An economics lesson

You don’t need to have an economics degree to answer this question. You need not understand profit and losses. You could flunk every math test you ever took and still answer this question.

You do not have to be an expert - or even well read - on our energy situation. You can answer this question easily. And when you do, you will know you are smarter than lots of the birds that fill the seats of your Congress.

Here is the big question: Do you know of any instance when we taxed something and as a result got more of it?

I will state it in a different way: Do you know of any instance when a higher tax on something brought forth an increased supply of it?

If you do, I hope you will email me about it.

Apparently our congress people do think they know of something that increases when you tax it. Recently they fell a few votes short of increasing taxes on big oil companies. Many of them spoke proudly of their efforts to levy these taxes. They preened about how this would punish big oil.



Think about this now. Apply it in situations around you.

One of the easiest natural laws to understand is this: When you subsidize something, you get more of it. When you tax something, you get less of it.

We subsidized poverty. We handed out welfare willy nilly. And, per that law, we got more of it. More folks signed up.

We subsidized single moms. The more kids they had, the bigger the payout. As a result, we got more and more single moms.

We are subsidizing ethanol from corn. (Pity that the energy that goes into producing ethanol is more than the ethanol will give back.) The subsidy is spurring farmers to grow more corn. And less of other crops. Poor folks around the world will tell you this is hurting them.

Subsidize anything and you will get more of it. That is because the subsidy is a paycheck for producing.

The opposite is just as true. Tax something and you will get less of it. Because the tax is a penalty for producing.

Tax people at higher and higher rates and they will work less. They will say “Why bother? The government is going to take a huge chunk of the next dollar I earn. Screw the government.”

Visit a farmer. Tell him you heard the government is planning to increase taxes on what he produces. Then ask him what his plans are. I bet he does not tell you he will be inspired to produce more.

If you raise taxes on oil profits, you will get less oil. You can take that to the bank. Some oil drillers make modest profits. They operate wells that are costly to operate. The oil they bring to the surface has a high cost. Tell them you are going to tax them more and they will quit. Simple as that.

The big oil companies are no different. They operate on a 4% margin of profit now. Tax them more and they will cut out some of their least profitable suppliers.

If you don’t believe me, read some history. Congress, in its brilliance, slapped windfall profit taxes on oil companies nearly 30 years ago. Right away, companies produced less oil.

Apparently Congress people cannot read or remember. They taxed entrepreneurs more heavily years ago. They got less activity from them. The economy suffered. They lowered the taxes and the economic activity came back.

They taxed big oil more. In return, they got less oil. When they lowered the taxes they got more oil. And now they want to repeat what failed.

We have a lot of birds in Washington who will respond if you sing out “Hey, Senator Duhhh.”

From Tom ... as in Morgan.

For more columns and for Tom’s radio shows (and to write to Tom): tomasinmorgan.com.

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