Former President Bill Clinton’s Treasury Secretary Larry Summers on Tuesday criticized President Joe Biden’s plan to tax the windfall profits of major oil companies on Twitter.
Biden threatened to work with Congress to tax the “outrageous” profits of energy producers during a Monday speech after Exxon Mobil and Chevron posted massive quarterly profits on Oct. 28.
However, Summers, who also worked in the Obama administration, said that Biden’s plan does not make sense as it would decrease profits and reduce investment in the industry, exacerbating current energy shortages.
“If you reduce profitability, you will discourage investment which is the opposite of our objective,” Summers wrote. “If it is a fairness argument, I don’t quite follow the logic since even with the windfalls Exxon has underperformed the overall market over the last 5 years.”
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Biden accused oil and gas companies of “war profiteering” and excessively hiking fuel prices following Russia’s invasion of Ukraine. The American Petroleum Institute, an industry group that represents Exxon and Chevron, stated Monday that global markets determine energy prices and also said that Biden’s plan would accomplish the opposite of what is intended, according to a press release.
Windfall profit taxes that were implemented in the 1980s caused oil production to decline and forced the U.S. to be more dependent on foreign oil, according to a 2006 Congressional Research Service report.
Summers warned in February that the $1.9 trillion American Rescue Plan, combined with massive coronavirus relief spending and low-interest rates, could drive inflation to unprecedented levels.
The inflation rate rose 8.2% over the past 12 months, according to the Bureau of Labor Statistics.
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