Congressional kneejerk reaction to oil spill – more taxes

Fear not, citizens, your congress has responded to the Gulf oil spill by proposing to quadruple the tax on a barrel of oil. (story here from This is being done to finance cleanups for future oil spills. It will raise about $11B over the next decade.

Responding to the massive BP oil spill, Congress is getting ready to quadruple—to 32 cents a barrel—a tax on oil used to help finance cleanups. The increase would raise nearly $11 billion over the next decade.

The tax is levied on oil produced in the U.S. or imported from foreign countries. The revenue goes to a fund managed by the Coast Guard to help pay to clean up spills in waterways, such as the Gulf of Mexico.

OK, this is a good thing – right? Well, since the last major off-shore oil spill happened in 1969 one has to wonder if this is necessary. (more here)

Spills from platforms have become far less frequent over recent decades, federal data show.

A report by the National Research Council found that offshore oil and gas drilling was responsible for just 2% of the petroleum in North America’s oceans, compared with 63% from natural seepage and 22% from municipal and industrial waste. Coast Guard reports show that the amount of oil spilled in U.S. waters dropped from 3.6 million barrels in the 1970s to less than 500,000 in the 1990s.

During Hurricanes Katrina and Rita in 2005, 115 oil platforms were toppled, but only insignificant amounts of oil spilled, says Roland Guidry, Louisiana’s oil spill coordinator.

I’m not saying that the oil companies shouldn’t clean up their spills but by taxing the whole industry, it puts consumers on the hook for this instead of the responsible party. It doesn’t take an MBA to figure this out but somehow one of the fundamental tenets of business escapes our “geniuses” in government:

Corporations and businesses DO NOT pay taxes – they pass them along to the consumer in the form of higher prices.

BP is the responsible party and they should pay to clean up this spill. Market conditions will not allow them to pass the cleanup costs to the consumers.


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