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Exxon Mobil Dodges the Tax Man
Exxon Pays a Lower Effective Tax Rate than the Average American
Exxon Mobil Corp.'s robust balance sheets have become a poster child for what The New York Times dubs the “paradox of the United States tax code.”
Gas prices above five dollars a gallon are seen on a sign at a gas station in Washington. (AP/Susan Walsh) The company’s large 2010 profits allowed them to lead Fortune 500’s annual ranking of the nations’ most profitable firms for the eighth time in a row. But the oil giant’s average effective tax rates are roughly half the 35 percent tax rate that currently stands as the high-water mark for American corporations. Meanwhile, Exxon Mobil and other big oil companies continue to exploit tax loopholes for nearly $4 billion in subsidies each year. These subsidies include write-offs for drilling costs and a deduction for domestic production that was intended for manufacturers, not big oil producers.
Exxon Mobil registered an average 17.6 percent federal effective corporate tax rate on its annual earnings in the three years spanning 2008 to 2010. Its average domestic profits exceeded $6.8 billion. And as a 2011 Citizens for Tax Justice report points out:
Over the past two years, ExxonMobil reported $9,910 million in pretax U.S. profits. But it enjoyed so many tax subsidies that its federal income tax bill was only $39 million—a tax rate of only 0.4 percent.
Even when Exxon Mobil had a record profit of $40 billion in 2008 due to record oil prices it had only a 31 percent effective tax rate. That’s 13 percent lower than the maximum 35 percent despite being Exxon Mobil's fifth year as the top corporate earner in Fortune 500’s annual listing. The company paid no taxes at all to the U.S. federal government in 2009 on its domestic profits of nearly $2.6 billion. It appears that they avoided the tax man that year by legally funneling their profits through wholly owned subsidiaries in countries like the Cayman Islands, and reinvesting their earnings overseas.
More striking still is the discrepancy between Exxon Mobil's rates and those of most American breadwinners. The company’s effective rate of 17.6 percent is nearly 16 percent below the average individual federal tax rate, which according to the Congressional Budget Office was 20.4 percent as of 2007.
Individuals in the highest quintile pay an average tax rate just over 25 percent in the United States. Exxon Mobil, meanwhile, paid approximately the same effective tax rate as Americans in the fourth income quintile—which includes Americans earning from $62,000 to $100,000 a year.
Exxon Mobil tries to mask its relatively low effective tax rate with some questionable accounting wizardry. According to CNN Money the $3.1 billion in taxes the company claims to have paid since January 2011 includes both federal and state gasoline taxes—that are really paid by drivers—as well as employee payroll taxes.
Think Progress’s Pat Garofalo rightly observes that “Exxon is counting as part of its tax burden [taxes] that it simply does not pay,” making the exorbitant subsidies the company receives even more unnecessary.
These strategic maneuverings have not been lost on congressional Democrats. Rep. Tim Bishop (D-NY) introduced a bill to repeal at least one of these tax loopholes for large oil companies including Exxon. The legislation would result in $12 billion in revenue over 10 years by removing the Section 199 domestic manufacturing tax deduction.
House Republicans successfully blocked Democratic attempts to force a vote erasing this unnecessary oil subsidy on May 5 by passing a motion, 241-171, on two drilling bills.
But this promises to be only a temporary respite for Big Oil tax breaks. And a short one at that. The Senate is expected to vote next week on the Close Big Oil Tax Loopholes Act, legislation introduced by Robert Menendez (D-NJ) and other senators to address oil prices and subsidies for the five biggest oil companies.
Seth Hanlon, Director of Fiscal Reform at the Center for American Progress, explains that the glaring contrast between:
Today’s high gas prices and inflated profits have undermined the industry’s argument that their tax breaks benefit consumers.
Meanwhile, federal budget deficits have sharpened Congress’s focus on eliminating wasteful government spending—of which oil subsidies are one of the worst examples.
Right on cue, Rep. Max Baucus (D-MT), on the morning of May 6, called on executives from Exxon Mobil and its Big Five compatriots—BP, Chevron, ConocoPhillips, and Shell—to stand before the Senate Finance Committee for a May 12 hearing on "Oil and Gas Tax Incentives and Rising Energy Prices." As of this writing, top-level representatives from each company have confirmed attendance, including ExxonMobil Chairman and CEO Rex Tillerson. He now finds himself with the difficult task of publicly rationalizing Exxon's share of billions in subsidies, despite the company reaping enormous profits and paying relatively little in the way of taxes.
Download full data on Exxon Mobil's effective tax rate from 2008 to 2010 (.xls)
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Show AllJUSTICE FOR ALL
Just could never get into the words or concepts of capitalism, socialism, communism, or any of the other “ism’s”. There is only one word or concept that works for me that would work in a social, economic, or a political community, state or country where all peoples would have a chance at their slice of the pie; the pie being this thing we call life. That word and concept is justice.
Justice for all; it sings for me and the way I see it has to start with a well rounded education system where the students are taught thinking skills; thinking inside the box, outside the box, under the box, on top of the box. Education is where empire starts it’s destructive forces. With that taken care of it is just a matter of time until the educated ones with a greed streak chip away and corral what is left of educational opportunities for the rest and make it almost impossible to have even a chance at a mediocre and “tunneled visional” learning experience. Like learning a trade and nothing else to complement it. Robots.
Justice and politics; sounds like an oxy- moron but because it is more practical to have a governing body of some of the peoples than to have all the peoples writing rules and regulations; this could be set at a manageable level. The binding document of all would be on paper and all, ALL votes, changes or whatever would be seen by all any time they so choose and if they do not care for the wording or the whole thing; their concerns must be heard and published for all the peoples to see and voted on. Unwieldy? No more so than what we have now: with this justice would overshadow politics.
Quality of life, work and all this entails; justice would not take from any that deserved what they had or inherited and yet would, under justice, see that all who worked would receive a portion of any profit made by any corporation, company, McD’s, what is made by any worker; from ceo to janitor. Shareholder profits would be capped and the owners too. You might say that the owner and or shareholders “deserve” whatever they can get but “justice” would not allow this; The owner may have come up with an idea, a product or any such thing and the shareholders saw it as a money maker: but and this is a big but, workers did what needed to be done to make it marketable and they deserve a fair share of the revenues, besides what any idea is thought up by any in this life today, or yesterday, or the day before was gleaned from older ideas that were learned in a school, a school paid for by the peoples and Solomon said it all; “there is nothing new under the sun”. A proportionate share for all; voted on by all.
With all this an educated peoples would be able to solve most any of the problems that plague us today and without guns. So the word, the concept of what the community, the state, country, world could be with a life of freedom from want, fear, health problems and with all that thinkers would know that mother earth needs some real and concrete TLC and that can be had with “justice for all”. As an aside, most of these companies, corporations would not make it in a true marketplace; as the only reason they do now is by monopoly and politics which is the reason we are still stuck with oil, coal and nuke power. The modern version of “^The Dark Ages”.
Tony 5/10/2011
"Exxon Mobil Dodges the Tax Man... No foolin, who would have ever thunk it.
If (every) one of us would totally avoid Exxon or Mobil sevice stations and or their convenience stores, they would (have to) lower their price of gasoline and diesel fuel. They would have to. They (love) volume.
When they do drop it a cent or two, don't go there anyway, their competition will very soon meet their prices. Keep it up until they are really hurt and they lower prices further and further. Keep it up, don't buy from them, stick it to them, (karma).
Now of course they will, and they do, supply many of the (no name) brand stations across the country, so we will be buying some of their over priced fuel, but if we all stopped buying from their (name brand) stations, gas prices will drop a lot.
Try it and if you agree, start a chain e-mail to your friends and ask them to pass it on to all of their friends. You may be amazed at how many will agree and pass it on and on and on to many million others.
Exxon and the other major oil companies are screwing us and the national economy and they avoid paying fair taxes... Screw em, they have been screwing us for years. Don't buy their fuel, tell others, we may see gas and diesel at an affordable and fair price again.
And yes, it will hurt the contract Exxon dealers, it's better and fairer a few suffer than everyone does. Don't buy their fuel.
Good idea! I've not entered an Exxon station since the Valdez disaster, the repercussions of which are still going on, long after Exxon (and the rest of the country) has stopped thinking about it. I know all oil companies are guilty of tax evasion and other 'standard' corporation hanky panky, but the Exxon Valdez incident, and the arrogant way Exxon handled it, still rankles with me. When a cheap, viable plug-in car becomes available in the U.S. and/or public transit becomes available across country and in all cities, I will say fuck off to gas stations altogether. I can hardly wait, though I'm not going to hold my breath.
>>the Valdez disaster, the repercussions of which are still going on, long after Exxon (and the rest of the country) has stopped thinking about it.<<
Heard anything about Fukushima lately? Me neither. Americans have the attention span of goldfish.
Government of, by and for the super-rich and their Wall Street Casino, thanks to their conservative useful idiots.
They're not destroying our democracy. They already have.
Walk or ride your bike, when possible.