1980 U.S. windfall tax raised $80B of $393B projected
Three bills in Congress would tax windfall profits in the oil and gas industry, a pool that analyst firm Wood Mackenzie estimates will reach $495 billion in 2026. The measures follow Chevron’s July 31 report of its highest quarterly profit in six years, and President Donald Trump has said the oil companies are “making too much money.”
Wood Mackenzie’s estimate covers profit above and beyond what the industry expected before the U.S.-Israel war with Iran began, according to an analysis by Tibor Besedeš, a professor of economics at the Georgia Institute of Technology, republished from The Conversation by UPI’s Voices section.
A proposal by Sen. Sheldon Whitehouse of Rhode Island and Rep. Ro Khanna of California, both Democrats, would levy a 50% excise tax per barrel on the difference between the current average Brent crude price and the 2025 average of $69. With a July 2026 average of $84, a company would owe $7.50 per barrel, regardless of production costs or profitability.
A second bill, the Iran War Oil Crisis Windfall Profits Tax Act by Rep. Brad Sherman of California, a Democrat, would impose a 100% tax on the amount by which crude prices exceed $75 per barrel. At the July 2026 average of $84, companies would owe $9 per barrel, and the tax would remain in effect only until hostilities end and prices fall below that threshold. Both price-triggered measures are keyed to prices rather than to any measure of underlying profit, Besedeš wrote.
A third proposal, the Taxing Buybacks from Big Oil Windfalls Act by Democratic Sens. Ron Wyden, Chuck Schumer, and Michael Bennet, would raise the excise tax on stock buybacks from 1% to 25% for large oil and gas companies, targeting what companies do with the windfall rather than the profits themselves.
Both the Whitehouse-Khanna and Sherman bills would rebate proceeds directly to households. The Whitehouse-Khanna proposal could give an estimated $216 a year to a single taxpayer at $100-per-barrel oil, which Besedeš said would help offset pump prices particularly for lower-income families, who spend a larger share of their budgets on fuel.
The U.S. has taxed oil windfalls before. The Crude Oil Windfall Profit Tax, enacted in 1980, was projected to raise $393 billion over its planned 10-year life but collected about $80 billion before its repeal in 1988 — roughly a fifth of the projection. Prices collapsed after 1986, domestic production was increasingly exempted, and the tax was generating almost nothing by the time it was repealed, according to Besedeš.
Other governments have such taxes in place now. A U.K. windfall tax on North Sea oil and gas, layered on top of existing levies for a combined rate of 78% on profits, is on course to generate an estimated 8 billion pounds in 2026 (about $10.8 billion), roughly double its 2024-25 revenue, the analysis states. A European Union-wide tax, imposed as a one-time measure after Russia’s 2022 invasion of Ukraine, raised 26.15 billion euros ($30 billion), and five EU countries are calling for a second one in response to the Iran war.
The American Petroleum Institute has argued that proposals like these “erode the certainty needed to make investment” decisions, and the Tax Foundation has warned that “taxing producers is the opposite of a solution to a supply crisis.” Neither side has put a specific dollar figure on how much investment would actually be deterred, per the analysis.
Wood Mackenzie data in the analysis show the 49 largest oil and gas companies will pocket about $272 billion of the sector’s windfall — roughly equal to 70% of their combined annual investment budgets. Investment spending has barely moved, stock buybacks are on course to fall, and dividends have stayed flat, with the cash accumulating on balance sheets.
Besedeš argues the case that such a tax would prevent important economic activity weakens by the day, because the windfall is not being invested now anyway, and he calls the 1980 experience a cautionary tale for revenue projections. He also writes that whether the trade-off between taxing war-driven windfall profits and the risks of market intervention is worth making depends on questions that economists alone cannot settle.