June 13, 2008
"How a Windfall Oil Profits Tax Would Hurt You"
By Elizabeth MacDonald
We are witnessing a fresh round of stiff-necked fulminations over the need for a new windfall tax on oil profits from elected officials who appear to understand little about the economic impact their legislation has on US taxpayers.
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But here's an important economic point. Companies don't pay taxes. Instead, they pass tax costs along to workers, consumers and shareholders. Or they pull stakes and move operations out of the country. Why do you think the US accounting firms have been steadily growing their operations overseas? It's because of the US's onerous tax and regulatory structure.
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And oil companies pay a lot of money in taxes to the government.
Over the last three years, Exxon Mobil has paid an average of $27 bn annually in taxes, says Mark J. Perry. a professor of economics and finance at the University of Michigan. That's as much in taxes annually as the entire bottom 50% of individual taxpayers paid in 2004 (most recent year available), which is 65,000,000 people, Perry notes.
Exxon's effective tax rate in some years is at around 40%, bouncing down to a still steep 35% in other periods.
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So what the government giveth in subsidies, it quickly takes away with taxes.
Also, the Tax Foundation's Scott Hodge and Jonathan Williams noted say that in recent decades federal, state and local governments "have collected far more revenue from gasoline taxes [from consumers] than the largest U.S. oil companies have collectively earned in domestic profits."