Incidence and Effects of a Windfall Profit Tax on Natural Gas

摘要

A windfall-profit tax on natural gas would have an incidence and effects similar to those of any other excise tax on a single commodity. In the short run, its burden would fall upon consumers as well as operators and royalty owners. In the long run, its burden would fall upon consumers and landowners. Its principal effect would be to contract the intensive and extensive margins of gas production and to reallocate resources at the expense of the gas industry, with the usual costs to society of artificially induced reallocations. it would lead to greater imports of oil, worsening the national-security cost of excessive dependence on insecure sources of supply. It might yield between $10 billion and $20 billion of net additional revenue to the federal treasury. Its adverse effects could be reduced by means of certain special provisions, such as the exemption of new gas, but these introduce new problems and would reduce the revenue yield. A windfall tax that falls heavily upon consumers is a poor device for dealing with the ethical problem of windfalls and major transfers between resource owners and consumers. Given the possibilities of getting revenues by means of taxes that are allocatively more neutral (such as a value-added tax) or allocatively more desirable (such as a tariff on oil imports), a windfall tax on gas must be regarded as undesirable from a general social point of view. It will make us unnecessarily worse off. Second best, perhaps, is a windfall tax exempting new gas. As for the ethical problem of windfalls, we had best rely on the automatic effects of the corporate and personal income taxes, imperfect as they are. (ERA citation 08:011819)