Yesterday's editorial, "Taking Oil Profits," incorrectly suggested that President Carter's late April proposal for a windfall profits tax did not measure up to his early April promises.
In fact, the tax measures forwarded to the Congress on April 26 were the same as those promised by the president on April 5 during his speech to the nation.
The tax always has been a 50 percent excise tax. Excise taxes always have been income tax deductible. There always have been certain types of oil to which this tax would not apply, and the most significant of those exemptions-the marginal-well exemption-was specifically pointed out at the press briefing on April 5.
A fact sheet distributed on April 5 to each member of Congress and to the entire press corps, also pointed out that there would be exemptions to the 50 percent windfall profits tax
But neither the Congress nor the press was forced to calculate the actual impact of this tax from such general descriptions. Estimates of increases in federal revenues and reductions in oil industry profits due to the windfall tax were distributed on April 5 and are virtually identical to those distributed on April 26. Rather than "inching into view," as The Post would have it, they were presented in writing on April 5 to The Post and to every member of Congress.
On both April 5 and April 26, two sets of estimates were distributed, both of which assume increases in the world price of oil: one at the rate of inflation, and one at inflation plus three percent per year.
What do those revenue estimates say about this tax and about oil company profits?
Under the inflation-only price assumptions, the administration's windfall tax would reduce the amount of money that the oil industry would keep as a result of decontrol by 30 percent. If OPEC prices increase by three percent per year above the rate of inflation, the reduction would be 40 to 45 percent.
Looked at another way, without a windfall tax, producers would keep 43 cents from each $1.00 of increase in revenue. With a windfall tax, oil producers would keep 29 cents of each $1.00 of increase in revenue.
Those were the figures presented to the press and each member of Congress on April 5, and those were the figures presented to the press and each member of Congress and April 26.
Between 1979 and 1981, $15.4 billion of additional revenues will flow to producers as the result of decontrol. If the president's windfall profits tax is enacted, $8.4 billion (55 percent) will be taken by federal taxes ($3.3 billion in windfall taxes and $5.1 billion in federal income taxes), $1 billion will go to state and local governments and $6 billion will be kept by the producers.
Can that $6 billion be well spent in the exploration for and development of new oil resources? We think so, and it was on the basis of that assumption that the tax was designed. As the president has made clear, however, we would support responsible and fair efforts in the Congress to tighten the tax and divert more of the revenues to public purposes. Those enthusiastic about those prospects, however, should remember the almost universal skepticism regarding congressional enactment that greeted the president's initial proposal.
Many of those who are now saying that an honest windfall profits tax is an accomplished fact were saying such a tax was a hopeless cause a few weeks ago. They were wrong then, and they are wrong now.
If public interest wanes or is distracted by dreams of an easy way out, we may well end up this year as we have each year since the embargo of 1973-with a problem growing worse and nothing accomplished.
As to The Post's proposed "simple severance tax" of $4 per barrel applied without exemption, we find a bit unrealistic the editor's faith in the Congress' willingness to enact a COET tax even more expensive than the one that failed in the last Congress.As to the revenues The Post estimates from that tax- $15 billion annually-The Post's readers should know that total oil industry revenues from decontrol won't reach $15 billion annually until 1982-83, even if world oil prices rise at a high rate of three percent per year above inflation.
Thus, the president's windfall profits tax is identical to the one initially described a month ago, and has been carefully designed to take a substantial bite of after-tax income from the oil industry, while providing sufficient incentive for increased domestic oil production so badly needed.