What Are the Chances for a Windfall Profits Tax?

HERE WE GO AGAIN: President Biden blasted the big oil companies yesterday, suggesting that he could support a windfall profits tax. The industry had staggering profits in the third quarter — but there’s absolutely, positively no chance anytime soon that Congress could pass a new tax on the industry.

THE OIL COMPANIES ARE A CONVENIENT FOIL in an election year, and bashing the industry was back in the limelight yesterday, as Biden called firms “war profiteers” who should return some of their profits to consumers. He specifically cited Chevron and Shell.

BIDEN SAID YESTERDAY THAT OIL COMPANIES should lower their prices instead of buying back their shares or increasing dividends. Stock buy-backs are an increasingly attractive target for activists; a buy-back tax hike was included in infrastructure legislation that passed in the summer.

A WINDFALL PROFITS TAX has won support in some European countries, and has backing from the left in California, where the average price of gasoline is slightly above $6 per gallon. And there’s some support in Congress; Sen. Ron Wyden, the liberal chairman of the Senate Finance Committee, introduced a bill this summer applying a 21% tax on the “excess” profits of large oil and gas companies with more than $1 billion in annual revenue.

WHY THE BILL WILL STALL IN CONGRESS: The math is simple — a windfall profits tax would require a filibuster-proof 60 votes in the Senate, which would be highly unlikely unless it wound up in a reconciliation measure. Even if a windfall tax made it out of the Senate via reconciliation, the House — about to flip to the Republicans in next week’s election — would easily reject it.

IN ADDITION TO VIRTUALLY UNANIMOUS OPPOSITION to a windfall profits tax among Republicans, there’s opposition from Democrats from energy producing states. Sen. Joe Manchin (D-W. Va.) is the leader of that group.

BECAUSE THERE’S A BRICK WALL of opposition to a windfall profits tax in Congress, the Biden Administration will continue to focus on aggressive regulation of pipelines, production, refining, etc. Some oil industry officials say they would prefer to leave oil in the ground until there’s a new climate in Washington, with a president who understands that fossil fuels will be necessary for many years to come.

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