The Double Inefficiency of the Windfall Profits Tax on Crude Oil

Blankenship, J. W.; Weimer, David L.

doi:10.5547/issn0195-6574-ej-vol6-nosi-15

Cited by 4 publications

(1 citation statement)

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“…The arguments for the elimination of the WPT rest primarily on efficiency grounds. Thus, for example, Jorgenson and Slesnick (1985) and Blankenship and Wiemer (1985) both argue that the WPT has an impacts on production decisions and hence retards production, in that actual crude oil production for any period where the WPT is in effect is below its socially optimal level, although Knoll (1987) argues that just some (i.e., not all) categories of crude oil affected by the WPT will be affected. Additionally, there is the contention that the WPT discourages additions to reserves by dampening the incentives for more intensive exploration and development activity and extensions of existing reservoirs.…”

Section: Introductionmentioning

confidence: 99%

Assessing the impact of the windfall profits tax on the US economy

Boyd¹,

Uri²

1990

Int. J. Energy Res.

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The paper focuses on the effect that the elimination of the windfall profits tax (WPT) on crude oil would have on the various producing sectors, consuming sectors and household categories in the USA, where the interrelationships between these entities are explicitly considered. Special attention is given to the agricultural sectors of the economy. Thus, in the context of a general equilibrium model, the effect of the elimination of the WPT on the producing sectors in general and the three agricultural sectors plus forestry in particular, on the consuming sectors, on households and on the Government is calculated. Over the period 1984–1990, such a policy initiative would result in higher output by the non‐crude‐oil producing sectors (by about $1.783 billion), higher consumption of goods and services (by about $1.651 billion), and an increase in welfare (by about $1.625 billion). The Government will realize a decrease in revenue of about $1.362 billion while the domestic crude oil industry will experience an increase in output of approximately $1.217 billion. For the agricultural sectors, output overall will fall. Specifically, for the programme crops sector, output will decline by $39 million, for the livestock sector, output will fall by $14 million, for all other agricultural commodities, output will decline by $36 million and for forestry, output will be reduced by $29 million. Attendant on these reductions in output will be lower prices for the respective commodities.

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Section: Introductionmentioning

confidence: 99%