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Overlooked Gas Tax Fact!
One point that seems to get overlooked in the MSM and candidate discussions of the Gas Tax BS is that the 18 cent gas tax is NOT A CONSUMER TAX! The gas tax is paid by producers. It is assumed that the tax is passed on to the consumer in full, but this is not a tax that gets applied at the pump.
As such, why would HRC ask us to believe that her "windfall profits" tax that she wants the oil companies to pay to cover her "tax holiday" wouldn't also be passed directly down to consumers?
How is it possible that this became the major campaign issue of the moment?
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Comments (9)
A "windfall profits tax" would be a percentage of the profit. There's just no way to pass down a percentage from the top. If they were to raise prices say 20¢, then they'd have 20¢ more profit to be taxed.
May 6, 2008 1:16 PM | Reply | Permalink
I'm going to need you to explain to me how you didn't just prove my point.
If ExxonMobil is currently getting profits of nearly $10 Billion and the govt. says that they don't need to pay the federal gas tax anymore. Then let's say, for arguments sake, that their "new" profit is $12 billion. Along comes HRC saying that they need to pay, I don't know... maybe 20% "windfall profit tax".
Low and behold, ExxonMobil still made nearly $10 Billion in profits THAT QUARTER!
It's a shell game.
May 6, 2008 1:27 PM | Reply | Permalink
The current tax is piad by the companies for book-keeping and compliance reasons. If every little gas station had to file forms with the feds, then they'd have to submit lots of paperwork, there would be some who'd collect the tax and not pay, plus there'd need to be a bigger set of auditors.
I'm pretty sure that most gas pumps have a sticker or is pre-printed with a notice that the price includes all applicable state and federal taxes. (This is may be regionally dictated to insure that no unscrupulous dealer tries to collect another tax at the register, but the wording is always the same).
Also, maybe it was back in the 80s, but when truckers were getting a bad rap from some segments, signs that said how much that individual truck pays in fuel taxes were very popular. Basically, they said "we paid for this road".
The current tax is submitted by the fuel companies because it is easier for them to do it and it is a tax on every gallon sold, while a "profits tax" would be a tax on every dollar kept. If a holiday were to pass, when the holiday is over, the reinstated current gas tax would become an expense and it'd have no effect on their profits.
May 6, 2008 1:38 PM | Reply | Permalink
And then the prices would go up beyond where they would've been prior to this whole thing. If I add a 10% tax onto a company's profits, all the company has to do is raise prices by 11.1% in order for the tax not to have any impact on the company's bottom line (assuming inelasticity of demand). In reality, the company would have to raise prices slightly more than that to also offset reduced purchases.
Don't get me wrong, I'm in favor of a windfall tax or any other gas tax, but I also wouldn't put it past them to pass the tax on to the consumer. This would not be a bad thing as it would reduce consumption, eventually.
May 6, 2008 1:50 PM | Reply | Permalink
As I understand it, the tax would be after the fact, so if they were to raise the price by 11%, then their profits would be increasing by 11% and the tax would be factored on the new total.
Also, as I've pointed out in comments to my post on the topic, Obama has also strongly advocated the "windfall profits tax" and the only real difference is that Hillary would make one conditional on approving a "tax holiday", while Obama dismisses that particular idea, out of hand.
May 6, 2008 2:52 PM | Reply | Permalink
That's my understanding as well. That's the reason I said 11.1% was needed to offset a 10% tax on profits. Here's an example: let's say that company A is making $100 profit. The government then decides to impose a 10% tax on profits. The company adjusts its prices so that it's now making $111.11 profit. After subtracting 10%, the remainder is again $100.
May 6, 2008 3:50 PM | Reply | Permalink
Not to mention the fact that the windfall profit tax would have to get through GWB in order to be passed in time for the 'holiday' which is a little more than unlikely.
May 6, 2008 1:18 PM | Reply | Permalink
Though I'm not saying that I necessarily support the holiday, if the "profits tax" is in the bill that enables the "holiday", then he'd have no choice because he doesn't have a line-item veto.
Personally, as I've said numerous times and in my recent post on this topic, I don't think a "holiday" could pass through Congress without a "profits tax" attached and though I've never said the following before, but if Bush was up for re-election, then I'd probably support giving him the illuminating choice of whether to veto such a bill.
May 6, 2008 1:27 PM | Reply | Permalink
Exactly!
How come nobody is mentioning that the start of this "holiday" is less than 3 weeks away? The federal govt. can't change a light bulb in less than 3 weeks.
May 6, 2008 1:30 PM | Reply | Permalink
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