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Thomas: Windfall Profit Tax Is Bad Policy
Wyoming’s senior senator takes tax opposition to Senate floor
 
November 17th, 2005 - WASHINGTON -- U.S. Senator Craig Thomas spoke in opposition to the windfall profit tax today on the Senate floor.

“The windfall profits tax amendment offered is not only bad policy, but sends the wrong message to American companies and entrepreneurs. Supporters of this tax have tried to demonize the whole concept of making a “profit.” Companies are in business to make a profit! If they didn’t make a profit, they shouldn’t be in business.

Supporters of this tax want you to believe that the oil industry has somehow managed to reap undeserved profit, resulting in one of the highest profit margins of any industry in America. This just isn’t the case. Profit margins for oil companies – when measured against other sectors of the economy – are extremely modest.

A number of other industries are much higher, including the financial sector, pharmaceuticals, software, and insurance. (Reference floor chart)

For those who want to argue that this chart plots second quarter profits rather than the higher third quarter profits that have been recently announced, I’ll give you that.

But just so you know, if the third quarter profits were charted, they’d be right there at 8.1 percent.

Do the supporters of this amendment want to include those sectors that outperform the oil industry in the windfall profit tax amendment?

I understand that there are colleagues in the Senate who represent a number of insurance companies in their home state, and, despite their profit margin of over 10 percent, I don’t see those members rushing to the floor to vilify their insurance companies.

As I listened to the debate on this issue last evening, I thought some of the attacks directed at Senate colleagues were inappropriate. Members of this body should hold themselves to a higher standard.

The facts speak for themselves. Congress tried this approach once before in the early 1980’s, and it didn’t work. It is already a failed experiment.

The non-partisan Congressional Research Service has documented that this policy was a failure in the past. I can only conclude from their analysis that it will be a failure in the future.

The whole concept just defies common sense. Who exactly is qualified to deem that profits determined by the market are “too” high? I certainly don’t believe that one member of Congress has those qualifications.

We live in a market economy, and it is a model that works. Our economy is in excellent health, unlike many of our neighbors that have tried – and failed at – a non-market approach.

A market economy means that if you engage in the risk associated with investment, you should reap the benefit of that investment. Arbitrarily deciding that the market is wrong doesn’t make sense to me.

Not unlike other industries, the oil and gas industry requires significant investment and risk.

The industry is experiencing very high exploration and development costs. According to Goldman Sachs, replacement costs for domestic onshore oil production are between $50 and $60 per barrel.

Companies doing business in my state are investing in Wyoming – in a big way.

Billions of dollars are being pumped into the state through wages, royalty payments, capital and infrastructure investment, and tax revenues.

This effort is generating record production that everyone in this chamber relies on. Additional investment will be needed, not only to produce more fuel, but to do it in a better and more environmentally-friendly way.

A windfall profits tax would discourage investment and new domestic oil production, as seen when it was tried earlier: between 1980 and 1986, domestic oil production decreased by about 1.6 billion barrels. As a result, oil imports rose between 8 and 16 percent.

To again go down this road would severely undermine our national energy policy and our desire to be less reliant on foreign oil. If we accept a windfall profits tax on the oil industry, every industry in America should be concerned.

If this can happen to one industry today, it can happen to others tomorrow. I’d like to finish that I strongly believe that if market manipulation or other criminal behavior has taken place, the actors should be punished to the full extent of the law.

For a market to work, it must be free of wrongdoing, and I fully support identifying and going after people who engaged in illegal conduct.

I don’t believe a windfall profit tax, however, is the correct response. In support of both good tax policy and good energy policy, I urge that my colleagues oppose the pending windfall profits tax amendment.

View Floor Chart  

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November 2005 Press Releases  « October | December »   « 2004 | 2006 » 
29th -  Parks Chairman to Tour Grand Canyon
29th -  Thomas on the Mining Provision:
22nd -  Thomas: Visitor Center Renamed for Taggart
18th -  Military construction, veteran bill goes to President
18th -  Thomas Secures Extra $4M for Grand Teton
18th -  Thomas Request Funds Agriculture Research
17th -  current Press Release
17th -  Thomas works to revive COOL
17th -  Thomas Demands Equity for Rural Health
15th -  Delegation: Grizzly Delisting Overdue
15th -  Thomas, 'Support Those Who Defend Our Freedom'
8th -  Thomas: Park Policies Need More Public Input [ listen to Radio Clip ]
8th -  Thomas: Gulf Residents Committed to Recovery [ listen to Radio Clip ]
4th -  Thomas’ Rural Health Bill Passes Senate
4th -  Thomas Heads To Gulf for Field Hearing
3rd -  Thomas, Enzi continue crusade for COOL
3rd -  Thomas: Senate Fuel Price Reviews Will Continue
2nd -  USDA Corrects Delay on Livestock Assistance
1st -  Thomas: Parks Hearing Provides Input for Policy
1st -  Chairman Thomas Reviews Park Policies

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