A Tale of Two Companies

With gasoline prices so high, some politicians have decided to make Exxon-Mobil the evil of all evils.

After all, Exxon-Mobil made an obscene profit of $11.6 billion dollars in the last quarter (See Full Story). However, those same politicians fail to mention that Exxon-Mobil pays an effective tax rate of 41.8% and pays more in taxes, alone, than the bottom half of all the taxpayers in America, combined. Last year, Exxon-Mobil paid $71 billion dollars in taxes. And, don't forget. Because Exxon-Mobil is a worldwide company with worldwide profits, it bringings profits into this country and helps to stem the bleeding that we have in our Balance of Trade with other countries.

Out of those after-tax profits, each Exxon-Mobil stockholder will get a dividend. Based on the given tax bracket for each of those receiving that dividend, the government will get some more of those Exxon-Mobil profits in the form of dividend-related taxes. Standard & Poors rates Exxon-Mobil as a strong buy. Charles Schwab gives it an "A" ranking. For this reason, a lot of people buy and sell Exxon-Mobil stock. Actually, 28 million or more shares of Exxon-Mobil stock are traded daily. Because Exxon-Mobil is such a powerful company, most of those people who made trades on that stock probably made a profit. A profit, too, that will be taxed by our State and Federal governments. Finally, the company grew from 83,700 employees in 2006 to the current level of 106,400 or more. That's a growth of at least 23,000 new jobs. While not all new employee were added in this country, many were. All those new U.S.-based employees were added to the Federal and State tax rolls.

As a profitable concern, Exxon-Mobil will expand its business. That means that it will spend those profits it made on new land, products and services that are needed to grow its business. This means more business for other American businesses and other international businesses. This also means more profits for those businesses. As a result, more of Exxon-Mobil's profits will go, indirectly, to Federal and State taxes. Just because Exxon-Mobil had a profit, it doesn't mean, somehow, that they are going to willy-nilly throw that money away. They will either bank it for later use or apply it to expand their business. Ultimately, it will positively affect economic growth in America and throughout the world.

Now. Let's look at General Motors. They lost $15.5 billion dollars last quarter (See Full Story). That's a loss of nearly $4 billion more than Exxon-Mobil made. General Motors, because of their continued losses, will pay no taxes this year; just as they paid no taxes last year and the two years before that. A year ago, they cut their dividend in half to $1/share. That drop also cut the Federal and State tax revenues on those taxpayer that were receiving General Motor's dividends. The odds are high that they will eventually drop their dividend, completely, and there goes that tax revenue, too! General Motors also cut staff last year. Mostly in the United States. As a result, the Feds and States like Michigan also loss some payroll tax revenues and some States were forced to pay out taxpayer monies in the form of unemployment benefits. Since the year 2000, General Motor's stock has done nothing but fall. Those people who were invested "long" on GM stock and sold at a loss also didn't pay any taxes on those stock trades.

With General Motors bleeding like it is, bankruptcy is not out of the question; and, often rumored. If they do go belly-up, their losses will ripple out to all those other companies who were suppliers of product and services to General Motors and were still owed money by General Motors. As a result, each of those companies will be forced to write off that debt and their profits will go down. Once again, the Federal and State tax revenues will suffer.

Exxon-Mobil and General Motors are big international corporations. They are dealing in big money. Their profits are amazingly large and their losses can be equally as large. Most people seem astonished and even appalled that Exxon-Mobil made $11.6 billion. I think they should be "more" upset about General Motors and their $15.5 billion loss.

You tell me. Would you prefer that the United States have a bunch of corporations like General Motors or the ones like Exxon Mobil? Which of those companies is doing more harm versus good to the tax base and employment in this country? We should celebrate profitable companies; not demonize them. Exxon-Mobil's gross profits are high because they are an extremely large worldwide corporation. But by any other measure, they are so-so in the world of corporations. For example, Exxon-Mobil has a profit margin of 10.85%. By contrast, Apple Computer is almost 50% more profitable because of its nearly 15 percent profit margin. If Exxon Mobil's profits were excessive, then, I would say there is a problem and room for complaint. However, in the world of worldwide competition, the British equivalent of Exxon-Mobil, British Petroleum, has only an effective tax rate of 33 percent for the profits that they are taxed for in Britain. That's because we already tax our corporations more heavily than the government of Europe tax their companies. And, now, people like Barack Obama want to tax our oil companies (and all companies) at even a higher rate with both a higher corporate and business tax rate and with a windfall profits tax. Jimmy Carter and the Democrats tried this once, already, when they passed the "Crude Oil Windfall Profit Tax Act" of 1980. As a result, there was a decline of domestic oil production and our dependence on foriegn oil accelerated (See Full Story). And, believe me, the gas lines only grew longer. That tax had to be repealed in 1988 by Ronald Reagan and Democratic Congress.

So, let's just keep complaining that Exxon-Mobil is making too much money and not paying enough taxes. Let's let Barack Obama and the Democrats tax the hell out of those companies and all other business in this country. That way we can turn all of our businesses into a bunch of General Motors. Let's especially tax Exxon-Mobil and the rest of the oil companies so heavily so as to limit their ability to explore and drill for new domestic oil. Let's give the advantage to the Brit's with British Petroleum and the French will their oil company, Total, and the Dutch will Shell Oil Company. That should make this country even stronger! Right!

Statistics (like effective tax rates, etc) were sourced from non-public and non-re-printable reports by Charles Schwab and Standard & Poors; and from Fortune magazine.