I am always very suspicious whenever I hear the term ‘windfall profits tax.’ The term ‘windfall profit tax’ is just a euphemism, and it is invariably used as a gimmick to get a new tax measure passed that could not get passed on its own merits. A windfall profits tax is never actually a tax on windfall profits, like winning the lottery or finding a chest of pirate gold in your back yard. A ‘windfall profits tax’ is called that because a lot of voters will support anything called a ‘windfall profits tax’ without thinking about it because it appeals to people on an emotional level.
Right now, the ‘Berkeley Robin Hood Committee’ (as they call themselves) is collecting signature to put a measure on the November ballot to create a ‘windfall profits tax’ on landlords. The new tax will be 3% of gross rents collected. A tax on gross rents is not a ‘windfall profits tax.’ In fact, it is not a tax on profits. It is a sales tax, and like all sales taxes, it will be paid by consumers, in this case, tenants. Businesses do not pay sales tax. They collect sales tax from their customers and send the money to the government. All sales taxes work this way. You know that. You have paid sales taxes often enough. Landlords will simply add the cost of this new tax to their rents. The money will not come out of the pockets of landlords. It will be paid by tenants. This so-called ‘windfall profits tax’ will simply raise rents in Berkeley. It will not reduce landlord profits.
It is ironic that the sponsors of this ‘windfall profits tax’ call themselves the ‘Robin Hood Committee.’ According to legend, Robin Hood stole from the rich and gave to the poor; however, sales taxes are regressive in nature. They take a disproportionate amount of money from the poor, not the rich, and this tax will be paid by tenants, not landlords or homeowners.
As you can tell, I don’t like this ‘windfall profits tax’, which I think is a cruel voter hoax; however, there is one good thing about it. I will be exempt from paying it! Yes, this ‘windfall profits tax’ ballot initiative specifically states that landlords who own single family houses and duplexes will not have to pay the new tax, and the only rentals I own in Berkeley are single family houses and duplexes. So even though I think this tax is a bad idea, I don’t plan to get involved in this campaign.