Saturday, October 08, 2005

Reductio ad absurdum to the max!

Great post from Coyote Blog on windfall profits which complements this:

A number of politicians are calling for taxing "windfall profits" driven by the "price bubble" in gasoline and oil. Previously, I narrow-mindedly opposed this, arguing that the whole point of the pricing signal being sent is to call for new supplies, which won't happen if the government takes the money away from suppliers.

I say narrow-mindedly, because I have had an epiphany. I realize now that it is indeed unfair for sellers to benefit from such a pricing bubble. However, I think the politicians are wrong for looking at oil, since that bubble is only small potatoes. I propose we start with the much bigger bubble: In housing prices. In a time of housing shortages, it pains my heart to Americans profiteering from artificially high prices. Besides, oil companies actually do something useful with their windfall profits, like finding more oil; home sellers will just blow their proceeds on a big screen TV or something.

My proposal is that the government set a "fair price" for housing, based on a standard rate of appreciation. The price of the house in a base year, such as 1970, adjusted for the CPI is a good starting point, but a process can be created modeled after Hawaiian gas pricing regulation to set up the exact standard. Every house in the country then will be appraised. Any house selling for or appraised for an amount above the 1970 price+CPI adjustment will be deemed as having reaped windfall profits. The government is authorized to seize 100% of these windfall profits. When this program is a success, we should then consider a retroactive program to seize windfall profits from the Internet stock bubble.

So, for all you who were supporting government intervention into gasoline pricing and profits, this must make you feel even better, since it is a much, much bigger bubble. Right? Or was it somehow more fun when Exxon was a target instead of, say, you?


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