Wind - fall Tax – What is it?
There is a wind and some trees fall on your property and you make some money – should the Government get a share?
A tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits. Windfall taxes are primarily levied on the companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses.
The benefits of a windfall tax include proceeds being directly used by governments to bolster funding for social programmes.
According to Wikipedia, “A windfall profits tax is a tax on profits that ensue from a sudden windfall gain to a particular company or industry.”
In 1980, United States federal legislation was passed that levied such a tax on oil companies because of the profits they earned as a result of the sharp increase in oil prices brought about by the OPEC oil embargo. Since then, the tax has not been re-enacted, however with gas prices once again reaching record levels there is renewed pressure on the U.S. government to bring back the tax. Amid low oil prices, the tax was ended in 1988 by President Ronald Reagan .
These are not to be confused with the excess profit taxes of World War I, World War II, and the Korean War eras. Windfall Profit Taxes are more of an excise-type of tax.
The etymology of the phrase is from colonial times. "The crown precluded the colonists from using any lumber, one foot or wider except whereby an act of God, such as a severe storm, a tree falling on one's own property. If that happened, the colonists could use the tree that fell down on their property during a storm or they could sell it for a significant amount. So if you had a big storm on your property back in colonial days, and a lot of trees fell down, the resulting monetary reward was called 'a windfall profit.' It was a beneficial thing to a property owner, because they had limits on how much lumber they could use. But if an act of God came down and knocked a bunch of trees, they could use whatever they had. There were no limits on it and they could sell it or use it for their own construction purposes, hence windfall profit.