Windfall Profit Tax, On Beer?

With the price of gas continuing to rise people are groaning more and more each time they fill their tanks. The Democrats, who have historically been in favor of high gas prices, are claiming that Bush and Cheney are responsible because they are “oil men” (as opposed to most male Democrats who are “girly men”). In Congress, members from both parties are talking about ways to reduce the cost of a gallon of gas and they are beginning to espouse the same ideas they touted during Jimmy Carter’s failed Presidency. They want to investigate oil companies for gouging (while ignoring the fact that the government has made more in gas taxes than oil companies have made in profit-that is REAL gouging). Oil companies have made profits that range from 6-11% but since they deal with billions of dollars the profits amount to large numbers. The Congress is very upset about the record profits of oil companies while ignoring the profits of companies like Microsoft, Google, and Yahoo. The answer, windfall profit taxes.

This is a bad idea. If they tax oil companies on their profits (more than they are already taxed) then the cost will be passed on to the consumer. If gas prices are artificially lowered then the market will have little influence on the price, people will not be encouraged to use less, and we will have real shortage problems. Despite the cost of gasoline, the stock market closed at a 6 year high yesterday. The stock market was fueled by higher than expected earnings from No. 1 brewer Anheuser-Busch Cos. Now we are in real trouble. The number one producer of beer has had higher than expected earnings. Beer, as well as all alcohol, is taxed very heavily (just as oil is), so how long will it be before the Congress goes after the beer industry for “gouging” consumers. Consumers already pay more than $6.00 for a six pack (which contains less than a gallon of beer) and that is twice the price of gasoline.

How long can the American consumer put up with gouging at the package good store? How long before Congress requests the tax records of the beer companies? How long before we see the executives of America’s beer companies up on the Hill explaining how terrible they are for gouging people at the liquor store? Oh the tragedy of it all.

I am willing to bet Congress will never complain about how much alcohol producers charge for beer even though beer is more expensive than gas and the high prices of both are causing families to have to make a decision, beer or gas? How dare Anheuser-Busch charge so much when they are raking in “record” profits? Hell, now people will not only be unable to drive to their vacations, they won’t be able to have a few cold ones while sitting at home lamenting how a dollar a gallon difference from last year cancelled their vacations.

Chip Franklin from WBAL in Baltimore said this yesterday, If the one dollar difference in gas means you can not drive to the ocean (Ocean City Maryland) on vacation, you were probably sleeping in your car anyway. Chip is on target with this question and he understands the market much better than the knee-jerk politicians in DC. I hope the beer news does not change his mind….

In a related story, members of the Senate are saying we need to disband FEMA and start from scratch. They cite FEMA’s poor performance, bureaucracy, confusion, and lack of leadership as reasons to take this approach. If you think about it Congress fits that description perfectly so what do you say we disband Congress and start over from scratch there as well?

Source (for stock market and beer info): Reuters