Windfall profits tax

From Wikipedia, the free encyclopedia

It has been suggested that this article or section be merged into Windfall tax. (Discuss)

Public finance
This article is part of the series: Finance and Taxation
Taxation
Income tax  ·  Payroll tax CGT ·  Stamp duty  ·  LVT Sales tax  ·  VAT  ·  Flat tax Tax, tariff and trade Tax haven
Tax incidence
Tax rate  ·   Proportional tax Progressive tax  ·   Regressive tax Tax advantage
Taxation by country Australia • British Virgin Islands Canada • China • Colombia France • Germany • Hong Kong India • Indonesia • Ireland Netherlands • New Zealand Peru • Russia • Singapore Tanzania • United Kingdom United States • European Union  v • d • e  Tax rates around the world Tax revenue as % of GDP
Economic policy
Monetary policy Central bank  ·   Money supply Gold standard
Fiscal policy Spending  ·   Deficit  ·   Debt
Policy-mix
Trade policy Tariff  ·   Trade agreement
Finance
Financial market Financial market participants Corporate  ·   Personal Public  ·   Regulation
Banking
Fractional-reserve Full-reserve  ·   Free banking Islamic
view • talk • edit • project

A windfall profits tax is a tax on profits that ensue from a sudden windfall to a particular company or industry.

[edit] United States

In 1980, United States federal legislation was passed that levied such a tax on oil companies because of the profits they earned as a result of the sharp increase in oil prices brought about by the Arab oil embargo. Since then, the tax has not been reenacted, however with gas prices once again reaching record levels there is renewed pressure on the U.S. government to bring back the tax. Amid low oil prices, the tax was ended in 1988 by President Ronald Reagan [1].

The Congressional Research Service has analysed that the windfall profit tax brought in $80 billion in extra revenues for the United States government, which was far less than the projected $393 billion. Also, domestic oil production by oil producers was said to be lowered.^{[citation needed]}

These are not to be confused with the excess profit taxes of WWI, WWII, and the Korean War eras. Windfall Profit Taxes are more of an excise-type of tax.

The etymology of the phrase is apparently from colonial times. "The crown precluded the colonists from using any lumber one foot or wider except whereby act of God, such as a severe storm, a tree falling on one's own property. If that happened, the colonists could use the tree that fell down on their property during a storm or they could sell it for a significant amount. So if you had a big storm on your property back in colonial days, and a lot of trees fell down, the resulting monetary reward was called 'a windfall profit.'It was a beneficial thing to a property owner, because they had limits on how much lumber they could use. But if an act of God came down and knocked a bunch of trees, they could use whatever they had. There were no limits on it and they could sell it or use it for their own construction purposes, hence windfall profit."[2]