Windfall Profits Tax

Here is a campaign ad I saw in TV recently -

http://www.youtube.com/watch?v=NdOK4L868cI

This ad really makes me mad.  First off, I think it is really unfair he is singling out a specific company to attack.  It isn't like he is accusing them of doing anything illegal - just that they run a business too efficiently and, therefore, make too much money.  Let's look at the accusation and the practical application of such a tax on running a successful business.

Proposition: Exxon makes outsize profits.
Explanation:  According to Fortune.com, Exxon made $40.6 Billion
on Revenues of $372.8B in 2007. That's a ratio of 10.9%.  
Let's compare that to the profit/ revenue ratios of some of 
the other Fortune 500 Titans.  To be fair, I am showing 2007 
results from companies representing a cross-section of industries:

General Electric -12.6%
Bank of America - 12.6%
AT&T - 10.0%

Can someone explain to me why Exxon is being singled out here? 
Could it be because gas prices happen to be high at the pump at
the moment (a function of a world commodity - oil) This political
grandstanding makes me sick.  Is President Obama going to go
after other industry leaders next?  And who sets the threshold
for "outsized profits" that call for a windfall profits tax?  Ridiculous. 

Also, if we want gas prices to go
down we need a) to reduce demand (unlikely, given the rise of China
and India) or b) increase supply.  What incentive do Exxon or other
oil companies how to increase supply if the gov is going to artificially
limit the amount of money they can make?  This type of tax goes 
against our entire economic system.  If Senator Obama wishes to 
encourage  alternative fuels, have at it, but don't force existing oil 
companies to finance the competition that will make their product
obsolete.  That's crazy.

This kind of blame game is the very "politics as usual" Senator Obama
professes to be against.  Finally, a windfall profits is an additional tax on
the company, but more importantly, on the shareholders of that
company. That means Senator Obama is taking $ out of the pockets of
the retirement funds of millions of Americans through their 401K and
IRA investments.  I imagine a large majority of pension and mutual
funds have stakes in Exxon and the other large oil companies.  I wonder
if this would be such a popular message if those facts were emphasized 
(calling John McCain...) 

Barack - stealing from the successful to give to the less successful is not
a viable long-term strategy.  If does not provide incentive for the less
successful to work harder, and it provides dis-incentive for those who
have the capability to achieve success.  Bad news all around.

Just so you don't think I am alone in my comments above, here is a
corroborating opinion from an expert:

Obama Goes Populist, Seeks Penalty on Windfall Profits of Oil Companies
by Gerald Prante

Presidential candidate Barack Obama has released a new ad that contains a lot of rhetoric designed to appeal to the masses, yet whose underlying economics is pure nonsense.

Obama seeks to impose a tax on the windfall profits of oil companies, which he implies in the advertisement is the cause of the high prices at the pump. The fact of the matter is that it doesn't work that way. The CEO of Shell doesn't get up one morning wanting to raise gas prices and say "I'm going to screw the American consumer today so my company's shareholders will get a greater return." And then the next morning when he wants to lower prices say, "I slept well last night and feel good this morning so I'm going to lower prices for the American people even if it cost my shareholders."

The oil companies have reaped a lot of gain from the recent rise in oil prices. There is no disputing that. And a windfall profits tax in the short-run would do little to change the price of gasoline, and would push money into government's coffers. However, in the long-run, by telling the oil companies that if they have higher than average profits in any given period they will be taxed extra on those profits, then that tax affects business investment for the future. That, in turn, lowers investment in oil, raising the price at the pump, lowering wages, and lowering returns to investors.

The fact of the matter is that Obama would be more accurate if he said that his foreign policy would help lower gas prices given that recent tensions in the Middle East have played a larger role in raising the price. Unfortunately, Obama is merely engaging in nonsensical political rhetoric by targeting the current outcomes of the energy markets instead of the underlying causes.