CCAGW Slams ‘Reasonable Profits Board’ Proposal

(Washington, D.C.) – Today, the Council for Citizens Against Government Waste (CCAGW) condemned a bid by six House Democrats to create a federally-run board that would levy enormous tax rates on oil companies whenever gas prices jump. Proposed by Rep. Dennis Kucinich (D-Ohio) along with Reps. John Conyers Jr. (D-Mich.), Bob Filner (D-Calif.), Marcia Fudge (D-Ohio), Jim Langevin (D-R.I.), and Lynn Woolsey (D-Calif.), H.R. 3784, or the “Gas Price Spike Act of 2012,” would “impose a windfall profit tax on oil and natural gas” whenever energy companies record “windfall profits,” defined as any profits above an amount determined by the “Reasonable Profits Board.”

If passed, the bill would create taxes of 50 percent on profits 100 to 102 percent above a “reasonable” amount, taxes of 75 percent for profits between 102 and 105 percent of a reasonable profit, and a 100 percent tax on anything above 105 percent. According to Kucinich, the new revenue would be used on “forward-thinking transportation alternatives.”

“This bill represents populist demagoguery in its lowest form,” said CCAGW President Tom Schatz. “Gas prices, like all others, are determined by supply and demand. The idea that they can be lowered by imposing exorbitant, arbitrary taxes on the companies that provide consumers with gasoline and natural gas reveals an unflattering degree of economic ignorance among these members. The predictable result, which has already been observed in states that have experimented with price ceilings on gasoline, will be shortages and a dramatically more inconvenient gas-buying experience.

“It is not the business of government to determine which industries may or may not benefit from increased demand for their products,” added Schatz. “Nor is it possible to define ‘reasonable’ profits in any objective manner. The notion that such a threshold should be decided by the political class is frightening, to say the least, and a plan to lower the price of valuable products by reducing firms’ incentives to produce those products is about as likely to be effective as pixie dust or séances. Consumers decide which firms to patronize, and consumers determine businesses’ fates. Political meddling with that system leads to disasters like Solyndra.”

The Council for Citizens Against Government Waste (CCAGW) is the lobbying arm of Citizens Against Government Waste, the nation’s largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.