Clinton: Let Uncle Sam Determine Profits

Hillary Clinton was on Fox News's The O'Reilly Factor last night and said what she would do about high gas prices:

In the short term, I do want a gas tax holiday but to pay for it by putting a windfall profits tax on the oil companies.... The oil companies have made out like bandits, and there is no basis for them to have these huge profits. They're not inventing anything new.... You set a baseline and, above that baseline, you begin to tax their profits.

As they say on my favorite TV show, Battlestar Galactica, "All this has happened before, and all of it will happen again." We tried a windfall profits tax in 1980, with lousy results. This from the Tax Foundation (boldface mine):

During the 1980s the federal government experimented with a new tax intended to limit the "windfall profits" of domestic oil companies. In reaction to the rise of energy prices during the late 1970s and the removal of price controls on the energy industry, President Jimmy Carter signed the Crude Oil Windfall Profits Tax Act into effect on April 2, 1980.... The windfall profits tax was forecasted to raise more than $320 billion between 1980 and 1989. However, according to the Congressional Research Service, the government collected only $80 billion in gross tax revenue ($146 billion in 2004 dollars). The net amount was actually less than this—roughly $40 billion—because the tax was deductible...CRS also found the windfall profits tax had the effect of decreasing domestic production by 3 percent to 6 percent, thereby increasing American dependence on foreign oil sources by 8 percent to 16 percent.... The 1980 windfall profits tax was also found to be highly burdensome for the industry to comply with and for the Internal Revenue Service to administer, especially in years when no revenue was raised. It seems unlikely that a new tax could be designed in a less burdensome fashion. Tax Foundation economists estimate that U.S. companies currently spend nearly $150 billion annually to comply with the federal income tax alone.