Friday, August 01, 2008

Putting Exxon's Income Taxes in Perspective: It Will Pay More This Year Than Bottom 50% of Taxpayers

Exxon has already paid $19.828 billion in income taxes for 2008 (data here), and will probably pay almost $40 billion in income taxes this year (see graph above, income tax data for 1999-2007 taken from Exxon's annual reports).

To put $40 billion of income taxes in perspective, it can be reasonably estimated that Exxon will pay more in income taxes this year (both here and outside the U.S.) than the entire bottom 50% of American individual taxpayers (about 67 million) will pay in income taxes this year.

Using IRS tax data through 2005 (in Table 6, data here), and making reasonable projections for tax payments in 2006, 2007 and 2008, the bottom 50% of taxpayers will pay an estimated $34 billion in income taxes this year, and it will probably be the first time in U.S. history that a single corporation paid more in income taxes than the entire bottom 50% of U.S. taxpayers.

Update 1: Of course, corporations don't actually pay taxes, they collect them, in the form of higher prices for consumers, lower wages for employees and/or lower dividends for shareholders. In other words, people pay all taxes in their roles as consumers, workers and shareholders.

Update 2: Exxon is a global company and operates in the United States, Canada, Europe, Africa, Asia-Pacific, the Middle East, Russia/Caspian region, and South America. In 2005, Exxon earned about 70% of its profit outside the U.S. and paid 70% of its income taxes outside the U.S., and in 2006 Exxon earned 71.4% of its profits outside the U.S. and paid 81% of its taxes outside the U.S. Source: Exxon's annual reports.

Update 3: What gets reported by the media is Exxon's second-quarter record profits of $11.68 billion for a U.S.-based company, without distinction between profits earned in the U.S. and profits earned outside the U.S. Likewise, Congress reacts to the total amount of Exxon's record profits with proposals of "windfall profits taxes," without a distinction between profits earned in the U.S. and profits earned outside the U.S.

Therefore, when it comes to a discussion of Exxon's income taxes, it also makes sense to look at Exxon's total income tax payments of $10.5 billion in the second quarter, or $40 billion for the entire year. Although not all of Exxon's income taxes are paid to the U.S. Treasury and not all of Exxon's profits are earned in the U.S., I think it is still useful to put $40 billion of taxes into perspective by comparing that amount paid by a single corporation to the amount of income taxes paid by the bottom 50% of U.S. taxpayers. In other words, record profits for Exxon = record taxes for Exxon.

22 Comments:

At 8/01/2008 1:18 PM, Blogger Walt G. said...

Exxon did not pay anything in taxes because there is no such person. Their shareholders and customers paid the tax. And, these are the same people who would pay a “windfall” profits tax. Our government officials are slick by popularly proposing the taxing of the demonic Exxon and his “friends.”

The politicians are actually contemplating pilfering your money by putting their hands into your pocket to get that tax money. They then think they can give you back $1000 and call it OK. They want two things: 1) Your money, and 2) our vote. Don’t give them either one.

 
At 8/01/2008 1:38 PM, Anonymous Tony Danza said...

Good point Walt...

Who in the aggregate owns XOM stock? Wealthier individuals in higher tax brackets through direct purchasing or through mutual funds, etc... So why is it a shock that Obama is calling for a $1,000 energy credit for every taxpayer? Who are his constituents? I doubt many of them have large holding of XOM and other energy stocks. I hate to say it, but it's a great political move on his part, make large oil the antagonist.

 
At 8/01/2008 1:59 PM, Blogger Walt G. said...

I'll take the $1000. They can just send it to me, but they don't have to tax Exxon and have me pay it back at the pump.

 
At 8/01/2008 2:53 PM, Anonymous bob wright said...

A common bumper sticker in town [Flint, MI] distributed by the UAW says: "Buy American"

I think the rank and file should get the UAW to modify the bumper sticker to say: Buy American Oil

DRILL - DRILL - DRILL

 
At 8/01/2008 3:00 PM, Anonymous bob wright said...

Why does the Democrat Party insist on OUTSOURCING oil industry jobs to Saudi Arabia, Venezuela, Iran, Iraq, Russia, .....?!?!?

note: a subscription to online WSJ may be required for link

 
At 8/01/2008 3:29 PM, Anonymous Anonymous said...

can someone show me exxon income vs. income aggregate of lowest 50% of population

 
At 8/01/2008 4:25 PM, Anonymous QT said...

Bob,

Excellent article. Thanks for the link.

 
At 8/01/2008 4:44 PM, Anonymous bob wright said...

Mark,

According to your second update, it is not clear to me whether the taxes paid by Exxon in your line chart are taxes paid to the U.S. treasury or taxes paid to the U.S. and other governments.

Any insight here?

Thanks

 
At 8/01/2008 7:00 PM, Anonymous Anonymous said...

So is Carpe Diem prepared to restate the original grade school statement being the blog post title.

Your grad student or someone else did some cursory research compelling the posting of update 2.

XOM pays less US income taxes than the bottom 50% of US taxpayers.

Are you going to retract the blog post title? I didn't think so.

 
At 8/01/2008 9:31 PM, Anonymous bob wright said...

Anonymous 7:00

Whether XOM pays all their taxes to the U.S. or a combination of governments, they still pay it.

If I owned the whole business and had to write that check, it would be a distinction without much difference.

 
At 8/01/2008 10:08 PM, Blogger Mark J. Perry said...

Note: When the media reports Exxon's record profits of $11.68 billion, and when Congress reacts to those profits with proposals for windfall profit taxes, neither ever makes a distinction between profits earned: a) in the U.S. and b) outside the U.S., all of the global profits gets lumped together for a U.S.-based company. Of the reported $11.68 billion in profits, only about $2.92 billion was earned in the U.S. and the rest was outside the U.S. But $11.68 billion in profits is $11.68 billion in profits for Exxon shareholders.

Likewise, when it comes to paying income taxes, $10.5 billion in income taxes is $10.5 billion income taxes, regardless of where the taxes are paid.

If the media and Congress are content to focus ONLY on Exxon's U.S. profits, then I'd be happy to re-do the analysis on U.S. income taxes ONLY.

 
At 8/02/2008 10:12 AM, Anonymous jorod said...

Finally, someone giving the other side of the story..How much did the oil companies and oil service companies as a whole pay in taxes???

 
At 8/02/2008 10:24 AM, Anonymous Anonymous said...

Of the reported $11.68 billion in profits, only about $2.92 billion was earned in the U.S. and the rest was outside the U.S.

Assuming that XOM pays taxes at the 35% statutory rate (most corporates pay less), XOM paid about $1 billion dollars to the US treasury last quarter on account of income taxes.

Now we are getting somewhere. What are the annual US subsidies (including tax preferences, e.g accelerated depreciation on drilling given to the oil and gas industry) given to XOM?

I don't vouch for the Friends of the Earth data indicating that subsidies and preferences for the oil and gas industry would total $33 billion over the next 5 years; XOM being the largest player would receive a substantial portion of those subsidies.

So how many incremental income tax dollars would XOM pay to the US Treasury by eliminating subsidies?

 
At 8/02/2008 3:35 PM, Blogger juandos said...

What are these alledged subsidies you mention anon @ 10:24 AM since I wouldn't believe the supposed, 'Friends of the Earth' even if they were trying to tell us the time of day?

Are these subsidies that same subsidies that any other business gets?

 
At 8/03/2008 5:06 AM, Blogger OBloodyHell said...

> I hate to say it, but it's a great political move on his part, make large oil the antagonist.

It's how a democracy reaches downfall, when they peeeepul realize that they can vote themselves largess from the public trough. See "Circuses, Bread and..."

It's why this wasn't intended to be a democracy, but a Republic.

The rot is starting to reach the core.

 
At 8/03/2008 5:09 AM, Blogger OBloodyHell said...

> But $11.68 billion in profits is $11.68 billion in profits for Exxon shareholders.

... and the American citizens owning that tax, at the least, get to pay level 2 taxes on that amount, through capital gains, etc.

Taxes -- the gift that keeps on giving.

 
At 8/03/2008 12:37 PM, Anonymous Anonymous said...

I think it is still useful to put $40 billion of taxes into perspective by comparing that amount paid by a single corporation to the amount of income taxes paid by the bottom 50% of U.S. taxpayers.

It is not useful in the least. It is ideological claptrap.

Compare XOM US taxes paid to US taxpayers.

Otherwise, compare XOM total taxes paid to world GDP or the GDP of some of the African countries where XOM extracts oil. Or compare it to some other conflating data set; e.g. the money raised to run for election as President of the United States.

 
At 8/03/2008 12:49 PM, Blogger Reeder said...

Are you kidding me?! Talk about bullshit! I can't believe a professor would speak so disingenuously. To not include the social security and medicare burdens that US citizens, not corporations, have to pay is a classic right-wing tactic.

If you don't provide the complete picture, then you, sir, are a lying propagandist for the forces of control, not liberty.

Shame on you.

 
At 8/03/2008 2:02 PM, Blogger Mark J. Perry said...

Note: Exxon also pays payroll taxes for its employees (6.2% for Social Security, 1.45% for Medicare, and federal and state unemployment taxes). The focus here is on INCOME TAXES ONLY, in response to the media's focus on Exxon's PROFITS.

 
At 8/06/2008 1:03 PM, Anonymous Anonymous said...

Tony said: "Who in the aggregate owns XOM stock? Wealthier individuals in higher tax brackets through direct purchasing or through mutual funds, etc... "

I don't think this is quite true. Pension funds own 50% or more of the equity in the United States so it is not only "the rich" who own XOM stock. The 401k's for teacher's pensions such as CALPERs, teamsters etc. Probably own a lot too. I know there is data on this out there, don't have time to post it now. Anyway, just a thought.

 
At 8/07/2008 4:02 PM, Blogger The Anon Guy said...

I guess "Reeder" has never ran a business himself or, I guess, ever read even a rudimentary story on payroll taxes. But then if he did, he wouldn't be able to rant and rave about evil capitalism.

As for Exxon, 52% of its shares are owned by institutional and mutual fund companies. If you have a 401k, pension plan or an IRA the odds are you own Exxon. Vanguard, Fidelity, Barclays, State Street, B of A, etc. do.

 
At 10/30/2008 11:31 AM, Anonymous Laura "Pistachio" Fitton said...

Curious what the relative INCOMES are. How much does the bottom 50% of US taxpayers earn in aggregate vs how much does Exxon Mobil earn?

Breaking it down further, per household, the bottom 50% of US taxpayers are not making a hell of a lot more than a minimum income needed to survive. So you would need to compare their aggregate "above poverty level" income with Exxon's profits to get a fuller picture here.

 

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