Monday, August 04, 2008

How much profit is too much?

The news was awash with the reports of the profits of oil companies. Most headlines read something like: "Exxon posts record $11.68 billion profit."

What's missing is the whole picture, including the fact that, for Exxon, prior to making $11.68 billion in profit, the government took $32.36 billion in taxes. The rest of the picture is that the profit is only 8.5% of their earnings. They're making under 10% in profit, but the government is getting 23% of their earnings.

Yes, Exxon mobile paid three times as much in taxes to the government, yet it is the government officials who are saying that their profit is 'too much' and should be taxed even more as a 'windfall.'

Did you know that one of the most widely held stocks in America is Exxon? Did you know that most retirement funds invest heavily in not only Exxon but other oil companies? Those profits are what's driving UP the value of your retirement portfolio, and providing you with the earnings you plan to live on when you're older.

Of course, presidential candidate Sen. Barack Obama immediately issued a plan for those profits - he wants to take those profits and give you a check for $1,000. How magnanimous of steal money from one entity in order to give it to another. And you cannot think of this as taking from some nebulous 'big oil' company - you must think of this as it will work: he wants to take earnings from every stockholder in order to give those dollars to someone else - someone who didn't purchase stock and make an investment in that company.

“Obama simply asks that big oil companies contribute a reasonable share of the windfall profits they receive from high oil prices over the next five years to pay for emergency assistance for families right now,” the campaign says.

Since those oil companies have already 'contributed' $3 for every $1 in profit, wouldn't it be logical to think they've already given a 'reasonable share' of their profits? Well, not if you're pandering to an ignorant voter base who only hears that they'll get something for nothing from that nanny-state government who's going to 'take care of us.'

Always remember - government has nothing that it doesn't first take from someone else. And companies don't pay taxes - they pass along the costs of taxes and fees to the consumer in the price of their product. And anything more that government takes from 'big oil' may end up reducing the income you plan to live on when you retire.

UPDATED: Today's Wall Street Journal asks a similar question: What is a windfall profit? (I came across this article after posting mine...and they make some similar points - but with better statistics.)


Tim Higgins said...


Coca Cola announced this month an operating profit at twice the level (17%) of Exxon, and Pepsi's was even higher at 20%.

Should we than propose a windfall cola tax to keep these profiteers from success? Should we formulate legislation to keep these evil corporations from taking advantage of us by feeding us caffeine, sugar, and bottled water?

(Did I say that out loud and give government another idea? Uh oh...)

Maggie Thurber said...

Let's not stop at soft drinks, Tim. How much profit to movies make? What about books? How 'bout if we pass a windfall tax on all those books that members of Congress write????

That will get 'em...

billy said...

I thought it was interesting friday when I heard on the radio how awful it was that Exxon made these huge profits while GM lost money..

Perhaps one company offers a product people are willing to pay for when the other does not?

Other auto company's sales are up - why not compare those figures to GM and ask why?

Maggie Thurber said...

Well, Billy, if we compared apples to apples, we'd have to examine some uncomfortable truths dealing with unions, taxation, regulation, and market demand.

If we don't, we can demonize 'big oil' and get people to vote for us...

It's not about truth or facts or what's good for America, it's all about getting elected and being able to exert control.

but then, you knew that...


Mad Jack said...

So the brand new news is Exxon makes a ton of money. The real problem is being obfuscated by those that announce the multi-billion dollar profits and the others who are carping about them one way or another.

Cut the price of gasoline back to something less than $2 per gallon, and no one will notice how much Exxon makes. Cut unemployment back to a reasonable level (2 or 3 percent) and slash taxes on everyone but the filthy rich, and John Q. Public will notice even less.

And, should the pellets really hit the windmill, legalize recreational marijuana. Tax it. The anti-drug people will be so busy fighting the closet case hippies there won't be room in the first section of the paper for anything else. For years.

But what do I know? I'm an aged hippie turned republican.

The A-Hole Lawyer said...

Brilliant Minds Think Alike!! Maggie has just posted some of my basic arguments which I present to those among us who demonize big oil profits, and agree that the money should be TAKEN from companies and given to others.

What other business in America could survive on an 8% profit margin, giving three times as much to Uncle Sam, and still employ tens of thousands of people, create a market for support industries, and increase the balance in union pension and retirement funds?


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