|
Short version, Betty, is that windfall profits taxes basically punish success. The thought is that if a company or industry is doing so well that they should pay extra. What this does is discourage competition within the industry and has the effect of harming consumers.
An example.
Let's say a flood hits an area and there's no food available. Someone risks life and limb and trucks in bread and sells it for $20/loaf, making a "windfall" profit of $18/loaf. Others hear someone is making $18/loaf and therefore decide they should truck bread in and do the same. This does two things - increases the supply of bread and lowers the price due to that increase.
If the government decides it isn't right and takes $17.50 of the $18 in profit, there is no incentive for others to bring in bread, and therefore there is less supply and the loaf still costs $20.
|