Take a look at this article, from AP "Business Writer" John Porretto.
"Exxon-Mobil Posts Record Profit."
As you read, you'll discover that the world's largest oil company earned the largest profit in U.S. corporate history last year--$39.5 billion.
I can already predict the collective reaction from the MSM and the public. Why, those greedy oil companies. They're gouging us, with Exxon-Mobil in the lead. Mr. Porretto helpfully reminds us that Exxon-Mobil also set the old records for earnings and profits, implying that the "Biggest of Big Oil" has been screwing us for some time.
But here's a question for you--and Mr. Porretto:
How much does Exxon-Mobil (and the other oil companies) pay in corporate income taxes during a year?
Quite a bit, it turns out. According to the Tax Foundation, Exxon-Mobil's corporate tax bill in 2005 (the most recent year for which data is available) was $23.1 billion, on a before-tax income of $59.1 billion. Exxon-Mobil's effective corporate tax rate in 2005 was 39.1%. Collectively, the nation's three largest oil companies (Exxon-Mobil, Chevron and ConocoPhillips) paid $44.3 billion in corporate income tax that year, with an average tax rate of 41%.
But you'll never read that in an AP business story. Just lots of big numbers that create the impression of gargantuan profits, and the need for a windfall profits tax.
I'd say $44.3 billion is a pretty sizeable windfall. But then again, I'm not a member of Congress---or a writer for the AP.
Not only do the MSM miss the point on taxes, they also consistently avoid talking about profit margin. I never see them touch on how much profit their making and then compare it to how much it costs to actually produce the product. Nor do I ever see any context about whether or not the difference between these two numbers are shrinking or expanding.
ReplyDeleteOne would think such context would be vital when leaving the impression that the profits are gargantuan.
The MSM also haven't talked about oil subsidies until the recent House action on cutting them. Government subsidies to industry smack of socialism plain and simple. If an industry can make a record profit, they surely don't need any of my money nor the cheap leases they receive for development on public land. Just sayin'
ReplyDeleteMaybe congress can pass a law whereby tax refunds are automatically issued when the government collects more in taxes than planned due to the growing economy.
ReplyDeleteAnother good question is how risky is investing in the oil business? Oil companies have to risk money to find oil, pump it, transport it, refine it etc etc. If the return on investment isn't greater than investing in a bank CD then the oil companies will invest their profits in CD's and where would we be then? You can't fill up your gas tank with paper.
Any person, corporation, or government which envies the profits of oil companies can buy shares of their stock, or invest in an oil sector mutual fund.
What Mike said, and then some. Look at return on investment over some time period including good and bad business stretches, good and bad macro demand, etc. And then compare those to the furniture industry, the software industry, the golf course management industry, while somehow adjusting for respective risk factors. THEN you might be able to decipher whether big oil is generating above-average returns, and THEN you can start from scratch developing a rationale for treating that return any differently from anything else - an effort that would fail unless it just makes stuff up and/or adopts a bolshevik confiscatory dementia in lieu of reasoning.
ReplyDeleteI've noticed retail gas prices plummeting since I got back from Iraq. Who's calling for investigations? Where are the headlines? Not hard to imagine a world where witches were burned or slavery tolerated when one looks at the demented, illiterate, pathologically envious idiocy regarding the oil industry from much of the public and most of the airhead "elites".