Natural Gas Price Deregulation and Windfall Profits Taxation

Changes in government tax, expenditure, or regulation policy that are desirable for efficiency reasons may generate windfall gains or losses that can become a barrier to reform. The current regulation of natural gas prices in the US is apparently such a situation. From economists' point of view...

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Bibliographic Details
Published in:Southern economic journal 1983-10, Vol.50 (2), p.529-538
Main Authors: Anthony Y. C. Koo, Fisher, Ronald C.
Format: Article
Language:English
Subjects:
Capital gains
Capital losses
Deregulation
Economic theory
Estimated taxes
Lump sum
Lump sum payments
Lump sum taxation
Market value
Natural gas
Natural gas prices
Price regulations
Property taxes
Studies
Tax rates
Taxation economics
Taxes
Utility deregulation
Windfall profits
Windfall profits tax
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Summary:Changes in government tax, expenditure, or regulation policy that are desirable for efficiency reasons may generate windfall gains or losses that can become a barrier to reform. The current regulation of natural gas prices in the US is apparently such a situation. From economists' point of view, deregulation of natural gas will lead to windfall gains to the investors who risked money in natural gas under the expectation of regulated prices. On the other hand, consumers will face higher prices. A form of a lump sum tax to serve as a windfall profits tax is proposed. A lump sum capital gains tax on windfall profits would not create incentives to alter the amount and timing of gas extraction, can be easily assessed, and is very feasible. The advantages, administration, and revenue potential of a lump sum capital gains tax are explored.
ISSN:0038-4038
2325-8012
DOI:10.2307/1058224