Reaping the Whirlwind
Last week, we reported that Joe Biden’s tax plan would give the US the highest tax rates in the Western world.
And now comes Senator Bernie Sanders with a ‘one-up’:
‘On Friday, Sanders introduced the “Ending Corporate Greed Act,” cosponsored by fellow progressive Senator Ed Markey, with New York Rep. Jamaal Bowman introducing the legislation in the House.
‘Under Sanders’ plan, companies that make over $500 million in annual revenue would be taxed 95% on their “windfall profits.” That amount would be calculated based on their average profit level in the five years leading up to the pandemic. Deemed a “temporary emergency measure,” the tax would only be in place from 2022 to 2024. In a release, Sanders said the levy would bring in $400 billion in just one year.
‘“We cannot allow big oil companies and other large, profitable corporations to continue to use the war in Ukraine, the COVID-19 pandemic, and the specter of inflation to make obscene profits by price gouging Americans at the gas pump, the grocery store, or any other sector of our economy,” Sanders said in a release.’
Robbing Peter to bribe Paul
Sanders’ pencil pushers figure they can squeeze US$66.1 billion from Berkshire Hathaway (a company that offers candy, insurance, Coke, and other consumables), Amazon (a company that makes it easy to shop) is supposed to cough up US$28.6 billion, JPMorganChase is targeted for US$18.8 billion (JPMorgan is, of course, a bank; it does whatever banks do), and an additional US$12.9 billion from Chevron (which provides fuel to thousands of drivers).
Let’s see…the money will go from people who provide valuable goods and services to…
…Raytheon and General Dynamics, who will give the nation yet more weapons! (Has any investment in weapons since 1945 actually paid off?)
…Baltimore and other cities…which squander billions each year in corruption and incompetence (the more they get…the more they waste).
…payoffs to lobbyists…student loans that don’t get paid back…sex change operations…and a list of grift and plunder that would take weeks to catalogue.
There’s no need to spend our time pointing out how absurd this is. But we’ll do it anyway…if only to reach for another point: the world doesn’t respond favourably to simple-minded control by jackasses. Instead, it is a weave of connections, often invisible and infinitely complex. Pull on one thread, and the fabric wrinkles or tears.
But how would Sanders know? Life’s intricate textiles are not of interest to him. Instead, typical of his entire caste, he has been in politics since 1971 — almost his entire adult life. He has no idea how the real world works; he only knows the world of socialist politics. So herewith is a brief tutorial on ‘windfalls’:
Profits — windfall or otherwise — are the reward for providing goods and services. The ‘windfall’ happens when those services are most appreciated.
A guy who spends all year cutting firewood, for example, will reap a ‘windfall’ when the weather turns especially cold.
The proposal on the table is to take the money away from him…and give it to people who didn’t bother to cut a single log.
The fabric of civil society
Down here in Argentina, farmers grit their way through years of crushing taxes, socialist rules and regulations, droughts, and heatwaves — often going broke. And then, through no fault nor virtue of their own, the weather turns favourable…farm prices rise…and they’re able to pay off their loans and stay in business.
This year, US dollar inflation, and sanctions against one of the world’s largest grain producers sent farm prices soaring. Suddenly, the gauchos are in high clover, eager to make up for years of barely making ends meet. Should we take away their ‘windfall’ profits now?
Or how about people who manufacture portable, emergency generators? Their whole business strategy may be based on windfalls. Most of the time, few people want to make the investment in their generators. But come the big hurricane, and suddenly, customers can’t get enough of them.
And how about Warren Buffett’s insurance company? Is it a ‘windfall’ when the winds pick up and people see the need for hurricane insurance?
Or how about the pharmaceutical companies? They spend millions maintaining research labs — a cost, not a profit centre. Then, without warning, a new virus appears. The white coats go to work manufacturing a drug to fight it: Bingo — windfall profits.
Of course, Sanders’ proposal will make sense to many people. They think the US is plagued by a severe lack of legislation and regulation. Every ill…every problem…every sin and setback…can be solved by more laws! They believe that every louse that ever crawled into a human crotch can be hosed out — by Mitch McConnell, Nancy Pelosi, and the whole tribe of meddlers, do-gooders, and deciders in the greater DC area.
Back in 2017, Forbes counted 88,899 federal rules and regulations added in the previous 20 years. The Sanders folks think we need more!
They pull their strings…and the fabric of prosperity and civil society unravels.
For The Daily Reckoning Australia