In a desperate attempt to avert blame for high energy prices and a reduction in domestic oil and gas production, President Biden has threatened the U.S. energy industry with a windfall profits tax. Ironically, this specific tax would further increase costs and reduce domestic production of oil and gas.

In one tweet, Biden gives the industry two “choices”:

The President’s assertion is that oil and gas prices are high because energy companies are erroneously raising prices to profiteer from the war in Ukraine and the fallout of the coronavirus. 

This is a lie. To be clear, President Biden and congressional Democrats are largely to blame for high energy prices. The American people must not allow the Left to rewrite history—especially because Democrats were so shameless and gleeful about their contributions to the downfall of this industry. 

President Biden came into office and immediately canceled vital energy projects, prevented new drilling leases, and threatened new tax hikes on American energy. Biden’s fiscal year 2023 budget proposal included 11 tax hikes on the oil and gas industry. In total, the administration has threatened 17 new energy taxes. 

Further, Democrats have already followed through on some of these threats. Democrats’ reconciliation bill—signed into law when inflation was already surging—contained substantial tax hikes including a 15% corporate alternative minimum tax, a $6.5 billion natural gas tax, a $12 billion crude oil tax, a $1.2 billion coal tax, and several more

Biden touted this bill as an integral part of his plan to impose “the most aggressive action ever, ever, ever to confront the climate crisis… And that’s not hyperbole.”

Virtually every economic sector is affected by high energy prices, driving inflation. The consumer price index remained high at 8.2% on an annualized basis in September, according to the Bureau of Labor Statistics (BLS). Notably, annual inflation was at a stable 1.4% when Joe Biden took office. 

A windfall profits tax would exacerbate our existing crisis. It would have the opposite of the administration’s desired effect: lower prices and more domestic production. 

In fact, a windfall profits tax has been tried and failed in the past.

In response to the 1979 oil shock, President Jimmy Carter signed the Crude Oil Windfall Profits Tax Act into law in 1980. This legislation imposed a 70% excise tax on the amount of an oil sale price exceeding $12.81 per barrel. 

The Congressional Research Service noted that the windfall profits tax was “an extremely complicated tax to comply with and administer,” that it generated a fraction of the revenue projected, and that it raised the cost of gasoline and increased dependence on foreign oil.  

Specifically, it reduced domestic oil production by as much as 8% and increased U.S. dependence on foreign oil by as much as 13% from 1980-1988. Though the tax was projected to raise $393 billion, it only raised $80 billion between 1980 and 1988. 

This law was a disaster and, thus, was repealed eight years later. Only one Senate Democrat voted against its repeal in an 85-11 roll call vote. Biden, who also served in the Senate at this time, was absent from the vote. 

It seems that the Biden administration is perfectly willing to exacerbate America’s crippling inflation problem to create the appearance that they are not to blame. It is certainly no mystery why Biden is picking this fight now, one week before the midterm election.