Retirees and employees saving for retirement would bear the brunt of any windfall profits tax on oil companies, according to a study by Robert J. Shapiro, chairman of consulting firm Sonecon, and Nam Pham, an economic consultant to research firm NDP Group.
They estimate the windfall profit tax proposed in Congress would generate $18 billion to $104 billion in gross revenue between 2006 and 2010, based on oil prices of $45, $50, $55 and $60 per barrel for each successive year. But because corporate tax payments would be deductible, the net five-year revenue would be less than half that, ranging from $8.6 billion to $48.6 billion.
For oil company shareholders, the opportunity cost from the tax would range from an average of $21.3 billion to $121.8 billion a year, depending on oil prices and inflation. And while the higher oil prices would increase oil companies' earnings and market capitalization, the tax would reduce any higher market cap by between 2.7% and 10.9%, depending on oil prices.
The authors determined those costs would be borne by oil company shareholders. Americans maintain 175 million private and public retirement accounts that hold about $267 billion in U.S. domestic oil and gas company stocks. Although higher oil prices — and company earnings — would increase the value of those holdings, the tax would cut the value and dividends of those retirement account holdings by $8.7 billion to $50 billion a year, depending on oil prices, and more for state public employee pension funds, which have higher allocations to oil and gas company stocks.