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.
