Windfall profits tax

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A windfall profits tax is a tax on profits that ensue from a sudden windfall to a particular company or industry.

[edit] United States

In 1980, United States federal legislation was passed that levied such a tax on oil companies because of the profits they earned as a result of the sharp increase in oil prices brought about by the Arab oil embargo. Since then, the tax has not been reenacted, however with gas prices once again reaching record levels there is renewed pressure on the U.S. government to bring back the tax. The tax ended in 1988 amid low oil prices by Ronald Reagan [1].

The Congressional Research Service has analysed that the windfall profit tax brought in $80 billion in extra revenues for the United States government, which was far less than the projected $393 billion. Also, domestic oil production by oil producers was said to be lowered.

These are not to be confused with the excess profit taxes of WWI, WWII, and the Korean War eras. Windfall Profit Taxes are more of an excise-type of tax.