Obama says he would impose oil windfall profits tax

Communism in its finest.

 

Karl Marx would be proud!

 

And up goes the price on a gallon of gas, as the oil companies pass it on to the poor people!

Politicians need to shut up!

 

You cannot pass taxes on to the consumer. That just increases your taxable amount.

 

The last time we had a windfall profits tax:

"We've actually been down this road before in the form of the Crude Oil Windfall Profit Tax of 1980. According to a study published by the Congressional Research Service, the tax discouraged investment in the domestic oil industry to such a degree that domestic oil production was 3 percent to 6 percent less as a result of that tax, and foreign oil imports grew accordingly by 8 percent to 16 percent. There isn't a single credentialed oil economist in the country who would argue that windfall profit taxes are good for consumers."

- www.cato.org/pub_display.php?pub_id=6370

 

That just proves I have never been rich enough to worry about things like that! :smilewinkgrin: :laugh: :thumbsup:

 

You can't pass taxes on to the consumer, if the tax rate is 100%. Otherwise, yes it can be passed on.

 

It doesnt benefit you to pass higher taxes on to the consumer. There is no benefit from it and there is only a down side. There is no point increasing your taxes because your taxes have been increased.

 

But if your profits are increased by more than what your taxes are increased, then you have more net profits....unless again you are taxed at 100% of profits

 

Have you ever run a business? If your taxes go up by 5% and you raise your prices 6%, now you have just raised your taxable amount once again. So you immediately need to raise your prices. There are a lot of reasons to raise prces that are beneficial. Taxes are not one of them. So you need to fond a way to shelter your money form taxes instead of raising prices. That would be a never ending monster.

 

I have been in busines, and this isn't that hard to understand. The tax is on your profit, not the entire cost of your business. If you sell $1,000 worth of goods and the goods cost you $500 to buy/produce, then you are taxed on $500. Part of the cost of your goods is the amount of tax you pay on those goods. If the tax goes up by $100, and you increase the cost of your goods to $1,100, your bottom line is still the same. The one who is stuck is the one who purchased your goods. If the oil companies choices are to pay the additional tax out of their profits or to increase the price of gas to cover the tax, I'll give you 3 guesses which one they'll choose.

 

And now your taxable amount is just gone up as well. Every time you raise your prices your taxable amount increases regardless of the reason. There are a lot of reasons to raise prices. The best thing to do is to shelter money form taxes not raise prices because of them.

 

If the cost of the product is $10 and it sells for $11...that is a $1 profit margin. However if you are taxed at 40% of that profit, you only receive 60 cents to put in the bank.

However, raise the price to $11.70, the profit to be taxed is $1.70. 40% tax on 1.70 is 68cents. Now you've raised the price by 70 cents and instead of only 60 cents going into the bank, $1.02 has gone to the bank.

You've increased the price by 70 cents...the government received an extra 28 cents, the merchant has received 42 cents more in profit margin...and as long as the market will bear the price, then the consumer has paid the extra taxes.

And in the case of gasoline, consumers have shown that they have not reached a point that they can't afford yet.

 

Not true. It would be true if we talking of a sales tax, but this is a tax on profits, not sales. Surely you understand the difference between net and gross. Taxes are on the net, not the gross, and the tax you pay is part of the cost of doing business, which is subtracted from the gross.

 

Say a grocery makes 1% selling a gallon of milk. The price jumps from $2 to $4. If the store still makes 1% the profits have doubled but the store still complains about low profit margin. When milk hits $10 they will still make 1% and complain about low profit margin.

The question should be is the gas price rising out of step with the other retail items? The guy selling the gas hasn't gotten a raise and all the gas station does is provide the service of selling the stuff. Has the cost of the service (not the product) increased 4 times?