Windfall tax: doing that wrong way
… If done directly as it is, just a straight-up tax that goes into a common pot, without addressing the issue at hand.
tldr: Windfall taxes are a quick cash grab by the states, frequently targeted for immediate gains rather than to solve the source of the problem – market inefficiency. Better way would be to use that to address issue and try for a long term solution.
Hehe, guess who finally found out where the windfall money is actually going? That made me furious.
What a windfall actually is
Okay, windfall taxes are when some company gets profit in times of crisis, unusual circumstances and so on. And generally you have to think of what happens. It is usually an emergency or something unusual or a shock. But think of it not just that something happened, but something happened and the market was not flexible, not fluid, unable to quickly adapt, adjust, price that in, and absorb the new stuff real quick.
Or in simple terms, the market was inefficient regarding the new circumstances.
Oh yeah, of course nobody sits in the markets waiting for a new crisis to cash in on. But the general expectation would be: the market naturally absorbs around 10% of the shock, and if previous anti-crisis measures were in place, we would hope they absorb the next 20%.
A windfall tax is a reactive treatment anyway.
When a government imposes a windfall tax, they are essentially saying: "We see this massive distortion in the market, and we are going to capture the surplus created by that distortion."
The wrong way: tax it into the common pot
Yet what everyone always does is the same. We get a flat tax, put it into the treasury or pay off all the debt, using it as a quick bandaid to satisfy voters who are complaining and call it a day.
No more thinking, no strategizing, no long-term thinking or adapting to anything.
Quick and easy decision. No thinking required. Immediate win vs long-term fix or adjacent countermeasures. "See! We did something. We punished them for racking up the profits! Now you can go home and enjoy that justice has been served. We showed those greedy fuckers how to behave!"
Or worse… taking that and just doing the same thing, keeping the lights on in their massive bureaucracies.
Or much worse – funding whatever the current administration thinks will get them votes or satisfy its ego.
No consideration of what happens next time…
… Even if it was justified at all. Sometimes we just see a company racking up profits without a crisis or anything really strange or unusual happening, and see it as a quick opportunity to grab cash.
Most windfall taxes are about distribution. They are trying to fix the "unfairness" of the outcome. But they almost never touch the structural unfairness of the market’s design.
Of course, as a libertarian I mostly oppose this tax, but many would consider it a valid choice in emergencies.
One more question. Is this fair when they are punishing for success? And yet, on the other point, such happens only when your market is rigid or underdeveloped, quite possibly because you did something wrong in the past. Not always, but most of the time. Either because you have policies or because market participants are not experienced, not accustomed, and just don’t know the history too well.
Yet there is a completely opposite, good way to still make the tax and make sure your economy is resilient in the future.
Just don’t spend it. Invest. That was the market signal: it was not ready for a crisis. Prepare for the next one.
Meh. Nobody is doing that. Everyone wants to forget about the next crisis once and for all, yet some crises are almost constantly recurring anyway.
OOH, dump it into the common pile and hope that such a thing never happens again.
"Oh, shit, here we go again"
Revenue tool, not a market tool
And yet there is a completely different way to do things.
If a market is "inefficient" – meaning prices are being driven to extreme highs because of a supply shock (like a war, a pipeline break, or a sudden lack of production) – the logical economic solution is to increase supply.
To increase supply, you need investment. You need companies to feel confident enough to spend billions on new drills, new infrastructure, and more exploration.
But, on the other hand, you also cannot rely on them to actually follow through on that. They might see it as temporary and not prepare. And here is your job: to pay attention.
We are talking about the short-term disruptions, not something that is established as a new norm.
A change in consumption pattern and energy consumption type or production would qualify as a new norm, when you know this is the next new thing.
And if it is just a tax grab, it also sends the wrong signal.
When governments implement windfall taxes to "help the people" with high energy prices, they often inadvertently ensure that prices stay high.
Step 1: Supply drops -> Prices skyrocket (Inefficiency).
Step 2: Companies make massive profits -> Government gets greedy -> Windfall tax applied.
Step 3: Companies see lower long-term ROI (Return on Investment) due to the tax -> They cut back on long-term, risky exploration projects.
Step 4: Future supply stays low -> Prices stay high -> Repeat.
If they actually tried to fix the inefficiency, they’d have to do something unpopular or complicated, like:
- Deregulating production (which gets them yelled at by environmentalists).
- Building massive new infrastructure (which takes decades and costs a fortune).
- Investing in long-term energy transitions (which doesn’t give them an immediate "win").
But a windfall tax? That’s easy! It’s a massive PR win. They get to stand on a stage, point at a billion-dollar oil company, and say, "We are taking their blood money to help you!"
The so-called market stabilizers become not the ones who actually help, but the parasites on chaos.
What happens when you just take the money without talking to them, without thinking – then what are you gonna do the next time?
It would be better if we just didn’t interfere at all in this case.
Here is also a trap: if you have the desire to utilize such a tool and yet you let the company slide, they may ignore it. They may hope the crisis is a one-off and they may not need to think about it more. Or they may not understand that the market shifted and they have to invest. Or they could be afraid to do so. Also, maybe the tool would be, not to just grab their money, but to coordinate collaborative investments or insure them if they invest and do not see returns and all that.
Oh, we know how hard it is for these morons to actually think about averting future problems instead of the easy cash grab to throw into piles. But you could just nudge them once. Maybe, maybe that next crisis could be averted.
Your politicians are already very risk-averse and afraid of anything new and unknowable and strange. At least this time you can actually utilize that.
Stories
Oil: taxed over and over, fixed never
1973 embargo, 1979 shock, then the big one: Crude Oil Windfall Profit Tax Act, signed April 1980. Projected $393bn. Collected $80bn gross, some $38bn net. Domestic production fell, import dependence grew. Repealed 1988 because it made America more dependent on foreign oil, not less. [1]
Then 2007-08: nine new windfall bills. Then 2022: UK Energy Profits Levy, EU solidarity contribution. [2] Then the 2021-23 energy crisis. I can’t talk the best, but oil prices were rising. Nobody learned. The Russian invasion began. Prices rose. Ok, one year everyone suffered. The taxes flowed. Nobody learned. And then, just a couple years later, the war with Iran, Hormuz closed, Brent at $120, the same crisis came biting their asses.
And now? Poland 60%, [3] Hungary 95% on the spread, [4] Portugal 33%, [5] UK 78% effective until 2030. [2] Taxed over and over, and nobody ever built the thing that would stop the next one. Nobody even thought in that direction.
Memory: the tax that failed, the fund that worked
DRAM contract prices went ~5x from the early-2025 base. [6] Samsung Q2 2026 operating profit ₩89.5tn, up 19x year-on-year. [7] SK Hynix ₩60.5tn. Combined some ₩150tn in one quarter. And through all of 2025, they were cautious: prioritizing profitability over capacity, only fulfilling ~70% of DRAM orders, refusing multi-year deals. [8] Oversupply here is essential, I say, because memory will always be used anyway. And yet they would not build.
So Korea tried to tax it. Three times. [9] A "national dividend" from the semiconductor excess revenue – stocks dropped, opposition screamed communism, retracted within 48 hours. A "special-purpose tax" on chaebol excess profits – business lobbies killed it. A corporate top bracket instead – went nowhere.
And then the flip. June 30, 2026: Samsung and SK Hynix pledged a combined ₩3,200tn and backed the plan to double Korea’s memory capacity in five years. [10] SK Hynix’s Yongin cluster alone is $720bn. [11] Both running at 100% utilization. Nobody needs to nudge them anymore – they are committed to pumping up as much as possible, Jensen Huang literally signed a wafer "Please make more."
Meanwhile the money got captured anyway, without any windfall tax: ordinary corporate tax jumped from ₩115tn to ₩216tn forecast, some ₩120tn of it from Samsung and SK Hynix alone, and ₩162tn of the excess went into the Future Response Fund. [12] Yes, ₩104tn of that just sits as reserve, and zero won goes to memory capacity directly. But give them credit: the fund pays for AI data centers, SMRs, the power and water infrastructure the fabs need. [13] It is not allocated for memory specifically, but if they hit any production hiccup, that cushion is there. Tax failed three times; the fund exists. That is more than oil ever got.
UK power: the one that actually paired the tax with a fix
Britain taxes nuclear, wind, solar and biomass generators at 45% on everything above £75/MWh. Why? Because for structural reasons the price of electricity is tied to gas, so low-carbon generators pocket revenues far beyond normal returns without doing anything to earn them. The Treasury wrote that into law. Then in April 2026 they raised it to 55% – and announced it alongside the thing nobody else ever does: moving generators onto wholesale Contracts for Difference, with the stated goal of breaking the link between high gas prices and high electricity prices. [14]
The numbers show why it matters. Gas set the UK power price 90% of the time in the early 2020s, around 60% now, heading for 50% by 2030. A third of Britain’s power still sits exposed to gas-set wholesale prices, and the voluntary fixed-price contracts target exactly that third. [14] Tax the rent, fix the mechanism, in one package. Three years late, but it exists. Nobody can call this thesis fringe when HMRC wrote it.
Greece and Romania: taxed it, subsidized bills, built nothing
2022: Greece ran a 90% retroactive levy on power producers’ excess profits. €373.5M straight into an "Energy Transition Fund" that only subsidized consumer bills. Romania taxed revenue above 450 lei/MWh at 80%. Pure consumption relief. Nothing supply-side.
And now? Greece, August 2026: wholesale at €133/MWh, up 20% in a month, spiking to €184 – near the highest in a year. One week in August, demand flat, renewables down 34%, price up 41% to €144. After sunset the solar disappears, gas plants take over, prices more than double within the day. Storage never got built, so cheap midday power dies at noon. Suppliers held consumer prices five months straight and are breaking. The government is now examining targeted support again – while ruling out another windfall tax on refiners, so there is nothing to fund it with. Diesel at €2.04 a liter, up 48 cents since February, after €370M in fuel subsidies already burned. [15]
Romania, September 2026: the highest electricity price in all of Europe, per E.ON Romania’s own general manager. ~30 cents per kWh against purchasing power that makes it the worst on the continent. Gas at €70/MWh in Europe, sold to households at €24 by legal mandate – a scheme expiring March 2027 with no successor. The grid itself is now the bottleneck for the whole economy. His words: "with the right investments, it can decrease significantly" – photovoltaics, storage, gas plants under construction that were never finished. [16] Four years after the 80% grab, the investments still are not made.
That is the evil version with receipts. Tax → bills → nothing. The shock comes back and you pay twice.
Gas and LNG: taxed the windfall, built with your money anyway
They did tax gas. The EU solidarity contribution hit fossil profits in 2022-23 at min 33% above the 2018-21 average plus 20%, raised some €28bn – and the regulation says it plainly: "to contribute to the affordability of energy for households and businesses." Bills. The same pile. [2]
Meanwhile Europe rebuilt its gas supply chains at terrifying speed. Germany chartered five floating LNG terminals, Wilhelmshaven live by December 2022, budget ballooning to €9.7bn. [17] Uniper alone cost up to €34.5bn in approved state aid to nationalize. [18] All of it from the state budget and the €200bn Economic Stabilisation Fund – taxpayer money. The transition could never be covered by the windfall tax anyway, so they used the fund. And here is the thing: they had no choice. Russian gas was gone. They would have built regardless of whether they taxed the companies or not. The tax did not fund the fix; the fix happened because there was no alternative.
And the biggest gas winner sat outside the tax entirely. Equinor posted $74.9bn adjusted operating profit for 2022. Norway is not in the EU, paid nothing into the solidarity contribution, and sold into a desperate continent at desperate prices.
Objections
"This will just produce more bureaucracy?"
Well, yes, it is possible that the moment you just announced that the tax money is going to be used, you would have a lot of leeches trying to get their pie. Everyone would come with different ideas. You would have lobbying or rent-seeking. Everyone would try to get that, if it is a public discussion.
Not to mention the time lag to be accounted for, which makes it more complicated.
But, what the hell? You are paying them to do their job anyway! If your lefties are claiming that they help manage your economy, one expects them to do their job, damn it.
"Why should you not just give the money away immediately?"
Well, because you are patching money doing relief on already-done damage. You’re doing damage control one time without any hope for the future.
Consider that in case of oil prices, you usually tax the companies years after. Like, crisis happens one year, only in the second year you start taxing and redistributing. For the whole year, the population already suffered. They already lost money, they already adjusted their businesses, they already thought of how they’re going to manage, they already relocated their assets. Refinanced loans and so on. You are doing a relief when the market already adapted to different circumstances.
That is a shitty way to actually manage the economy. You do help, but you are doing to them exactly what a windfall is, but in reverse. You give them almost like a stimulus check. Checks they possibly did not anticipate, they did not know, they did not plan for it, while they definitely planned for prices possibly staying the same or returning.
If you don’t know what to do, store it
And if you don’t know at all what to do with windfall taxes, just fucking store it. Do not redistribute; better, just store it, convert it to gold, put it in your bank, some in other percentages, and so on.
That was the signal that the market is alive and volatile. Crisis happened, expect more in the future. That is your reminder never to sit idle.
Prepare, put this money away, don’t spend, collect a fat chest and prepare for the next crisis. Norway is the proof it works: in 2022 their petroleum revenues hit NOK 1,457bn, by far the highest ever recorded, and by fiscal law all of it flows into the Government Pension Fund Global to be invested in foreign markets. [19] They had no idea what to spend a gas bonanza on either – so they stored it for the future. That is exactly the move.
[1] https://www.everycrsreport.com/reports/RL33305.html
[2] https://taxfoundation.org/data/all/eu/windfall-profits-taxes-europe/
[6] https://www.trendforce.com/presscenter/news/20260202-12911.html
[7] https://news.samsung.com/global/samsung-electronics-announces-second-quarter-2026-results
[11] https://www.cnbc.com/2026/08/13/inside-sk-hynixs-720-billion-bet-to-build-enough-memory-for-ai.html
[12] https://biz.heraldcorp.com/article/10858696
[14] https://www.gov.uk/government/news/decisive-action-to-break-influence-of-gas-on-electricity-prices
[18] https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7830