Kinsley on the oil tax

[Sauron]

Good stuff.


http://www.washingtonpost.com/wp-dyn...l?nav=hcmodule

Oil Tax' Greases Wheels of Rich

By Michael Kinsley

Monday, June 20, 2005; Page A15

Watching the House and Senate quarrel over which favored users and which alternative suppliers will get new subsidies and tax breaks in the energy bill ought to be a hair-tearing experience for anyone with a basic understanding of economics. But at the Bush White House -- where they care more for business than they do for capitalism -- the frustration is only that all this is distracting from the important work of enacting new tax breaks for the traditional oil industry.
[...]
Domestic producers have higher costs. But they were profitably pumping away in 2002, when the price was $27 a barrel, so it's reasonable to assume that most of their output costs $27 or less to put out, and that they've also gotten a raise of $30 a barrel or close to it. Eight million barrels a day at $30 a barrel works out to $87 billion a year. If the extra $131 billion we pay to foreigners is a tax, so is the extra $87 billion we pay to the domestic oil industry. And if that $87 billion is a tax when it is collected from consumers, it is in effect a subsidy when it is pocketed by domestic oil extractors.

And the tax-and-spend doesn't stop there. When the price of oil goes up, the prices of other forms of energy go up too. This includes alternative energy sources such as windmills, cow exhaust, whatever. They all benefit from the equivalent of a subsidy of $30 a barrel, financed by the "tax" on energy consumers of an equal amount.

So it is odd, from an economic point of view (though less so from a political one), that the energy bill debate should be over who will get even more subsidies. What we want or should want (boring as this may be) is more energy taxes, not subsidies. This has been a theme of those irritating people, "thoughtful moderates," since at least the forgotten John Anderson third-party presidential campaign of 1980. The centerpiece of that campaign was a 50-cents-a-gallon gasoline tax, which would have been "rebated" by a drastic reduction in the Social Security tax. The idea was not to raise revenue but to affect behavior. That is still the right approach, though hopeless in today's political culture. Come to think of it, it was hopeless back then, too.