The Left’s Big Hate on Big Oil is a Big Farce

Think Progress had a recent blog post railing against the Left’s favorite target – Big Oil.

“The top two corporations on the Fortune 500 Global ranking, Royal Dutch Shell and ExxonMobil, announced their 2012 second-quarter earnings today, bringing the profits for the three Big Oil companies to $44 billion for 2012 or $250,000 every day this year.  Exxon profited by $16 billion this quarter, bringing its earnings for 2012 to $25 billion.”

Wow, $16 billion in profits for just one quarter is a lot of money but the Left seems to only look at the bottom line of a Profit and Loss Statement because those huge profits by the evil 1% tug at the heart strings and play into the faux class warfare meme Team Obama wants Americans to embrace.

But alas, the math on a P&L statement is more complex than one line so let me break it down for you.  I have reproduced ExxonMobil’s 2nd quarter results in a spreadsheet below and I’ll use the rest of this post to dive deeper into the numbers.

Net Profit Margin

Yes, ExxonMobil had net earnings of $15.9 billion but when you take that as a percentage of total revenues, the company made a profit of 12.5%.  If you were to start a company that engaged in a risky, competitive and regulated industry that involved extracting oil from the Earth, refining it to various grades of fuel, selling it and transporting it all over the world then what percentage of profit would you be willing to accept for those efforts?  Net profit margins of 12.5% seem not only reasonable but at the lower end for a corporation taking such a huge risk in a highly competitive industry.  When we focus only on the dollars and ignore the percentages, we play to our emotions and forget about the complexities that are involved in running a major corporation.

Cost of Doing Business

Leftists also forget to look at how much money a corporation spends to produce their product and this is comprised of research and development, sales, manufacturing, equipment purchases and general administration.  For ExxonMobil, this spending number for the 2nd quarter amounted to $101.1 billion and equates to $770,000 every minute.

Wait, let that sink in.  During the 2nd quarter of 2012, ExxonMobil spent over three-quarters of a million dollars EVERY MINUTE on people’s salaries, manufacturing, transportation, vendors who supply goods/services to them and other line items that translate into JOBS.

Income Tax Rate

Now let’s look at the income tax rate that ExxonMobil paid during the 2nd quarter of 2012 but before we do that, let’s see what the average corporate tax rate is for US corporations.  It is well known that the US has the highest corporate tax rates in the world at 39.2% but large corporations use various accounting tricks to get that lowered as this link shows.

“However, no major company really pays the nominal rate – just as no one walks into a car dealership expecting to pay sticker price.  Big companies enjoy a huge buffet of credits, shelters, deductions, and other preferences that reduce their rate to an average of 13 percent.”

So the average ‘real’ corporate tax rate for US corporations is 13% but as we see from ExxonMobil’s 2nd quarter results, they paid 32.6% which is 2.5 times the national average.  They paid over $8.5 billion to the US government for just one quarter and if we extrapolate ExxonMobil’s income tax payments over the whole year that would amount to $34 billion in federal tax revenue.

Using the following link, we see that the US federal government is on pace to spend $3.795 trillion in 2012 so ExxonMobil’s projected annual tax revenue funds our government operation for 3.3 days.  But suppose we let the Leftists have their way and we soak the evil Big Oil ExxonMobil even more by taking ALL of their net earnings ($15.9 billion per quarter times 4 quarters = $63.6 billion).  If we did that, the extra tax revenue from ExxonMobil’s net profits would fund our US government for only an additional 6.1 days.

Leftists still believe we have a tax revenue problem (not a spending problem )and they think soaking the evil corporations will solve the problem.  They are either bad at math or evil.  Or both.

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