A windfall profits tax is an idea floated by many that would tax an industry based on income in a single year that is much higher than its previous years. The idea became very popular in late 2008 when the price of a barrel of oil approached $150. President Obama made a campaign promise to enact such a tax. Many people continue to push the idea of a Windfall Profits Tax even though oil has since dropped below $40 a barrel as a method to stimulate the economy. Lloyd Chapman makes this argument in his Huffington Post article.
The problem is that a Windfall Profits Tax often has the effect of severely curtailing current exploration, which in turn, drives up future oil prices. Energy Tomorrow, a group with an admittedly vested interest, has an excellent website that explains what the Windfall Profits Tax is, and how, such a tax would be devastating in the long-term.
Tags: Oil and Gas, stimulus, Windfall Profits Tax, WPT