OPINION & EDITORIAL
Doyle’s oil tax will hurt consumers
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by Gerald Cox
Monday, February 19, 2007
I wish I had stock in ExxonMobil. After posting record profits in 2005, ExxonMobil is at it again, shattering its record profits from a year before in 2006. Things are looking up for Big Oil and Wisconsin Gov. Jim Doyle has taken notice. So have I, and I wish I had purchased the aforementioned stock years ago. The governor, however, isn't interested in Big Oil stock options. Mr. Doyle is interested in justice: an ill-conceived, "uncapitalistic" justice that seems more of an attempt at revenge than anything, or an attempt at garnering support and boosting his popularity. Politicians are prone to such things.
After last summer's breathtaking price increase, Mr. Doyle plans on implementing a unique and as-of-yet untested oil tax that will tax companies that provide oil to Wisconsin. The tax, which I like to call the Robin Hood tax, is intended to take from the rich and give to the poor, so to speak. The Robin Hood tax is intended to give back to you and me — Wisconsin consumers — the ones who have been paying rather exorbitant prices for a necessity.
Mr. Doyle believes the Robin Hood tax can't be passed along to the consumer and promises to punish any oil provider that finds a way to do so. In this way, oil providers are "giving back" to the Wisconsin consumer in the form of taxes that will help pay for Wisconsin roads.
Unfortunately, Mr. Doyle's plan does not look like sound economic policy. It looks like vengeance, and vengeance has no place in a market.
Democrats have long been the traditional enemy of Big Oil, and rightfully so. While the oil industry laments the increased global demand, bemoans the perfidy of Mother Nature, and mourns the volatile nature of many of the regions from which oil comes, their profits have risen tremendously. Increasing prices at the pump have been the most visible factor behind these profits.
Democrats have taken exception to these exorbitant prices and astronomical profits. They have done a rather thorough job of casting Big Oil into the role of antagonist who is constantly stifling innovation and gouging the protagonist consumer for all he is worth. It is no surprise then that Gov. Mr. Doyle seeks retribution for Big Oil's actions. However, the Robin Hood tax will do little to encourage the oil industry to lower prices in Wisconsin. While his heart truly is in the right place, Mr. Doyle's Robin Hood tax is an ill-planned and "uncapitalistic" mistake that will only end up making things worse for the ones it is meant to help: the consumer.
One must appreciate the spirit of Mr. Doyle's attempt at taking on Big Oil. However, his plan is flawed at its foundation. The key to Mr. Doyle's Robin Hood tax is that oil companies will be unable to pass the tax along to the consumer in the form of higher prices at the pump. Any Econ 101 student can tell you that any tax, in part or in whole, invariably makes its way to the consumer.
If the purpose of this tax is to take some of the oil-price burden off of Wisconsin consumers, it will only do the opposite. Oil providers will simply raise their prices in order to account for the new tax. Lacking an army of auditors and economists, Mr. Doyle will be hard pressed to prove that this coming summer's inevitable price increases are partly the result of oil companies trying to circumvent Robin Hood, and thus he will be unable to persecute offending companies. The Robin Hood tax will have Wisconsin consumers serving the sentence for Big Oil's conviction. That's like serving jail time for being robbed.
What Mr. Doyle is proposing is an ineffectual tax that will at best make providing oil to Wisconsin even more expensive for producers and make purchasing oil in Wisconsin costlier for consumers.
Sound like sound economic policy?
Mr. Doyle's proposed tax is a clumsy attempt at doing the same thing the oil industry is doing: manipulating the market. Unfortunately, the corporation — that most greedy and thus efficient of capitalism's creations — is much better at manipulating the market than government will ever be. Oil providers will find a way around whatever enforcement Mr. Doyle has lined up for his Robin Hood tax and gas prices will be just a little bit higher than the highest they would have been in Wisconsin this summer.
While Mr. Doyle can only do so much to make oil providers like ExxonMobil mend their profiteering, gouging ways he can certainly avoid adding to the Wisconsin consumer's burden by tacking on yet another Wisconsin gas tax. The Robin Hood tax is a mistake that will end up costing the consumer the most and a clumsy attempt at exacting revenge on an industry that consumers see as pure evil. Surely Gov. Doyle knows that. So why is he proposing it?
Gerald Cox (gcox@badgerherald.com) is a junior majoring in economics and Middle Eastern studies.
Anonymous (February 19, 2007 @ 2:05am):
Now THAT was a good article. Couldn't have agreed more.
Anonymous (February 19, 2007 @ 4:46am):
Ask the government what their profit was on oil. I think you will find it is a little more than that of the big oil companies. Pretty disgusting if you ask me.
By taxing oil, the government takes away all their incentive to reduce consumption. Just look at MN, they raised the cigarette tax to make people quit, now that consumption is lower, politicians are complaining about reduced revenues. Don't let the politicians pull the wool over your eyes, let them know you are on to their insulting game!!
Anonymous (February 19, 2007 @ 7:01am):
If the Gov wants to hurt Exxon then he should propose large numbers of pebble bed nuclear plants and running everything possible on electrity. Electric cars cost $.02 per mile for the electricity.
Anonymous (February 19, 2007 @ 7:41am):
I'm starting to regret my vote for Jim Doyle, although the alternative wasn't palatable either. If Mark Green had a backbone and any opinion of his own, he could have been elected. Too bad he didn't give the middle finger to Bush, because that's the only way he could have been elected.
Anonymous (February 19, 2007 @ 11:34am):
I think a trolley would solve everything.
Anonymous (February 19, 2007 @ 2:37pm):
"By taxing oil, the government takes away all their incentive to reduce consumption."
On the contrary - the higher the taxes, the higher to prices and this WILL lead to lower consumption - unless there's an unlikely chanage in price elasticity.
If the Gov wants to hurt Exxon he should put in a huge increase in the tax on gas and oil. Of course the government already makes far more in taxes on Exxon than Exxon makes after it pays taxes.
Anonymous (February 19, 2007 @ 3:40pm):
A huge tax on any corporation will not be sucked up by the corporation, they will pass it on to the consumers. There is no such thing as a corporate tax, they may collect the tax and send the check to the government, but in the end, they do not pay it, the consumers do.
Let's put a tax on Exxon and watch the price at the pump go up.
Anonymous (February 19, 2007 @ 4:36pm):
" There is no such thing as a corporate tax, they may collect the tax and send the check to the government, but in the end, they do not pay it, the consumers do. "
HEAR HIM!!!
No company has EVER paid any taxes - the company's customers pay the taxes, just like they pay the rent, heat, salaries, etc.
Anonymous (February 19, 2007 @ 5:00pm):
Word.
Anonymous (February 19, 2007 @ 8:49pm):
Hmmm, if I recall, the very high prices last summer (nearly 200% greater than a few years ago and 66% greater than today) did very little to curb consumption (it did lessen some, but not a lot). But that is not the issue.
NEVER let the government tell you that they are taxing you to reduce consumption. That is a BOLD FACE LIE! They only tax you to take your money so they can feed projects (and not all projects are bad, taxes are needed). If consumption does go down, they will find something else to tax.
Anonymous (February 19, 2007 @ 9:20pm):
"did very little to curb consumption"
I call BS, and FOR SURE if it lasts long enough it WILL cause people to pay more attention to the mileage of the vehicles they buy. Much more effective than CAFE and it uses maket forces to get results - not government regulations and all the bureaucracy that entails.
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