TAKE THE EXCESS PROFITS OF OIL COMPANIES TO HELP WORKING FAMILIES DEAL WITH ENERGY COSTS WITH $1,000 REBATE CHECKS
Flashback: Obama’s Energy Promise
Obama announced his plan for a windfall profits tax on oil companies on June 9 in Raleigh, N.C., as he launched a two-week economic tour after clinching the Democratic nomination.
“Oil companies enjoying record profits would face a “windfall profits tax,” with the cash passed on to consumers.” (Jake Tapper, Obama’s Proposed “Windfall Profits Tax”, ABCNews.com, 8/05/2008).
The winfall tax on oil giants would help working families deal with energy costs with $1,000 rebate checks for families and a $500 rebate check for single tax-payers.
“This rebate will be enough to offset the increased cost of gas for a working family over the next four months,” Obama said. “Or, if you live in a state where it gets very cold in the winter, it will be enough to cover the entire increase in your heating bills. Or you could use the rebate for any of your other bills or even to pay down debt”
Raw data: Windfall tax and rebate check proposal Obama released in August (Source File: PDF)
During an ABCNews interview, the Obama campaign elaborated on the plan,
Senator Obama believes that while oil companies and shareholders need incentives to run well managed businesses that invest in efficiency and innovation, a significant share of the record profits the big oil companies have been making have nothing to do with their management skill or investment decisions. Instead, it is the result of changes in the price of oil because of factors like supplies in the Middle East, demand in Asia, and disruptions and distortions in the oil market.
Therefore, a well designed mechanism can impose a fee on a small share of these windfall profits without affecting incentives for oil companies and without affecting the price of oil. Indeed, as the Congressional Research Service recently concluded: “[T]o the extent that a surtax on the corporate income of crude oil producers on their upstream operations could approximate such a [pure corporate profits] tax, this would not raise crude oil prices and would not increase petroleum imports in the short run. While the current corporate income tax is not a pure corporate profits tax, a surtax for oil companies would arguably be an administratively simple and economically effective way to capture estimated oil windfalls in the short run.” (“The Crude Oil Windfall Profits Tax of the 1980s: Implications for Current Energy Policy,” Congressional Research Service, 3/9/06, p. 32.; Ibid, Tapper)
Largest Profit Ever Recorded
Barack Obama will require oil companies to take a reasonable share of their record-breaking windfall profits and use it to provide direct relief worth $500 for an individual and $1,000 for a married couple. The relief would be delivered as quickly as possible to help families cope with the rising price of gasoline, food and other necessities. The rebates would be fully paid for with five years of a windfall profits tax on record oil company profits. This relief would be a down payment on Obama’s long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief. The Obama energy rebates will: offset the entire increase in gas prices for a working family over the next four months; or pay for the entire increase in winter heating bills for a typical family in a cold-weather state. In addition, Obama has proposed setting aside a portion of a second round of fiscal stimulus to ensure sufficient funding for home heating and weatherization assistance as we move into the fall and winter months. (Source File: PDF)
Campaign Vows Change
Just last week, ExxonMobile posted the largest profit the
world has ever seen: $14.83 Billion Dollars.
In Lansing, Michigan, Obama discussed the windfall tax:
“ExxonMobil is the company that, last quarter, made $1,500 every second. That’s more than $300,000 in the time it takes you to fill up a tank with gas that’s costing you more than $4-a-gallon. And Senator McCain wants them to keep every dime of that money. So make no mistake – the oil companies have placed their bet on Senator McCain.”
Obama also produced an ad to make a point that he does not accept money from lobbyists, in an attempt to lend credibility to the claim he’s not influenced by the oil industry, and therefore better positioned to impose a windfall tax.
Yet, as FactCheck.org points out, the 1907 Tillman Act prohibits the President, and members of the House and Senate to take money directly from any specific company. So in all honesty, he’s no better or worse. However, the Tillman Act does not prevent individual donations from high ranking oil representatives.
And Obama received more individual donations than any other.
Furthermore, based on data downloaded electronically from the Federal Election Commission on July 29, 2008, reports CRP: “Through June, Exxon employees have given Obama $42,100 to McCain’s $35,166. Chevron favors Obama $35,157 to $28,500, and Obama edges out McCain with BP $16,046 vs. $11,500.”
Therefore the president-elect himself is tied to the oil industry, and as Obama suggests in the ad, it may be difficult for a recepient to impose windfall taxes on big oil.
Therefore, it should come as no surprise that Obama will not impose the windfall taxes he promised.
Obama’s advisers “said it was backing off plans to impose a windfall profits tax on oil companies–at least until oil prices start heading up again.” (Justin Fox, Barack Obama won’t raise your taxes. At least not in 2009, 11/06/2008).
A senior Obama aide said in an interview Thursday that the tax would only be implemented when oil prices are above $80/barrel, and that with oil currently trading in the lower-$60/barrel range, the windfall tax would not kick in.
The Obama team denies individual contributions had anything to do with the decision. This is probably correct considering any donations by his oil connections cannot compare to the $600 million he raised during primaries and general election.
Obama’s advisors, do however, cite the tumbling economy and low cost of oil for dropping the windfall tax. The economy is worse than they could have possibly imagined, and many initiatives will have to be realigned with current economic realities.
“Mr. Obama and his advisers acknowledge that their focus has to shift, but the change is still likely to be challenging, and a bit disappointing.”
“Unfortunately, the next president’s No. 1 priority is going to be preventing the biggest financial crisis in the last century from turning into the next Great Depression,” says Austan Goolsbee, an Obama adviser.” “That has to be No. 1. Nobody ever wanted that to be the priority. But that’s clearly where we are.” (David Leonhardt, Top Priority Is Stabilizing the Patient, The New York Times, 11/06/2008).
However, the New York Times is quick to point out in the article that the campaign had already been showing signs the Obama team understood the deepening economic crisis all along.
Two weeks before Eelection Day, top aids to Obama started developing plan to ‘kill’ expectations as to what Obama could accomplish during his first term.
But despite understanding the how grave the economic situation really was and is, he seem to continue with the same message that worked.
“Throughout the campaign, whenever Mr. Obama was asked about the financial crisis, he liked to turn the conversation back to his long-term plans, by saying that they were meant to solve the very problems that had caused the crisis in the first place. Back in January, he predicted to me that the financial troubles would probably get significantly worse in 2008. They had their roots in middle-class income stagnation, which helped cause an explosion in debt, and the mortgage meltdown was likely to be just the beginning, he said then. His prognosis was right — and the pundits now demanding that he give up major parts of his economic agenda in response to the financial crisis are, for the most part, wrong.” (David Leonhardt, Top Priority Is Stabilizing the Patient, The New York Times, 11/06/2008).
The pundits are right. The economic message we all heard was for a robust economy. At this point we see the first change of the campaign: his policies, so that they are economically sound for the situation at hand. It’s highly possible we will not get lower tax rates, any of the other well meaning, but expensive plans put forth during the campaign. 
