Wednesday, November 09, 2005

Stupid Letter to the Editor O' the Day

From the WSJ

As the author of the windfall legislation your editorial commented on, I must point out some misinterpretations. My bill offers a true windfall profits tax, unlike the 1970s excise tax on oil. The difference between these tax structures is critical to understanding the impact of my bill. I do not advocate an excise tax, which increases the price of oil because both cost of production and profit are taxed. The preferred approach is a windfall profit tax, because it is constructed to tax only excess profit, leaving production costs and reasonable profits unaffected.

A true windfall profits tax raises little revenue because it sends a signal to the industry that price gouging will not be rewarded. Therefore prices quickly return to a reasonable level. Any minor revenue raised gets returned back to the consumer via tax credits.

Rep. Dennis J. Kucinich (D., Ohio)

Please explain to me Mr. Kucinich, where in the constitution exactly does it give Congress the power, not to mention the wisdom, to determine what is "excess profit"? Did Congress pass a five year plan or something while I was wasn't looking?

For a contrast to this bit of congressionally sponsored idiocy, read this post on Cafe Hayek (written by actual economists) on oil prices and taxes.