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1 Scott A. Hodge & Jonathan Williams, Oil Company Profits and Tax Collections: Does the U.S. Need a New Windfall Profits Tax 1 (2005)

handle is hein.taxfoundation/ffebxz0001 and id is 1 raw text is: FOUNDATION November 9, 2005 Oil Company Profits and Tax Collections: Does the U.S. Need a New Windfall Profits Tax? by Scott A. Hodge and Jonathan Williams This week, the Senate will hold hearings on rising oil and fuel prices and the subsequent record earnings recently posted by U.S. oil companies. Some lawmakers have suggested that these profits are unseemly and, thus, should be subject to a new windfall profits tax. Before rushing to create a new federal tax, lawmakers should ask two questions: (1) Do oil companies currently pay too little in taxes compared to profits? (2) What was the effect of the last windfall profits tax enacted in 1980? The answer to the first question is that 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. These figures do not include local property taxes, state sales and severance taxes and on- shore royalty payments. The answer to the second question, according to the Congressional Research Service (CRS), is that the 1980s windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil.'

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