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More Congressional Quackery: H.R. 3784, The Gas Price Spike Act
H.R.3784 begins: "To amend the Internal Revenue Code of 1986 to impose a windfall profit tax on oil and natural gas (and products thereof) and to allow an income tax credit for purchases of fuel-efficient passenger vehicles, and to allow grants for mass transit."

Six members of the House, led by non-free market champion Denis Kucinich (D-OH), want to set up a "Reasonable Profits Board" to control gas profits. The Congressmen, worried about higher gas prices, want to set up a board that would apply a "windfall profit tax" as high as 100 percent on the sale of oil and gas, according to their legislation. The bill provides no specific guidance for how the board would determine what constitutes a reasonable profit, but would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms.

Grouch: This is yet more quackery from Congress disguised as consumer advocacy, but whose real purpose is to artificially manipulate markets and ultimately punish consumers with less supply and higher prices. One can see in the chart below just how the price of natural gas has skyrocketed without proper government supervision:




Right now there is an oversupply of natural gas in the marketplace and declining prices (those greedy capitalist pigs!). But our enlightened Congressmen are working overtime to correct this situation.

Just as a point of reference, the average industry in the US according to Yahoo Finance has a profit margin or 7.8%. The oil and gas industry profit margin comes in at an eye-popping 7.9%. What an outrage! How can this stand, when other industries have more reasonable profit margins: publishing (53%), silver (41%), gold (25%), cigarettes (22.5%)? Not to mention Apple, the favorite company of the politically correct crowd, coming in slightly north of 23%, or the much hated Microsoft at 31%. Comrades, we can not continue to let the marketplace operate freely at such obscene profits levels. This bill is clearly not expansive enough. We need a Commissar of Reasonable Profits for every industry in the country.

As George Will noted at the start of the year:

In 2011, for the first time in 62 years, America was a net exporter of petroleum products. For the foreseeable future, a specter is haunting progressivism, the specter of abundance. Because progressivism exists to justify a few people bossing around most people and because progressives believe that only government’s energy should flow unimpeded, they crave energy scarcities as an excuse for rationing — by them — that produces ever-more-minute government supervision of Americans’ behavior.
Posted by The Grouch at 2:58 PM  
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Six House Dems Would Confiscate ‘Excessive’ Oil Profits

Posted by Steve Maley (Diary)

Sunday, January 22nd at 8:35AM EST
19 Comments


Six House Democrats, led by Rep. Dennis Kucinich (D’OH), have filed a bill aimed at controlling gasoline prices. Styled the “Gas Price Spike Act”, H.R. 3784 would establish a “Reasonable Profits Board” which would have the power to confiscate 100% of oil company profits above a level that they deem to be “reasonable”.

I know: “You had me at ‘Kucinich’.”

Kucinich is either a naive buffoon, a craven panderer to his electorate, or a throwback to Soviet-style central planning. (Not that those descriptions are mutually exclusive.) That he could find five other elected nitwits (Reps. Woolsey[1], Langevin, Conyers, Fudge and Filner[2]) to put their names on such an unconstitutional socialist fantasy is an indication that the Progressive Wing of the Democratic Party has “progressed” beyond capitalism.



According to a Thursday post at TheHill.com:


The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and [natural] gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding “a reasonable profit.” It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms. Unlike other bills setting up advisory boards, the Reasonable Profits Board would not be made up of any nominees from Congress.

The bill would also seem to exclude industry representatives from the board, as it says members “shall have no financial interests in any of the businesses for which reasonable profits are determined by the Board.”

Oil companies would only be able to make less than a reasonable profit without penalty. Anything over 105% of reasonable would be taxed at 100%. Proceeds of the confiscation would be dedicated to tax credits for high-milage vehicle purchase and mass transit subsidies for the poor.

Peeling back the layers of stupidity in H.R. 3784 would be akin to peeling an artichoke. In the interest of time, I will cut to my central point.

Implicit in the very suggestion that a Windfall Profit Tax is called for is the notion that somehow the oil companies are able to manipulate the price of oil, and hence, gasoline.

Gasoline prices are at historically high prices. Despite the spike above $4.00 per gallon in 2008, you actually paid 10% more at the pump in 2011.

When we refer to the industry as “oil and gas”, we mean “oil and natural gas”, not oil and gasoline. All oil companies make a substantial fraction of their revenue — many more than half — from natural gas.

The price of natural gas has plunged to 10 year lows recently as a result of warm winter temperatures, slack industrial demand and burgeoning supplies.

Natural gas prices have fallen to levels that make it difficult to justify drilling for more. Many of the new supplies of gas that come on will be incidental to the successful search for oil.

I challenge anyone who believes that oil companies control the price of oil and gasoline to explain how they do it, and why they seemingly have no control of natural gas.

[1] Rep. Lynn Woolsey (D-CA), chair of the House Progressive Caucus from Marin Co., CA.

[2] Rep. Bob Filner (D-CA). From his Wikipedia entry:


Filner has been a vocal supporter of the People’s Mujahedin of Iran, a group designated as a terrorist organization by the United States. Filner has long argued that the group’s designation should be removed, and considers the MEK an ally against the Iranian regime. He has accepted free trips, and paid speaking engagements from the group for which he has been criticized by the National Iranian American Council.

The other co-sponsors are John Conyers (D-MI), Rep. Marcia Fudge (D-OH) and Rep. Jim Langevin (D-RI).

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SEC. 5. REASONABLE PROFITS BOARD.

(a) Establishment- There is established an independent board to be known as the `Reasonable Profits Board' (hereafter in this section referred to as the `Board').
(b) Duties- The Board shall make reasonable profit determinations for purposes of applying section 5896 of the Internal Revenue Code of 1986 (relating to windfall profit on crude oil, natural gas, and products thereof).
(c) Advisory Committee- The Board shall be considered an advisory committee within the meaning of the Federal Advisory Committee Act (5 U.S.C. App.).
(d) Appointment-
(1) MEMBERS- The Board shall be composed of 3 members appointed by the President of the United States.
(2) TERM- Members of the Board shall be appointed for a term of 3 years.
(3) BACKGROUND- The members shall have no financial interests in any of the businesses for which reasonable profits are determined by the Board.
(e) Pay and Travel Expenses-
(1) PAY- Notwithstanding section 7 of the Federal Advisory Committee Act (5 U.S.C. App.), members of the Board shall be paid at a rate equal to the daily equivalent of the minimum annual rate of basic pay for level IV of the Executive Schedule under section 5315 of title 5, United States Code, for each day (including travel time) during which the member is engaged in the actual performance of duties vested in the Board.
(2) TRAVEL EXPENSES- Members shall receive travel expenses, including per diem in lieu of subsistence, in accordance with section 5702 and 5703 of title 5, United States Code.
(f) Director of Staff-
(1) QUALIFICATIONS- The Board shall appoint a Director who has no financial interests in any of the businesses for which reasonable profits are determined by the Board.
(2) PAY- Notwithstanding section 7 of the Federal Advisory Committee Act (5 U.S.C. App.), the Director shall be paid at the rate of basic pay payable for level IV of the Executive Schedule under section 5315 of title 5, United States Code.
(g) Staff-
(1) ADDITIONAL PERSONNEL- The Director, with the approval of the Board, may appoint and fix the pay of additional personnel.
(2) APPOINTMENTS- The Director may make such appointments without regard to the provisions of title 5, United States Code, governing appointments in the competitive service, and any personnel so appointed may be paid without regard to the provisions of chapter 51 and subchapter III of chapter 53 of that title relating to classification and General Schedule pay rates.
(3) DETAILEES- Upon the request of the Director, the head of any Federal department or agency may detail any of the personnel of that department or agency to the Board to assist the Board in accordance with an agreement entered into with the Board.
(4) ASSISTANCE- The Comptroller General of the United States may provide assistance, including the detailing of employees, to the Board in accordance with an agreement entered into with the Board.
(h) Other Authority-
(1) EXPERTS AND CONSULTANTS- The Board may procure by contract, to the extent funds are available, the temporary or intermittent services of experts or consultants pursuant to section 3109 of title 5, United States Code.
(2) LEASING- The Board may lease space and acquire personal property to the extent that funds are available.
(i) Funding- There are authorized to be appropriated such funds as are necessary to carry out this section.