970s and now total roughly $58.4 billion. Due in part to substantial hikes in the federal gasoline excise tax in 1983, 1990, and 1993, annual tax revenues have continued to grow. Since 1977, governments collected more than $1.34 trillion, after adjusting for inflation, in gasoline tax revenues - more than twice the amount of domestic profits earned by major U.S. oil companies during the same period.[/i]

So again I ask, who's gouging?


Ridiculous. And who's going to pay for it? We, the consumer.


All I have to say is that big oil should be treated like everyone else... which probably means no big tax breaks and no big tax hikes.




The argument can be made that gas taxes are in part beneficial to the oil companies since it is the federal and state governments who do build and repair roadways.

On another note, taxes cannot really be considered a source of gouging as they are a constraint built into the market in which compaines operate and typically do not rise significantly over a short period of time. Additionally, gasoline taxes are slow to change, often with significant warning (ie: while a bill is in committee, a period of time built into a bill before a tax increase were to take effect, statutorily mandated increases in taxes).

The general characterization of the recent rise in gasoline prices as price gouging is rather definitionally incorrect as gasoline is not an essential good necessary for the preservation of life, limb or property - the standard usually used by government in determining weather or not to prosecute a person or entity for price gouging. Raising the price of generators or foodstuffs in anticipation of a blizard or hurricane would constitute price gouging.

That said, were the government to impose a windfall tax on companies and that tax were to be passed on to consumers, this could be argued to be price gouging on the part of the government.


I'd honestly like to see us end every scrap of corporate welfare in the form of subsidies and tax breaks that we ALREADY hand out to the big oil companies before talkinga bout windfall profit taxes. Let them pay their fair share first, and if we still have a problem, perhaps it'll be time to re-evaluate their purported supply and demand driven price point.


Personally, I agree with the idea of getting rid of the fucking-ridiculously-huge tax breaks that the oil companies get. In addition, I would also like to get rid of the, again, fucking-ridiculously-huge tax breaks that EVERY major business gets.

When a major business moves to an area, we (the citizens) end up paying their taxes for the supposed privilege of that business to bring income to the area through goods, services, jobs etc. Do you know what happens then? These very same corporations turn around and outsource those very same goods, services, jobs etc. to third world countries or illegal labor because either they are getting tax breaks for that as well or it reduces their bottom line and their board rakes in enormous dividends! So we get fucked twice! We pay for the privilege for them to outsource the very things that they were supposed to bring to the area! So we get all the cost and none of the benefits! In the meanwhile, the small, mom and pop businesses don't get any of these breaks, but they provide the services. It is just plain wrong!

What does our wonderful government do about this, nothing! Oh, unless you count the numerous pay raises that they voted for themselves! They do nothing because, these privileged elitists in public office are also benefiting from this travesty!

Sorry about the rant...Thanks for letting me get this off my chest.


The problem is if business doesn't get the tax break they often go somewhere else.

There is no magic solution.