What Company Pays More Taxes than 50% of the People Combined?

The 27 October 2008 issue of Forbes has a quote of an Investor's Business Daily article which answers this astounding question. We hear Obama and his supporters constantly claiming that McCain is offering a tax break to the oil companies and we are supposed to assume that this is an evil act on McCain's part. Well, actually, he is not planning any special tax break for oil companies as seems to be implied by the Democrat claim. What he is planning to try to do is to reduce our corporate tax rate which is essentially tied with Japan's corporate tax rate as the highest in the world. He knows that our super high tax rate is causing American companies to expand more of their operations abroad at the expense of expanding operations in the U.S. Of course, it is also allowing companies based in Ireland and the many other low corporate tax countries to take business away from American companies.

Many Democrats have called for a windfall profits tax on American oil companies. According to the Investor's Business Daily article, economist Mark Perry has observed that ExxonMobil will pay more taxes to the Federal government this year than the combined total of taxes paid by 50% of all taxpayers. ExxonMobil paid $61.7 billion in taxes in the first half of the year, while having an aftertax income of $22.6 billion. The government makes much more from ExxonMobil's operations than ExxonMobil does!

Jimmy Carter went the windfall profits tax route on oil companies. There was a resulting 6% drop in domestic oil output and an increase in oil imports of 15%. If ExxonMobil were not being taxed so heavily, it would undoubtedly spend more on oil exploration, drilling, and oil field development. The result is already that less oil is coming to market and this means that oil prices are higher.

But Obama wants to milk even more money out of all of America's producers and it is especially easy to convince the simple-minded that oil companies are prime targets to be milked for all they are worth. Expect less oil and other goods and expect America's standing in a global economy to worsen when Obama puts his policies into effect. Expect American energy dependence to greatly increase despite all of Obama's foolish claims that his subsidies for alternative, sustainable energy sources will bring us to energy independence. Actually, I do not believe that he believes what he is saying. He is simply using the power of government subsidies, regulations, and mandates to gain control of the energy industries in order to advance his socialist agenda. This is as much a route to power as is giving tax rebates to people who do not pay taxes! It is all about power gained by promising some ill-gotten gains at the expense of some others chosen to be sacrificed.

Gasoline Taxes by State

The Democrats in Congress love to complain about the huge profits being made by the oil companies, who are making a profit of about 8% on their total revenues. This is not a particularly good rate of return for oil company investors. Many industries provide a better profit margin. But Barack Obama calls these windfall profits and wants to confiscate them and turn them over to people with low incomes to help pay for their home heating costs.

Now oil companies revenues come largely from the sale of oil, gasoline, and some organic chemical products, such as those that go into making plastics, waxes, paints and other products. If we assume that they make about the same profit on a gallon of gasoline as they do on all of their other products, then they make a profit of about $0.32 per gallon when gasoline is selling for $4.00 at the pump. In comparison, the sum of gasoline taxes taken by local, state, and federal government in July 2008 is shown by state in this map.

Some states and the federal government have a tax which is a fixed dollar amount per gallon of gasoline. Some states set the rate as a percentage of the cost of the gasoline sold at the pump or have a combination of fixed amount and percentage tax rates. Because Americans used less gasoline in the first half of this year, those states with fixed amount rates are crying in pain because they are raking in less gasoline taxes, so some of them have actually increased the gas tax this year! Those who tax as a percentage of the price are very happy with the gasoline tax money swamping them. Well, of course they are up to the task of spending any tax revenues and then some on top of that!

In July, in California governments raked in $0.749 per gallon of gasoline sold at the pump. Connecticut was nipping at CA's heels at $0.708/gal. total taxes. Let us make a list of the tax take by all levels of government by state for the most expensive states:

California $0.749
Connecticut $0.708
Illinois $0.666
New York $0.623
Michigan $0.607
Indiana $0.569
Washington $0.559
Florida $0.516
Wisconsin $0.513
Hawaii $0.51
Nevada $0.51
Pennsylvania $0.507
West Virginia $0.506
Rhode Island $0.494
North Carolina $0.486

Other state tax takings of interest to some friends and family are:

Ohio $0.464
Kansas $0.434
Minnesota $0.424
Maryland $0.419
Colorado $0.404
Texas $0.384
Oklahoma $0.354

Only South Carolina at $0.352, Wyoming at $0.324, and Alaska at $0.264 have lower gas tax rates than Oklahoma. Only in Alaska is the government gasoline tax taking less than the estimated $0.32/gal. of profit for the oil companies.

So, if you live in a state with a gasoline tax stated as a percentage of the gasoline price, you would have a much better claim for relief from the high cost of gasoline against your state than you would against the oil companies.

In any case, if we have a shortage of gasoline and that is causing the high gasoline prices we are paying, taking profits away from the oil companies will only encourage them to forget drilling for more oil and forget refining oil into gasoline, and perhaps encourage them to invest their money instead into photovoltaics and wind farms, while seeking government subsidies for those operations. Of course, these subsidies will be paid by you for many, many years. But, neither photovoltaics nor wind farms are going to power your car now or in the next few years, so any so-called windfall profits tax on oil companies will only drive the price of gasoline up more. This is exactly what Barack Obama and the Democrats want. They want gasoline to cost more and they want to try to reduce oil and gasoline use while forcing the oil companies to invest more into the development of alternative energy.

The net result for you will be more expensive fuel costs all around and higher taxes to pay for more subsidies. What a bargain. Oh well, you can feel good that you are doing your part to stop man-made global warming! Ah....., but there is no evidence that that is a problem, while there is clear evidence that high energy costs are a huge problem. What a bargain those Democrats are offering you! But, they can sell half the people Brooklyn Bridge, so we have to hand it to them that they are effective salesmen. Demagoguery is their specialty.