Riding the Metro into the Swamp this morning, before I leaned my head against the glass to catch my last few minutes of sleep for the day, I noticed that there were stories in the freebie news rags about the dramatically increased Metro ridership due to gasoline prices. Even the conductor even commented on the number of people saying that “We all know why.”

So, it is with a great deal of chutzpah that the left-leaning codgers in the Senate tried to…get this…increase gas prices to punish the evil corporations:

The legislation at issue called for repealing some $17 billion in tax breaks for oil companies and for imposing a 25 percent windfall profits tax. Companies could avoid the windfall profits tax if they invested the money in renewable energy development or in new refineries.

…

“The Bush administration has failed to address these concerns,” said Senate Majority Leader Harry Reid, a Nevada Democrat. “Sadly, the Republican members of Congress have stood by his side, cheering him on, cheering on the oil companies as they make more money.”

reason’s Ronald Bailey had this to say:

In any case, [the U.S.] has had a previous bad experience with “windfall profits taxes” on oil companies. In 1980, as a parting gift, President Jimmy Carter and Congressional Democrats imposed just such a tax. How did it work out? Not so well. In 2005, the Tax Foundation looked at the issue and pointed out that the Congressional Research Service…

…found the windfall profits tax had the effect of decreasing domestic production by 3 percent to 6 percent, thereby increasing American dependence on foreign oil sources by 8 percent to 16 percent. A side effect was declining, not increasing, tax collections.

Great idea, huh? But it gets even worse. In 2005 Congressional testimony, ConocoPhillips CEO James Mulva cited the same CRS study as finding…

…the windfall profits tax that was signed into law in 1980 and repealed in 1988 drained $79 billion in industry revenues during the 1980s that could have been used to invest in new oil production-leading to 1.6 billion fewer barrels of oil being produced in the U.S. from 1980-1988.

So not only does a “windfall profits tax” boost prices now, it reduces investment in oil exploration helping to keep prices high in the future. Let’s call that a “lose-lose” for American motorists.

And by the way, just how much in taxes has Big Oil paid? Back in 2005, the Tax Foundation reported…

…over the past 25 years, oil companies directly paid or remitted more than $2.2 trillion in taxes, after adjusting for inflation, to federal and state governments-including excise taxes, royalty payments and state and federal corporate income taxes. That amounts to more than three times what they earned in profits during the same period, according to the latest numbers from the Bureau of Economic Analysis and U.S. Department of Energy.

You don’t need a Ph.D. in Economics to understand that if you raise the cost of providing a service, the cost will be passed on to the consumer. Hell, you should be able to figure this out with an 8th grade education…or a memory that goes back further than the previous election cycle.

Filed under: The Dismal Science, Profiles in Governance