Dear Senator:

On behalf of our more than 700,000 members nationwide, I strongly urge you to oppose the imposition of a “windfall profits tax” (WPT) on oil companies—whether the tax is being proposed overtly through the amendment expected from Sen. Byron Dorgan (D-N.D.), or covertly by changing the way oil companies are allowed to deduct their expenses.

Such taxes harm hard working Americans by reducing the supply and increasing the cost of gasoline, heating oil, and other products that use oil.

The negative impact of a WPT is not theoretical—previous experience shows the harm it causes. Between 1982 and 1988, the year WPT was repealed, the oil and gas extraction industry lost about one-third of its jobs as the WPT made doing business in America too expensive. The Congressional Research Service (CRS) reports that between 1980 and 1986 the WPT reduced domestic oil production by as much as 1.6 billion barrels, increasing our dependence on foreign oil, causing oil imports to rise between 8 percent and 16 percent. The WPT would also harm the millions of Americans with 401(k) s, retirement plans, and pension funds, as almost all large oil and gas companies are publicly owned entities. Taxing away their profits is effectively tax away retirement savings.

If Congress is concerned about the price of oil and gas, it should instead look at role the government has played in restricting the supply of oil—supply being half of the supply and demand equation that helps to explain gas prices. Environmental regulations, for example, have cost the oil industry $47 billion over the last 10 years and resulted in zero new refineries being built in the United Stated in the last 30 years. Consequently, U.S. oil refining capacity is now less than it was in 1980, despite the 25 percent increase in demand. The restrictions on using the huge oil reserves in Alaska, the Gulf and the Atlantic and Pacific coasts should also be considered.

FreedomWorks urges you to vote against any windfall profits tax and will count your vote against the Dorgan amendment as a KEY VOTE when determining eligibility for the Jefferson Award, which recognizes Senators with voting records that support economic freedom.

Sincerely,

Dick Armey
Chairman
FreedomWorks