Wednesday, November 16, 2005

Klobuchar still peddling old wine 

Amy Klobuchar, a candidate for the DFL nomination to replace Mark Dayton in the Senate, is still selling her plan for a "gas gouger tax" and is running a radio ad in northeastern Minnesota. At the request of Gary Miller at Kennedy versus the Machine, I wrote this over there. I transcribed the radio ad from here and offer you the first 30 seconds (the rest covers her background, as you can hear for yourself.)

News announcer: "Today ExxonMobil reported the biggest profits in U.S. history: $10 billion in three months."

Voiceover: The oil companies are raking it in, and you know who's paying. What are the Republican leadership in Congress are doing: Absolutely nothing. Well, Amy Klobuchar thinks there' something we can do. Make the oil companies that are profiteering pay a penalty. The more they gouge, the more they pay. Klobuchar says the money should help people pay for home heating oil. And also invest in the long term in home-grown energy, like ethanol and biomass, wind and solar, a comprehensive energy policy.

The twist here is the directing of the tax money. As David Altig points out here in discussing the Byron Dorgan variation of this, the money gets tied to a home-grown energy policy. If it's such a great idea for governments to engage in this, though, why tie funding of these policies to a windfall profits tax? Given the failed history of these taxes to raise revenues, either those policies go unfunded or they increase demand for higher income tax rates.

David also pointed out a major problem here, which is that it makes energy exploration a heads-I-win-tails-you-lose proposition. If you invest in something that produces a good whose price is rising, you get taxed extra hard. If you invest in something that produced a good whose price is falling, nobody compensates you. See my post here, and in particular the video of the interview between Lee Raymond and Neil Cavuto. Or see MSU Mankato economist Phil Miller at Market Power.
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