And the implications of any "windfall profits tax" are troubling for future growth. If you want an economy that continues to innovate and expand, it is not wise to send a signal to companies that they will be punished for doing too well. Very rarely, after all, do we offer special "windfall losses" tax rebates, where companies that do particularly badly get extra tax loss abatements. Thus, any windfall profits tax functions as a profit on risk-taking. And risk-taking is what the American economy does very, very well. Note that this effect will endure, economy-wide, even if in this particular case the oil companies are able to jam the taxes down onto consumers.Having stable long-term incentives is very important.
Monday, August 4, 2008
At least one bad idea of Obama's...
A "windfall profits tax" on oil companies. Bad for a number of reasons, summed up by Megan McArdle (who else!). Besides the fact that consumers are likely to pay for almost the entirety of the tax, it has very broadly negative implications for the entire economy:
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