Corporations and the Tax Man
August 20th, 2008 by NSwiftSteven Malanga takes on the “free-ride for business” myth at RealClearMarkets. Check it.
Many businesses we regard as successful operate on small profit margins. After paying $5.8 billion in taxes in 2005, Wal-Mart earned $11.7 billion—a nice chunk of change. But those earnings were on revenues of $312 billion, a mere 3.4 percent net profit margin. Exxon Mobil earned $36 billion in 2005 after paying $23.3 billion in taxes on revenues of $371 billion. Looking at that result you realize that in America today, a ‘windfall’ profit is one that amounts to less than 10 percent of revenues.
With profit earning companies vilified so much in the media, and threats of increased rates always on the horizon, it’s easy to forget that we have the second highest corporate tax rate among OECD nations.
On their way out the door for August vacation, Congressional leadership threatened all kinds of windfall profit taxes aimed at oil companies - as if taking more money from a business would result in lower prices, especially ones who are already paying record taxes in keeping with their profits.
This Wall Street Journal article also sheds some light on “windfall profits,” pointing out that compared to other industries, oil has one of the lowest profit margins.
Maybe they have in mind profit margins as a percentage of sales. Yet by that standard Exxon’s profits don’t seem so large. Exxon’s profit margin stood at 10% for 2007, which is hardly out of line with the oil and gas industry average of 8.3%, or the 8.9% for U.S. manufacturing (excluding the sputtering auto makers).
If that’s what constitutes windfall profits, most of corporate America would qualify. Take aerospace or machinery — both 8.2% in 2007. Chemicals had an average margin of 12.7%. Computers: 13.7%. Electronics and appliances: 14.5%. Pharmaceuticals (18.4%) and beverages and tobacco (19.1%) round out the Census Bureau’s industry rankings.
August 22nd, 2008 at 10:10 pm
You guys need to keep your myths straight. What ever happened to that myth that you “conservatives” keep spinning about how corporations don’t really pay any taxes, their consumers pay them all?? Now it’s the corportaions “are really paying their fair share”.
The history of the Windfall Profits Tax on oil companies in the 1980s is very, very clear. It had NO negative impact on oil prices or domestic oil supplies, period end of story.
August 22nd, 2008 at 10:41 pm
Please, educate us pooplings with your tasty knowledge. You could at least cite a reference.
I mean, I can make shit up too.
Liberals declare war on proletariat, intend to raise gas prices until only wealthy west and east coasters can drive, to punish middle America for the 2004 elections.
What’s the matter with Kansas? Well, we’ll teach them a lesson.
August 27th, 2008 at 10:05 pm
Too bad for you that we’ve already been over all of this before. As these graphs clearly show, the WPT from 1980-88 had NO negative impact on oil prices or domestic oil supplies:
en.wikipedia.org/wiki/Image:Oil_price_chronology.gif
en.wikipedia.org/wiki/Image:US_Oil_Production_and_Imports_1920_to_2005.png
“Liberals declare war on proletariat, intend to raise gas prices until only wealthy west and east coasters can drive, to punish middle America for the 2004 elections.”
Excuse me?? Since when does the Democratic Party control gas prices?? Last time I checked…the east & west coasts of the USA had some of the highest gas prices roo!
September 24th, 2008 at 9:24 am
It occurs to me that the government produces nothing. It does not add to the GDP. It only takes in money, takes a big cut off the top and then uses what’s left to purchase goods and services. People might say that the government builds roads but really it takes in money to build roads, keeps a bunch and then pays a contractor (probably at an inflated rate) to build the roads. I did the math and at least 10% of the people in the U.S. are employed by the government. I don’t know what percentage of adults that is but obviously it’s more than 10%. These people also get much better benefits - pensions etc. - than the private sector so they cost more. The rest of us are paying for them. Plus we have other industries that produce nothing that revolve around the government like lobbyists. They do not add to the GDP either. What a mess. Imagine what we could do if we could keep most of that money in the private sector producing real goods and services!
September 24th, 2008 at 6:05 pm
The economy isn’t increased by merely purchasing “goods and services”?? I think it is…
The economy isn’t increased by private contracting out to “builds roads”?? I think it is…
“These people also get much better benefits - pensions etc. - than the private sector so they cost more.”
They do, in general, get better health care benefits, but they *don’t* cost more than what’s available in the private sector. In fact, federal govt. employees & Congress merely get access to a set of private health insurance plans, and Obama would like the rest of his fellow Americans to get access to buy into these exact, same plans.
October 14th, 2008 at 11:31 am
Mister Guy - I think you missed the point. The economy is increased by purchasing goods and services and building roads but it it the companies that are doing the building and making the goods and providing the services that are adding to the GDP - not the government. The government is just skimming off the top through administrative costs plus the hidden costs of lobbyist etc. The government does not “add value” to the situation. The less that the government is involved, the more money stays in the private economy. If the government skims 25%, then that money is not used to produce anything. If health care were nationalized, a portion of the funds collected would be used for admin purposes rather than to provide healthcare not to mention that they would be making health care decisions for us by determining what would be covered and not covered. At least with private policies, we can shop around for the coverage that we need.