Bennet and Warren’s tax on energy companies didn’t work in the 70s, and it won’t work now
For Immediate Release
March 11, 2022
DENVER, CO – To combat surging prices at the pump Sen. Michael Bennet has decided to team up with Elizabeth Warren and Bernie Sanders to tax the oil companies.
The plan, which also has the backing of Senators Bernie Sanders, Elizabeth Warren, Michael Bennet and Bob Casey, is introduced as Democrats are looking for a way to cobble together an economic policy plan while still they have majorities in both the House and Senate.
If taxing taxing oil producers to alleviate soaring gas price sounds counterproductive, it’s because it is.
Former Obama Council of Economic Advisors Chair Austan Goolsbee says Bennet and Warren’s plan to hike taxes on big oil companies would increase gas prices.#copolitics #cosen pic.twitter.com/CRuZMila87
— Compass Colorado (@CompassCOorg) March 11, 2022
What [Warren] calls “gouging” is actually demand adjusting to supply. She also forgets that higher profit margins strongly incentivize entrepreneurs to supply more of a good to the market thus eventually driving down prices through competition.
America has also tried Bennet’s idea out before under President Jimmy Carter.
Carter implemented a similar policy in 1980 in reaction to the Iran oil shock. It led to less domestic energy production, greater dependence on foreign oil, higher gas prices, and negligible tax revenue according to a 2009 Congressional Research Service report:
The $80 billion in gross revenues generated by the WPT between 1980 and 1988 was significantly less than the $393 billion projected. Due to the deductibility of the WPT against the income tax, cumulative net WPT revenues were about $38 billion, significantly less than the $175 billion projected. This report presents estimates of the amount of foregone oil production from 1980-1986 due to the WPT under three alternative supply price responses, reflecting three different assumptions about the price elasticity of the domestic oil supply function, a critical factor (statistic) in estimating lost oil output and increased import dependence. From 1980 to 1988, the WPT may have reduced domestic oil production anywhere from 1.2% to 8.0% (320 to 1,269 million barrels). Dependence on imported oil grew from between 3% and 13%.
To quote Colorado Gov. Jared Polis, “when you tax something you penalize it.”
If you are covering Bennet’s support for Elizabeth Warren and Bernie Sanders’s tax on big oil companies please consider the following quote from Compass Colorado.
“It’s difficult to imagine a more counterproductive solution to high gas prices than Michael Bennet and Elizabeth Warren’s tax on energy suppliers,” said Compass Colorado Executive Director Kyle Kohli.
“Penalizing energy producers with gas near $4 a gallon makes absolutely no sense whatsoever.”