The old tax’em when they are doing ‘too well’ government philosophy, is back in Washington D.C. The recent calls for a windfall profit tax against the oil companies certainly doesn’t support capitalism, fair play, foreign competitiveness, or sound economic policy. It is just plain silly.
Some facts about big bad ExxonMobil, as reported with their recent quarterly results. Revenues of $138b, Profits of $11.9b, $7b investing in finding new oil, $10b back to shareholders in dividends or share buybacks, $10.5b in income taxes, $9.5b in sales taxes, and $12b in other taxes.
First, as a percent of revenue oil companies are not profit machines. Under 10% profit margin? Not a huge wall street story there. If we need to focus on overly priced, close to monopoly, under regulated, excessive profit companies, someone should be looking at Google. Second, they pay a lot in taxes now, over 30% and if you add in the fact that dividends are taxed again as income, this is even higher. Third, they are investing in research (fair to point out R&D Tax credits for this) for new oil. I am not sure it is enough but they do owe their shareholders a return.
My proposal is to hopefully create a win-win situation. DO NOT tax corporations and DO provide incentives toward more alternative research. It is difficult for me to think that oil companies will become the ‘green’ companies of the future, contrary to current marketing efforts by BP and others, so Government incentives to promote research and development may be necessary.
From the article below; http://mygreensuit.com/2008/05/13/reduce-oil-prices/
We the people, should use the Strategic Petroleum reserve as leverage. It is a fairly simple plan, we sell 200M barrels of oil to the top 5 oil companies on a pro rated market share basis. We sell it to them at the 90 day moving average of a barrel of oil, or potentially at a slight discount, since refining costs and distribution need to be accounted for, and we take the proceeds and invest in some of the creative alternative energy, conservation and research ideas currently swirling around.
A simple plan review, the average cost of a barrel oil in the reserve = $24. Let’s estimate a $100 government profit on each barrel x 200M barrels = $20b for energy programs. The oil companies get a new supplier, with reduced shipping costs (it is already here!), and they still make some profit, WIN. The Government gets $20b to invest in alternative energy, and gets some satisfaction in making the oil companies do something they probably don’t want to – WIN.
Next post on what we should invest the $20b in.
