Liberal UNLV Professor wrong on Gas Taxes
Inside Liberty Watch Today - Sept. 26, 2005

The chairman of the UNLV economics department, Stephen M. Miller, was given an editorial page platform in the Las Vegas Review Journal recently to advocate for a windfall profits tax on oil companies as a solution to the nations oil dependence. Despite the article's title: "Gasoline Prices: Don't mess with the market" the professor advocates for just the opposite. 

Miller's piece was in response to State Senator Bob Beers' proposal to temporarily lift Nevada's state gasoline tax. Professor Miller (not to be confused with NPRI policy director Steven Miller or ex-city councilman Steve Miller) is against the Beers proposal because temporarily lifting the gas tax will not, in his view, lower the price at the pump, but will, again in his view, only serve to increase "big" oil company profits. Instead of the state of Nevada having those millions to pay his salary to shape the minds of young impressionable college kids, the money would instead flow into the coffers of private enterprise. That thought evidently offends the sensibilities of the department chair. 

Miller rightly contends that higher gasoline prices "rations the product to the best use on a willingness to pay basis." Plus, he identifies a couple of reasons why gasoline prices are high-increased Chinese demand and the lack of refinery construction constricting supply. 

Then strangely, the professor frets about the oil industry's image if the price of gasoline doesn't fall if the taxes are stayed. 

But he isn't too worried about "big oil," thinking that government should "take action to put a dent into those extraordinary
profits." But, how will this help the consumer at the pump? 

Where Beers wants to really give market forces a chance to help the consumer, Miller proposes a higher state gasoline tax that "could reduce the excessive profits of gasoline profits of gasoline retailers if their profits appear excessive." 

Obviously Professor Miller is less concerned about consumers than he is about "excessive" profits. And, by the way, just who does Miller think should be the judge of "excessive"? Government, of course. "Government can impose a windfall profits tax to absorb as much of the current profits of big oil that the government deems excessive," Miller writes. 

In fact, if gasoline prices were to fall without the tax, Miller believes that this "corresponds to precisely the wrong policy recommendation." 

The higher the price at the pump, the more that demand slows: consumers will buy less. Big oil companies sell gas on a wholesale basis to their retailer customers based upon the demand from those retailers irrespective of what state taxes happen to be. Most retail sellers of gasoline keep their prices as competitive as possible in order to attract customers to their properties to sell them other higher margin products like beer, cigarettes, food items, and video poker play.

Although Miller is correct that the higher costs of production didn't increase prices, demand has; consumers are now cutting their consumption, thus it is possible that lifting the tax might lower the price at the pump a few pennies as retailers attempt to recapture previous sales. Besides, perhaps Professor Miller hasn't heard, state government is flooded with taxpayer money at the moment. 

Also, just where does Professor Miller think oil companies will get the money to find more oil or increase refining capacity if profits are sent to the government to be wasted? 

The late great Murray Rothbard wrote about "excess" profit taxation in his book, Power and Market: "Attacking profits 'doubly'
disrupts and hampers the whole market-adjustment process. Such a tax penalizes efficient entrepreneurship."

Rothbard goes on to make the point that it is times of crisis like now that the "more important it is not to tax 'excess' profits, or any form of 'excess' revenue for that matter; otherwise, adaptation to the new conditions will be blocked just when rapid adjustment is particularly required." 

The anti-profits Professor Miller believes the correct policy "does not try to lower the price of gasoline." He wants consumers to pay more and the government to get more through an excess profits tax.

But, as Rothbard wrote about the excess profits tax; "It is difficult to find a tax more indefensible from more points of view than this one." 

Doug French, Liberty Watch Columnist