My take on ExxonMobil
09 09 10 - 13:13 Category: .
Yesterday someone argued with me that it's wrong for ExxonMobil to pay the highest amount of taxes by a single company ever. They stated that Exxon had to pay $50 million in taxes. My argument: they had the highest third quarter earnings a company has ever seen. But of course taxes are evil. What is important is to look at it from a percentage and proportional perspective, not an absolute numbers perspective.I decided to do some reading. It turns out that Exxon actually paid $32.51 billion in taxes for the quarter. According to Fox, the company paid taxes in the 43.3% bracket (source). However, with revenues of $137.74 billion, the company effectively paid 23.6% of their total revenue to taxes.
As a starting salaried accountant I'm in the 25% tax bracket for any income over $32,550. Effectively, taxing the portion of my salary over the threshold plus the base amount of tax I pay results in payment of 16.9% of my gross wages to tax. I realize I'm not a giant oil megacorp, but I don't see a problem with a mere 6.7% difference in the effective tax rate between a starting staff accountant and the company with the highest net income the country has ever seen.
The second argument I was presented with was that they only had a net profit margin of 10%. Their net income for the quarter was $14.83 billion. On gross revenue of $137.74 billion, that puts their net profit margin at 10.8%. Double digit net profit margin is huge no matter what industry. In 2007 Exxon saw a net profit margin of 10.04%. ConocoPhillips was at 6.11%, BP was 7.26%, and Chevron was at 8.46%. Even just looking at their industry they are way ahead of the game (thank you finance.google.com).
The last argument someone made is that with their millions of dollars in assets, it's perfectly fair for them to see a high return. But instead the American (this was from a Canadian) people expect them to only pull a couple million in revenue. No one said a couple million, but nearly $15 billion is off the charts. I could not find their total assets for third quarter 2008, but in 2007 their total return on average assets was 17.61%. ThatÂs a huge number for a company, again with the double digits. ConocoPhillips was 6.94%, BP was 9.33%, and Chevron was 13.28%. Again they lead the industry by a wide margin and are returning beyond what most companies would be thrilled to see.
Exxon has managed to bring in the highest net income in a quarter ever seen via a 58% profit increase (source), while at the same time seeing a drop in their overall production by 8% (source). What other industry can do that? What other manufacturer can cut their production while increasing profit by that magnitude? It's is pretty ridiculous. At their size, I see no problem with the level of taxes that they have to pay. From Fox News' perspective "while other companies have been asking for handouts, ExxonMobil has been keeping the government funded." That's what taxes are supposed to do. And it'd be interesting to see the kinds of golden parachutes the Exxon executives have, and how much they are getting paid. That is a talking point of the Republican Party isn't it? Oh wait, I forgot, this is big oil, it's not the same.