I say congratulations, although Hillary Clinton begs to differ.
At the winter meeting of the Democratic National Committee, the senator from New York said, “The oil companies reported the highest profits in the history of the world. I want to take those profits and I want to put them in an alternative energy fund.”
Take? Isn’t that a confiscation of private property? Author P.J. O’Rourke framed it perfectly on a recent edition of CNBC’s Kudlow & Co.: She’s “Hugo Chavez in a pants suit.”And what exactly would Mrs. Clinton be taking? ExxonMobil’s profits are outsized, but they come on sales of $377.5 billion, making for a profit margin of just over 10 cents on the dollar. This remains well below the profit margins of many industries, including banking and biotech where the margins nearly double those in the energy sector. The numbers are big, but the returns are middling.
And since sales and profits in the energy sector depend on the world price of oil, it’s feast or famine for these businesses. In the last decade, oil prices have fluctuated from about $10 a barrel to nearly $80. Talk about volatile pricing.
Indeed, the energy business isn’t easy. Still, ExxonMobil remains one of the best-run companies in America. Many professional investors believe it’s the best-run company. In his recent book, The Future for Investors, Jeremy Siegel of the University of Pennsylvania reveals that Exxon has been one of the top-three stocks in terms of return on investment over the past fifty-odd years. John D. Rockefeller Sr., looking down from on high, must be pleased.
But it’s also a tax-burdened company. While ExxonMobil recorded record profits last year, it also paid $100.7 billion in taxes -- two-and-half times its net profits, according to the Tax Foundation. In fact, over the past twenty-five years, federal and state governments took $397 billion from the largest oil companies and an additional $1.1 trillion in taxes at the pump. In today’s dollars, that’s $2.2 trillion.
This isn’t an isolated problem. The prevailing 35 percent corporate tax rate takes a monster bite from all U.S. businesses. Moreover, our business taxes are far too high in relation to the rest of the world. Believe it or not,the corporate tax rate is lower in France than it is in the United States.