Stupid Senate Tricks

I have posted on this subject several times, but this is even dumber than I expected.

The last time Congress imposed a form of the windfall tax was the final gloomy days of Jimmy Carter, and the result was: a substantial reduction in domestic oil production (about 5%), thus raising the price of gas at the pump; and a 10% increase in U.S. reliance on foreign oil. A windfall profits tax is the ultimate act of economic masochism because it taxes only domestic production, while imports and foreign oil subsidiaries bear almost none of the cost.

But wait, this time it's worse. The current Senate proposal would actually require oil companies with daily production of 500,000 barrels or more to disregard generally accepted accounting principles, by revaluing their oil inventories. GAAP accounting (and current tax law) allows oil firms to value barrels of oil sold at what it costs to replace that barrel.

The Senate bill would require the companies to revalue their inventories by $18.75 a barrel -- an arbitrary number if there ever was one. In effect, this means that Congress is creating the illusion of higher oil profits, and thus raising the tax liability of oil companies by an estimated $5 billion next year. This would be on top of the 35% tax rate they already pay on their actual profits.

When Andy Fastow tried to create phony profits at Enron, he got 10 years in the slammer. Now Senators want to create phony corporate profits, so they can grab them to spend. Where's Eliot Spitzer when you really need him? What's even more reprehensible about this revenue grab is its retroactive nature. In a sense this is less a tax than it is an ex post facto confiscation of private property.