Monday, May 5, 2008

Windfall Profit Tax

So I hear this morning that Hillary wont put her lot in with economists. This ironic on so many levels. First she's purporting that her intuition about the economy is better than those who actually study it. Second it shows how socialists err democrats really feel about economics.
She made these remarks in regards to her stance that we should have a windfall profit tax on oil companies. Who would be the losers of this tax. Its not Exxon. Exxon doesn't have feelings. It doesn't care what you, I, or Hillary thinks. The real losers are Exxons shareholders many of which I assume are large mutual funds of which hold millions of people retirement accounts.
The shareholders will be the losers because share prices are largely based on expected future cash flow. This cash flow is obviously largely affected by tax rates (in the US corporations are already taxed at 35 of net income plus the 15% capital gain that investors pay when they sale their stock). So if we increase the tax rate Exxon has less money to pay out to investors decreasing what the stock should be worth. But heh thats all economic jargon that Hillary doesn't believe.
This also assumes that the money is better in the hands of the government rather than wise investors that invested in Exxon.

1 comment:

Ti'ana said...

interesting... sometimes i have a hard time keeping up with you...