United for Jobs Warns: Federal 'Windfall Profits Tax' Legislation Will Cost Missouri Pension Holders/Taxpayers.
JEFFERSON CITY, Mo., April 3 /PRNewswire/ -- Today United for Jobs (UFJ) warned that federal legislation to impose a so-called "windfall profits tax" on U.S. oil companies would have a severe economic impact on public employee trust funds. The Missouri Highway Patrol Retirement System, the Public School Employees' Retirement System of Missouri, the Missouri State Employees' Retirement System, and other public retirement funds could lose as much as $325 million per year in foregone gains, according to a recent study by the Investors Action Foundation (http://www.windfallprofitstax.org/).
The study examined the "Windfall Profits Rebate Act of 2005," two variations of which are being considered by Congress as part of the Budget Reconciliation Bill. The Bill would impose a one-time accounting charge on integrated oil companies to fund the Low Income Heating Assistance Program and eliminate tax credits for payments made to foreign countries that do not have an applicable income tax.
Public employee pension plans are especially vulnerable to the costs of windfall profits taxes because they hold a large percentage of their assets in domestic oil and gas companies. According to the study, the windfall profits tax will cost the average American pensioner as much as $5465 in future gains over the next five years.
"Missouri taxpayers, firemen, nurses, teachers, police officers, and other public servants are the ones who are really going to be paying the price of this tax -- not the oil companies," said Harry Alford, president of the National Black Chamber of Commerce and UFJ board member. "State employees will see the value of their funds reduced and taxpayers will be left to make up the losses."
The study examined the tax's projected effect on 28 million accounts in more than 2,650 federal, state and local public employee pension funds. On average, state and local pension funds invest more than 66 percent of their assets in equities, including mutual funds and index funds. These funds hold approximately $64 billion in shares of U.S. oil and gas companies, or about 9.9 percent of the oil sector's market value. For Missouri, the tax would reduce future dividend payouts and capital gains earned by these funds by between $34.8 million and $325 million a year, depending on oil prices.
The study also found that state and local pension funds will bear proportionally larger costs than those borne by the federal employee pension system. Over the next five years, depending on oil prices, the federal employee pension system could have an opportunity cost loss as low as $100 million per year to $1.3 billion per year compared to the costs on state and local pension systems, ranging from $2.1 billion a year to $19.6 billion per year.
"These tax provisions designed to penalize domestic oil companies are horrendous economic policy, and unfairly penalize state and local pension fund enrollees more then their federal counterparts. These taxes devalue state retirement funds, hurt shareholders, drive up energy prices, hurt small businesses, and make us less competitive in the global marketplace," concludes Karen Kerrigan, president of the Small Business & Entrepreneurship Council and UFJ board member.
CONTACT: Bill Riggs, +1-202-772-2189, email@example.com, or Andrea Saul, +1-202-572-6260, firstname.lastname@example.org, both for United for Jobs
Web site: http://www.windfallprofitstax.org/
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|Date:||Apr 3, 2006|
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