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 taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ing 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 taxA windfall profits tax is a one-time surtax levied on a company or industry when economic conditions result in large and unexpected profits. Inheritance taxes and taxes levied on lottery winnings can also be considered windfall taxes on individual profits. es and special legislation that prohibits them from tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s 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 taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es. 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.
To read more about energy taxes, click here.Share