US - The economic impact of a windfall profits tax on oil companies could have an substantial impact on both institutional and individual pension accounts.
According to new research “The economic impact of windfall profits tax for savers and shareholders”, with 4.3% of retiree’s equity investments in oil, the controversial tax could impact some accounts by as much as US$886 for state public employee pension funds.
The report by Robert Shapiro and Nam Pham warned: “While higher oil prices and earnings will increase the value of those holdings, a windfall profits tax would reduce the value and dividends of these pension and retirement saving holdings by an average $8.7bn to $50 per year.”
The tax, which will be debated in Congress in the next few weeks, would reduce the market value and dividend of US oil companies, calculated from what they would be with oil prices ranging from $45 to $60 per barrel.
Shapiro and Pham discovered that in addition to reduced earnings on pension accounts, the tax revenue would be half the levels anticipated by Congress because payments would be deductible under the corporate income tax.
The measure would also discourage domestic oil production causing the US to be even more dependent on foreign sources.
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