Exxon’s obscene taxes
Posted by Richard on February 13, 2008
When Exxon Mobil announced a record $70 billion profit in 2007, every leftist and populist demagogue on the planet screamed in outrage that it was "obscene." But if you're an Exxon shareholder (and almost everyone with a pension plan, 401k, or IRA is, at least indirectly through an equity mutual fund), you might think that it's Exxon's taxes that are obscene. According to Mark J. Perry, Exxon paid $30 billion in taxes in 2007 — a tax rate of more than 40%!
In fact, for the past three years Exxon Mobil's tax bill has averaged over $27 billion a year. And here's the jaw-dropper: according to 2004 IRS data (the latest available), $27 billion is about what the bottom 50% of individual taxpayers pay. Their tax rate, by the way, is about 3% of adjusted gross income.
Clearly, tax cuts will always "favor" the rich. If by "favor," you mean "bleed less deeply."
Note: The Seeking Alpha article linked above is an expansion of a post from Perry's blog, Carpe Diem. If you're at all interested in economics and business, visit Carpe Diem regularly. Perry is a fount of fascinating facts. Just today, for instance, he honors the death ten years ago of Julian Simon most appropriately.
Perry has a knack for simple, striking graphs and charts that drive his point home. For instance, look at yesterday's post showing that we're in the most economically stable period in U.S. history. Or this graphic illustration of what's behind those CEO pay increases.
UPDATE: This IBD editorial about oil company profits and taxes also noted Perry's numbers and added another interesting stat:
And it's not just Exxon Mobil that's paying the freight. From 1977 to 2004, according to Tax Foundation data, U.S. oil companies cleared $630 billion after taxes while paying $518 billion in federal and state corporate taxes at an average rate of 45%.
So for the past 27 years, the investors who financed all the exploration, drilling, processing, refining, and distribution (and the concomitant job creation) have had to settle for just over half the profit that their risk-taking created and made possible — and then they had to pay personal income taxes on that.
To the economically illiterate (and the envy-driven), profits are obscene. To me, 40+% taxes are obscene.
UPDATE (10/31/08): The saga continues — Exxon's profits grew to a new record last quarter and its taxes grew even faster.
areader said
what kind of idiot compares corporate with individual tax rates!? corporate income is revenue minus costs. individuals aren’t allowed to subtract costs from their income like a corporation. corporate accounting is totally different. my guess is that bloggers who say a 40+% tax rate is obscene have never done business accounting before.
rgcombs said
”my guess is that bloggers who say a 40+% tax rate is obscene have never done business accounting before.”
Your guess is as off-base as your thoughts about corporate taxes. I’ve owned a corporation since 1990.
You realize that corporations are not real beings, just legal fictions, right? A corporation is merely a convenient set of contractual relationships for (generally) shared ownership of an asset. Corporations don’t ”’pay”’ taxes, they merely ”’collect”’ them — from their customers, employees, and owners. All taxes are paid by people — real, live human beings.
“Corporate income” is the pooled income of the corporation’s owners. In a ‘C’ corporation, that income is taxed twice. Exxon pays 40+% to the federal and state governments and distributes what’s left to its shareholders as dividends. Those owners then have to pay federal and state taxes on that income again.
Your complaint that “individuals aren’t allowed to subtract costs from their income like a corporation” confirms your utter ignorance of this subject. ”Any” producer of income — corporation, partnership, or individual — can deduct the ”cost of ”’producing”’ the income.” That includes the equipment, raw materials, labor, etc.
Your ”cost of living” expenses — groceries, home mortgage, car, pizza, movies, etc. — aren’t costs of ”producing income,” and its silly to equate them with the wages, rent, supplies, and equipment that produce products or services to sell. In fact, it makes you the idiot.
But, hey, thanks for stopping by. 🙂
Seocontest2008 said
It is good post…can i use this article on my site Seocontest2008 plz
rgcombs said
”It is good post…can i use this article on my site Seocontest2008 plz”
Sure, as long as you credit me and link back to my post. Good luck with the contest!
ArtMofo said
“Perry has a knack for simple, striking graphs and charts that drive his point home. For instance, look at yesterday’s post showing that we’re in the most economically stable period in U.S. history.”
Really? What do his graphs show as of Sept. 29, 2008? Still the most stable period in history?
rgcombs said
Um, Art? You didn’t click the link and actually ”look at” the two graphs to which I was referring, did you? Because if you did, you’d know that your attempted zinger is totally lame and off-base.
A terrible day for the stock market (and it ”was” terrible) doesn’t change at all the percent of time in the past 25 yrs. that the economy was in recession. Nor does it change the fact that annual real GDP growth remains in the stable 0 to +5% range it’s been in for 25 years (in sharp contrast to the -13 to +18% swings earlier in the last century).