The Ugly Truth About Big Oil Companies

[HBarlow]

Not the truth you were expecting but the REAL TRUTH about oil companies and the government.



February 2, 2007



ExxonMobil's Record Profits -- And Record Taxes



by Jonathan Williams



Today, ExxonMobil reported the largest corporate profits in U. S. History. From Yahoo Finance:



"Oil giant Exxon Mobil Corp. on Thursday posted the largest annual profit by a U. S. company -- $39. 5 billion -- even as earnings for the last quarter of 2006 declined 4 percent. The 2006 profit topped the previous record, also by Exxon Mobil, of $36. 13 billion set in 2005. " [Full story]



While they were recording record profits last year, they were also writing checks to Uncle Sam to the tune of $100. 7 billion -- two and a half times what they made in net profit. In fact, previous Tax Foundation research found that from 1977 to 2004, federal and state governments extracted $397 billion by taxing the profits of the largest oil companies and an additional $1. 1 trillion in taxes at the pump. In today's dollars, that's $2. 2 trillion.



And no doubt there will be renewed calls to punish energy companies with windfall profits taxes and special legislation that prohibits them from tax credits that others may take. The problematic truth is that these responses will always hurt more than help because they ignore basic economics. Businesses don't pay corporate taxes any more than a plot of land pays property taxes. Ultimately, people have to pay.



Economists across the ideological spectrum agree that individuals bear the burden of business taxes. As stakeholders, we all pay in one of three ways: The first to pay are the employees of oil companies here in the U. S. -- people who would make lower wages or perhaps even lose their jobs. Next would be the millions of Americans who have investments in the oil industry -- people who would earn lower returns on those investments. And finally, the principal group to pay would be American gasoline customers -- the millions of people who would pay more at the pump.



News of "record oil profits" will no doubt leave some politicians and pundits looking for ways to punish the industry by increasing taxes. However, few battles have been won fighting against the laws of economics - in the end, we'll all end up paying the bill.

 

[HBarlow]

To those of you who hate the big oil companies... ... ... .



Consider how much the price of a gallon of gasoline or diesel could be reduced if big oil companies like Exxon/Mobil didn't have to pay $100. 7 BILLION dollars to the federal government on their 2007 income alone.



Also consider how much it cost you and me to pay $2. 2 TRILLION in taxes at the pump since 1977.



The federal government stole from Exxon/Mobil 2 1/2 times as much as the company earned in profit.



Yep, big oil is greedy but government is good.

 

[RGardner]

I will tell you that there is something completely wrong about that story, There is NO way that ExxonMobil pays more in taxes than they earned! That is not how the system works, you are taxes on a percentage of your profits pure and symple. The first 50,000 is taxed at 15%, the next 25,000 at 25% and so on but in no way shape or form are your taxes going to be more than your profits.

 

[HBarlow]

You're percentages apply to personal income tax not corporate income taxes.

 

[Ereynolds72]

Thanks for posting that Harvey. For those that hate "big oil", this should be enlightening. They do provide a product after all.

 

[TRLRTRSH]

Try hating big government

 

[HBarlow]

Try hating big government

Good advice! I do. I wish more would also.

 

[Cummins Cowboy]

its the tree hugging wackos, that will not allow any drilling, and with our current choice of political leadership that is not going to change only get worse, so what the **** do you expect the price of oil to do??

 

[RGardner]

Those are the corporate rates, the only way that Exxon could have to pay that kind of taxes is if they are remitting fuel taxes that they have collected on behalf of the governments. Again there is no way that your tax will exceed your profits period!

 

[Bill Stockard]

From HBarlow’s original post:

While they were recording record profits last year, they were also writing checks to Uncle Sam to the tune of $100. 7 billion -- two and a half times what they made in net profit. In fact, previous Tax Foundation research found that from 1977 to 2004, federal and state governments extracted $397 billion by taxing the profits of the largest oil companies and an additional $1. 1 trillion in taxes at the pump. In today's dollars, that's $2. 2 trillion.



The point is:

Businesses don't pay corporate taxes any more than a plot of land pays property taxes. Ultimately, people have to pay.



Meanwhile, in Washington DC…

News of "record oil profits" will no doubt leave some politicians and pundits looking for ways to punish the industry by increasing taxes. However, few battles have been won fighting against the laws of economics - in the end, we'll all end up paying the bill.



Bill

 

[JFaughn]

Both , big government & big bis , have given us endless reasons to , not beleive/hate them .
And like mentioned above , the original post just does no add up .

 

[mberry]

I will tell you that there is something completely wrong about that story, There is NO way that ExxonMobil pays more in taxes than they earned! That is not how the system works, you are taxes on a percentage of your profits pure and symple. The first 50,000 is taxed at 15%, the next 25,000 at 25% and so on but in no way shape or form are your taxes going to be more than your profits.

I think you're confusing net income with total earnings. Their total earnings were something like $550 Billion. So if your corporate tax rate is around 20% wouldn't that be something like $107 Billion in taxes? In a large business like this taxes will ALWAYS be more than NET profits. At least I think so.

 

[RGardner]

Not any more than you are taxed on your gross income, corporations, people, and trusts are taxed on their net income, not there gross. I know from which I speak. And I also know that big oil is using every accounting trick available to beat their income down to the tiny little amount that it is! Equipment is written off at a rate much faster than is the actual life span for that equipment. I am not saying that they are cheating, those are the rules as they are written but don't think for a second that they aren't doing every thing they can to beat those profits down.

 

[HBarlow]

Not any more than you are taxed on your gross income, corporations, people, and trusts are taxed on their net income, not there gross. I know from which I speak. And I also know that big oil is using every accounting trick available to beat their income down to the tiny little amount that it is! Equipment is written off at a rate much faster than is the actual life span for that equipment. I am not saying that they are cheating, those are the rules as they are written but don't think for a second that they aren't doing every thing they can to beat those profits down.

So what. The point of the article above is that the federal government takes billions away from the oil companies leaving the oil companies with a smaller net return than the government took. If federal and state governments didn't take billions from the oil companies in excessive taxation the price at the pump for consumers might be half or two thirds of the current price per gallon.

 

[rbattelle]

An interesting article, Harvey, thanks. Do you have a link to the original article?

RGardner brings up an interesting point... I'm not an accountant, so I don't fully understand how this tax rate was calculated.

We're doomed.

I made the mistake of looking at this and this today. Yikes.

Ryan

 

[HBarlow]

Ryan,



The original article was a yahoo and appeared on the yahoo front page of my PC a few days ago. The link is at the end of the text but I doubt it works anymore. Those internet news articles are usually time limited.



I don't know what Exxon/Mobil's gross revenue was but after all tax deductible expenses were deducted and fed corporate taxes of $100+ billion were paid the oil company had a net profit left of $30+ billion.



Then there are more huge federal and state taxes at the pump, local also in some areas, the consumer has to pay.



Someone else sent me the article above today so I don't remember the original source. I would guess if you google the author's name you could probably find it.

Diesel and gasoline would be cheap if the fed and states didn't have their hands out.

 

[rbattelle]

Here's a link to the original article.

Best line of the whole thing: few battles have been won fighting against the laws of economics.

Ryan

 

[catoiler]

someone say "tax credits" yep that is good ol Al gore's loophole for them and he just happens to own the overseas co. that provides them!

 

[TAbbott]

FWIW, there are lots of different taxes. Think there might be a little property tax paid by the oil companies? How about excise taxes and inventory taxes and ... . on and on. Maybe some sales taxes here or there? How about the matching taxes they pay on each employee?



Figure out how many different kinds of taxes you pay and some multiple of those various types of taxes are paid by large corporations and passed along to their customers (us). It's not unreasonable at all to think that they paid more in all of their various taxes than they kept in net profits. I think Harvey's post was spot on.

 

[HBarlow]

Many, possibly most libs don't care a whit about taxes because they don't pay them.



One of the little secrets about our tax system is only middle income and above pay taxes. He won't admit it but CF doesn't pay taxes because he is retired.



Many libs are not very successful and work for modest wages as librarians, or other government jobs. They never admit it but many who fashion themselves as libs are simply angry and jealous of those who work hard, make good financial decisions, maybe start and run successful small businesses, and succeed. They particularly hate big corporations. Because in their ignorance they wrongly believe the CEOs and other top officers own the companies and collect all the profits. Libs usually are not investors so they have no clue that millions of Americans actually own major corporations in their 401ks, pension funds, and private investment accounts.



But amazingly, libs resent it very deeply when the Americans who pay taxes get a tax reduction. Only a lib could take such a position and angrily defend it.