Time’s up. Turn in your papers. Let’s see how many students got yesterday’s homework question correct. The question was, “How much, per hour, did ExxonMobil pay in taxes last year?” And the answer is, “We don’t know.”
We don’t know because the blog post I’m citing actually only dealt with the first quarter of 2011, not last year. You can view that as an error by the teacher, but I maintain it was a trick question that a smart student would have pounced on.
But onward we go. Here’s what Mark J. Perry, economist, had to say, summarized so I won’t go into the hall of fame of plagiarizers. Plagiarists. Thieves.
ExxonMobil earned $10.65 billion in the first quarter of 2011, an increase of 69% from last year. (Begin wrinkle-browed, low-pitched grumbling here.) That’s a staggering amount of money, of course, and the knee-jerk reaction is to get all apoplectic over those numbers.
But Perry looks more closely at the figures, as should we. For instance, ExxonMobil (hereafter just XOM, their stock symbol) paid $8 billion in income taxes. Divided into hours, that’s $1 million per hour. Now, those numbers include all of XOM’s taxes, including, assumedly, those paid to other countries. “Aha!” you may say. “It’s not fair to include those numbers into the equation.” And, equally as vociferously, I will reply, “Of course it is. XOM is a multinational corporation. It pays taxes to multiple countries. Any tax paid comes out of their profits, including those taxes sent to Elbonia and Needavowelstan.”
I recently re-watched the excellent stand-up special “Jake Johannsen: I Love You.” In that special, Johannsen relates how he has to file tax paperwork with every state he performs in. After paying taxes to Michigan, he can’t then turn around and tell California, “Sorry. I’m all tapped out. You’ll have to go to Michigan and ask them to share it with you.” Likewise, XOM can’t tell America, “Sorry, but Elbonian tax rates have gone through the yak-skin roof lately. I just can’t pay you, America.” The bottom line is, all these taxes come out of XOM’s bottom line. (See what I did there?)
Moving on, Perry also points out that XOM spend $7.8 billion–73% of its net earnings–on capital equipment and exploration. That’s more than $21 million a day. Remember what I said about oil companies taking the money and burning it all, with no one ever benefiting from it? I was kinda being sarcastic there. Every flange grommet, every Ferguson spronkweasel, every Slim Jim bought by an XOM driver at a convenience store as a business expense adds up to $7.8 billion in taxed dollars that benefits companies and individuals that then pay taxes on what they earn. The money doesn’t disappear.
XOM also increased its output of natural gas by 10%, with a big chunk of that increase coming from a 192% increase in natural gas production in the U.S. (More to come on that natural gas issue later. The short version is, we’ve got several million Bon Jovis worth.) And a funny thing happens when you increase production of an item or commodity. Seems the price of that item or commodity goes down. Perry says that U.S. natural gas prices, adjusted for inflation, are the lowest they’ve been since Dec. 2002.
Remember that $8 billion in income taxes? Well, that’s not all XOM had to pay. The total world-wide cost of all taxes (sales taxes, property taxes, inc.) added up to a nice little $26.2 billion. And that income tax figure alone means that XOM paid an effective tax rate of 42.3% on its income.
But still, oil companies make money at at a staggering rate. Their profit margins are obscene, right? If by “obscene,” you mean “6.1 average profit margin, ranking 112th for all industries,” then, yeah. If you really want to rail at “windfall profits” (and exactly who decides what’s a windfall and what’s not?), pick something like paper and paper products (9.2% margin), or wineries and distilleries (14.9% margin).
We’re just getting started. I’m going to keep exposing the seamy underbelly of the oil industry, root of all evil, until I’m snuffed out in the night by a 7-11 operative.