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1 Jonathan Williams & Scott A. Hodge, State and Federal Treasuries Profit More from Gasoline Sales than U.S. Oil Industry 1 (2005)

handle is hein.taxfoundation/ffdixz0001 and id is 1 raw text is: Note: An updated version of this study, Tax Gouging at the Pump, April 2, 2008, can be found at http://www.taxfoundation.org/blog/show/23069.html. October 26, 2005 State and Federal Treasuries Profit More from Gasoline Sales than U.S. Oil Industry Fiscal Fact No. 38 by Jonathan Williams and Scott A. Hodge High gas prices and strong oil company earnings have generated a rash of new tax proposals in recent months. Some lawmakers have called for new windfall profits taxes-similar to the one signed into federal law in 1980 by President Jimmy Carter- that would tax the profits of major oil companies at a rate of 50 percent. Meanwhile, many commentators have voiced support for the idea of increasing gas taxes to keep the price of gasoline at post-Katrina highs, thereby reducing gas consumption. However, often ignored in this debate is the fact that oil industry profits are highly cyclical, making them just as prone to busts as to booms. Additionally, tax collections on the production and import of gasoline by state and federal governments are already near historic highs. In fact, in recent decades governments have collected far more revenue from gasoline taxes than the largest U.S. oil companies have collectively earned in domestic profits. According to data compiled by the U.S. Department of Energy's Energy Information Administration, the domestic profits of the 25 largest oil companies in the U.S. have been highly volatile since the late 1970s. As illustrated in Figure 1, between 1977 and 1985, the oil industry recorded relatively high profits-averaging nearly $33 billion per year, after adjusting for inflation. These good times were followed by ten years of relatively flat profits, averaging just $12.3 billion per year. In 1996, profits began to rise again but have been anything but stable, ranging from $9 billion to nearly $42 billion per year. Between 1977 and 2004, the industry's domestic profits totaled $643 billion, after adjusting for inflation.

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