Fact Checking CAP's Characterization of Exxon's Tax Liability
Last week, the Center for American Progress published a misleading blog post in hopes of drumming up support for Democrats’ proposed tax hikes on oil and natural gas producers.
CAP’s statements are bolded and immediately followed by ATR’s rebuttal.
ExxonMobil 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.” 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.
CAP is deft at cherry picking data. The 17.6% effective tax rate for three years is 32% when looked at over six years. If CAP is bent on using those dates, a more effective point of comparison would be to compare it to other corporations like GE, which received a $140 billion bailout during 2008 alone.
And even taking this 17.6% at face value, this number far exceeds the rates other large U.S. corporations have paid over the last five years. According to The New York Times, Boeing paid a total tax rate of just 4.5 percent, according to Capital IQ. Southwest Airlines paid 6.3 percent. And the list goes on: Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.
ExxonMobil and other big oil companies continue to exploit tax loopholes for nearly $4 billion in subsidies each year – intended write-offs for domestic production that were “intended for manufacturers, not big oil producers.”
Unlike other sources of energy, the government does not give American oil and natural gas companies a cent to produce oil or gas. The deduction “intended for manufactures” is actually what’s known as Section 199.
Section 199 is not a special incentive for the oil industry. It is a standard deduction that applies to all domestic producers – to movie producers, coffee roasters etc. and is intended to support job creation and retention in the US. While the oil and natural gas industry employs only 6% deduction, nearly every other industry employs a 9% deduction.
Cites a new Tax Justice report which explains, “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.” Claims ExxonMobil paid no taxes at all in 2009 on profits of nearly $2.6 billion
This is an example of how CAP uses data out of context, leading to distortions. The reason Exxon’s rate was only .4 percent is because they’d overpaid in prior years. Specifically, ExxonMobil’s income tax expense related to 2009 activities was approximately $500 million – and over the past five years, they incurred a total U.S. tax expense of almost $59 billion.
Even when Exxon had a record profit of $40 billion in 2008 due to record oil prices it had only a 31% effective tax rate. That’s 13 percent lower than the maximum 35 percent despite being ExxonMobil’s fifth years as the top corporate earner.
The math doesn’t add up here. Either the authors made a mistake or they have engaged in fuzzy accounting.
There is a big discrepancy between ExxonMobil’s rates and those of most American breadwinners. Their effective rate of 17.6 percent is nearly 16 percent below the average individual federal tax rate, which was 20.4% as of 2007.
The more complex answer is that there is a clear lack of understanding about who actually pays taxes in America.
Companies pay taxes while the actual burden of taxation falls on consumers, employees, and shareholders. Consumers pay taxes in the price they pay at the pump, employees pay taxes in lowered take home pay and investors—including pensioners, retirees, insurance recipients and other individuals pay in reduced dividends and capital gains. They then must again pay taxes on their dividends, capital gains, pension and annuity income or money derived from IRA, 401k plans and the like.
The burden of taxes, whether in the form of sales, property or income, ultimately falls on individuals. CAP is trying to pretend that some entity other than individuals ultimately pays the taxes.
Individuals in the highest quintile pay an average tax rate of just over 25 percent in the United States. ExxonMobil pays 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.
See point above.
ExxonMobil’s accounting methods mask its relatively low effective tax rate. Exxon counts part of its tax burden taxes that it simply doesn’t pay.
CAP arbitrarily ignores the taxes they don’t like – including payroll taxes. Payroll taxes are a large part of operations and consequently a large part of the effective tax rate.
ExxonMobil now finds itself with the difficult task of publically rationalizing Exxon’s share of billions in subsidies, despite the company reaping enormous profits and paying relatively little in the way of taxes.
Exxon pays more in taxes than it receives in earnings. In 2010, ExxonMobil’s total tax expenses in the United States were $9.8 billion, which includes an income tax expense of more than $1.6 billion. That $9.8 billion in taxes exceeded ExxonMobil’s 2010 U.S. operating earnings of $7.5 billion.
And over the past five years, ExxonMobil incurred a total U.S. tax expense of almost $59 billion, which was $18 billion more than it earned from its U.S. operations during the same period.
Repeal Tax Credits, But Don't Raise Taxes
Originally posted at GlobalWarming.org
Americans for Tax Reform asks every candidate running for Congress to sign the Taxpayer Protection Pledge, a promise to their constituents that they will not raise taxes on Americans or their businesses. The Pledge, signed by 235 Members of the House and 41 Senators, reads:
I___ pledge to the taxpayers of the state
Of___ , and to the American people that I will:
ONE, oppose any and all efforts to increase the marginal income tax
rates for individuals and/or businesses; and
TWO, oppose any net reduction or elimination of deductions and
credits, unless matched dollar for dollar by further reducing tax rates.
The Pledge is by no means a panacea to America’s tax and spending problems, it is a stopgap which identifies tax increases and looks to prevent them. It is the second clause of Pledge that has caused a limited fuss within the conservative movement and, thus, is worth reexamining. Before we proceed, it is important to make the distinction between two types of tax credits—refundable and nonrefundable—as conflating them can lead to unnecessary confusion. A tax credit is employed to reduce a taxpayer’s tax liability, ie reducing the amount of money they must pay to the government. A refundable tax credit allows the taxpayer to reduce their tax liability below zero, meaning the taxpayer is owed money from the government. The outlay effect caused by refundable tax credits is spending. Americans for Tax Reform has unambiguously opposed outlays resulting from refundable credits. I recommend readers take a look here at which refundable credits trigger these outlay effects.
The second type of tax credit, which is much more common, is non-refundable; it cannot reduce a taxpayer’s liability below zero. When conservatives argue for blanket repeal of these credits—or the non-spending portion of refundable credits—they are arguing for higher taxes—repealing these tax policies means more money for Washington’s appropriators. ATR has consistently advocated for the repeal of any number of credits, as long as repeal is offset with identical or greater tax cuts. Offsetting the repeal of energy tax credits and deductions is incredibly easy as most are worth a few billion dollars.
Why is offsetting the repeal of a tax credit, thereby preventing a tax increase, so important? Prohibiting tax hikes draws a line in the sand between supporters of big government and small government. Democrats have no interest in reducing America’s historic spending levels and will only do so when tax hikes are off the table. With the highest corporate tax rate in the world and a high personal income tax rate, raising rates is, thankfully, a heavy lift. Realizing this, Democrats pivoted and are now trying to raise revenue by repealing tax credits and deductions.
Although conservatives are arguing for repeal of particular tax credits and deductions for different reasons—namely market efficiency—they should of wary of supporting the Left’s unambiguous goal—more of your money. Once conservatives begin supporting tax increases through blanket repeal of tax breaks, it becomes enormously more difficult to prevent other tax hikes—like those proposed by the Simpson-Bowles commission, President Obama, and the Gang of Six.
ATR does not universally support or oppose tax credits, which is why we are opposing HR 1380, the New Alternative Transportation to Give Americans Solutions Act. Otherwise known as the Pickens Plan, the NAT GAS Act further obscures America’s already convoluted energy sector. To remedy the overregulation problem in America’s energy market, Congress should be looking to peel back policies that to skew consumer choice, not add additional complexity.
Tell Congress to Oppose Tax Hikes on Energy Producers
In response to skyrocketing gas prices and a stagnant economy, House Republicans have passed three bills which would expand America’s domestic oil production, creating jobs, spurring investment, and reducing America’s dependence on foreign oil. Unfortunately, with a Democrat controlled Senate, it is unlikely Majority Leader Harry Reid (D-Nev.) will allow a vote on these House-passed bills.
Conversely, Democrats have proposed legislation which would raise the price of gasoline by further taxing oil and natural gas producers! The recently introduced, and inaccurately named, “Close Big Oil Tax and Loopholes Act,” is nothing more than a billion dollar tax and will do nothing to alleviate Americans’ pain at the pump.
Even with skyrocketing gasoline prices, Dems introduce bill to raise energy producers' taxes
Attempting to feign fiscal austerity, Democrats have looked to raise taxes on America’s oil and natural gas producers. With the nation fixated on deficits and debt, Senate Democrats, unwilling to seriously cut federal spending, have introduced the inaccurately named Close Big Oil Tax Loopholes Act of 2011—legislation to repeal expensing deductions and necessary tax policies employed by American oil and natural gas companies.
Are oil companies the recipients of government subsidies?
No, the federal government does not give oil and natural gas companies a cent to produce oil. Unlike other forms of energy, oil and natural gas producers receive zero grants or loan guarantees, nor does the government impose any consumption mandates.
According to its cosponsors, why is this legislation necessary?
“The American people are demanding to know why they are stuck paying $4.00 for a gallon of gasoline …And they want to know why these oil companies should continue to enjoy billions of dollars in subsidies when the working class, the needy, and the elderly are being asked to sacrifice in order to balance the budget?”
- No one seriously thinks that raising taxes on oil and natural gas producers will bring down the price of gasoline. In fact, raising taxes on oil producers, makes producing gasoline more expensive
- These Senators are purporting to protect the same people they are raising taxes on, “the working class, the needy, and the elderly:” 27 percent of oil companies are owned by pension funds, 23 percent by individual investors, 30 percent by mutual funds, and 14 percent by IRAs. Only 1.5 percent of oil stocks are held by corporate management.
Summary of the bill
Modify foreign tax credit: In order to prevent double taxation, oil and natural gas companies are allowed to credit income taxes paid abroad from their US income statement. Senate Dems have proposed to limit the amount US oil companies can deduct, crippling American companies competing abroad.
Repeal Sec 199, only for oil companies: In 2004 Congress enacted Section 199, the domestic manufacturing tax deduction. Not trying to hide their bias, Senate Democrats are attempting to repeal Sec 199—which is employed by every domestic manufacturer—only for oil and natural gas companies.
Repeal or limit expensing: Consistent with the belief that taxes should be paid only on profits, oil and natural gas companies are allowed to expense some of the costs associated with drilling a well or the lease purchase.
Supporting more than 9.2 million domestic jobs, America’s oil and natural gas producers are a pivotal part of the American economy. Repealing this industry’s expensing policies won’t put a dent in the deficit but will kill thousands of jobs and encourage Washington’s reckless spending habits.
To Fund Bloated Government, Dems Target Oil Companies
This article was originally posted at Townhall.com
Unwilling to reign in Washington’s overspending problem, Democrats and their allies on the Left are stuck championing tax increases. Raising the corporate income tax rate—already the highest in the world—or increasing the personal income rate is untenable, leaving Democrats no choice except to try and repeal tax credits and deductions.
With oil and natural gas companies releasing their first quarter earnings this week, look for revenue hungry Democrats and to set their sights on this industry. First out of the gate is the League of Conservation Voters (LCV) which began asking Members of Congress to pledge to raise taxes on American oil and natural gas companies by eliminating a handful of pro-growth deductions. The LCV pledge reads:
“With five biggest public oil companies enjoying $60 billion in profits and Americans struggling with high gas prices, we should no longer force Americans to subsidize oil companies. I hereby pledge to end taxpayer subsidies and handouts for oil companies.”
Let’s cut through the hyperbole. Unlike renewable sources of energy which received $60 billion in taxpayer dollars since 2008, the American government doesn’t give oil and natural gas companies a cent to produce oil. The LCV’s characterization of tax credits and deductions as subsidies is intentionally misleading. A subsidy is when the government takes money from you and gives it to someone else, like a solar company. Allowing a company to keep more of its earned money by employing a tax credit is anything but a subsidy.
You would think from the LCV’s pledge that oil and natural gas companies pay virtually no taxes and are gaming the system for profit. This could not be farther from the truth: paying nearly $100 million a day in income taxes—and $300 billion in total income taxes between 2004-2008—the oil and natural gas industry’s effective income tax rate is 48 percent, compared to 28 percent for other S&P Industrial companies. And that’s just income taxes, those numbers don’t even include an additional $60 billion in non-income taxes or $350 million in excise taxes paid on petroleum products.
Furthermore, it is worth asking who profits when oil companies prosper. Apart from the 9.2 million people the industry employs, 27 percent of oil companies are owned by pension funds, 23 percent by individual investors, 30 percent by mutual funds, and 14 percent by IRAs. Only 1.5 percent of oil stocks are held by corporate management. This means that if you or your employer has been saving for retirement, well, you are likely part of Big Oil. Gasp!
And then there’s the matter of gasoline prices. As a commodity, oil prices are subject to speculation from investors who access global supply and demand. When you spend a dollar on gasoline, 68 cents from that dollar go towards purchasing the crude oil and 18 cents is used for refining and retailing. The remaining 14 cents is forked over to the government in excise taxes.
If Democrats really wanted to alleviate Americans’ pain at the pump, they could reduce the gasoline excise tax. Revealing their true intention, more revenue, Democrats are arguing for higher taxes on oil and natural gas companies—it is hard to imagine how further taxing oil and natural gas companies would bring down the cost of gasoline.
The truth is Democrats would rather demonize oil and natural gas companies than make necessary spending cuts. Leadership is making tough decisions about which programs to cut, bolster, or eliminate, not which companies to tax.
GOP backs EPA into a corner, they come out...rapping?
With the public increasingly frustrated with the EPA’s power grab, the agency is ramping up its pr efforts pushing back against Americans’ concerns about federal overreach…with a rap? Releasing “Click it—flip it,” a song that would make Vanilla Ice blush, the EPA’s new education campaign for children is as weird as it is inaccurate.
The MC warns listeners what is at stake, due to global warming, “the bears don’t even know when to take a nap. On top of that, it’s not cool, when the flood waters rise and mosquitoes rule.” Thankfully, we have the EPA to stave off the coming mosquito apocalypse where bears plagued with insomnia battle Kevin Costner for scarce resources.
Phew, thanks for looking out, EPA. So what should we do to stop Tyrannical Mosquitoes?
“A 5 minute shower is all that’s needed to keep energy from being depleted. A long sleeve sweater is what I know will keep you toasted and the fuel bills low.”
Oh, that’s it?
And don’t forget, don’t ever forgot, to “click it—flick it, turn the handle to the right. Turn off the water push the handle real tight. Slip on some sneakers lace them up tight, leave the car parked you know that’s all right. Public transportation is the way to go you know, it’s one of the ways to keep emissions low.”
While showing a lack of creativity (the chorus’ rhyme scheme: right:tight:tight:right) even for federal bureaucrats, their creepy suggestions about how long children should shower for have nothing to do with what the EPA is really up to—regulating America’s energy companies and manufacturers out of business, and raising energy prices for every American.
Far from being an innocuous steward for the public good, the EPA is a politicized agency used to circumvent the will on Congress.
Drop the beat, EPA!
Fact Checking Cenk Uygur's "Rigged Game: Subsidies for Oil Companies"
Click here for a PDF copy.
Unwilling to reign in Washington’s overspending problem, Democrats and their allies are stuck arguing for higher taxes. Raising the corporate income tax rate—already the highest in the world—or increasing the personal income rate are untenable, leaving Democrats no choice except to advocate for the repeal of tax credits and deductions.
In this vein, MSNBC Anchor Cenk Uygur has launched a miseducation campaign on the tax policies employed by the oil and natural gas industry.
Uygur: “It’s estimated that every year the United States Government gives approximately 4 billion dollars in tax subsidies to oil and gas companies.”
Fact: Unlike other sources of energy—wind, solar, ethanol, etc—the government does not give oil and natural gas producers any grants or loan guarantees, nor does it impose any consumption mandates. Since oil and natural gas companies receive none of the above actual subsidies, Uygur targets deductions these companies can write off on their income statement:
Subsidy?: Allowing a company to keep its own money is not a subsidy. The government taking money from Mr. Uygur and giving it to me is a subsidy, I have no claim on that money. Allowing Uygur to keep his own money, by employing a tax credit or deduction, is not a subsidy.
Uygur: “If I got $4 billion a year in subsidies, I’d be pretty good in that sport to. I wouldn’t have to work very hard at all.”
Fact: Since 2008 Congress has spent $65 billion funding renewable projects. Even after receiving enormous taxpayer subsidizes; these forms of energy are anything but ubiquitous. Again, the $4 billion Ugyur calls a subsidy is anything but—the government doesn’t spend a single dollar facilitating oil and natural gas production.
Uygur: “Meanwhile, we all know that these companies are pulling in absurd profits. Last year alone, the top five oil and gas companies earned a total of $77.4 billion in profits.”
Fact: Implicit in this statement is the sentiment that oil and natural gas companies are not “paying their fair share,” and gaming the system to achieve profits. This could not be farther from the truth: paying nearly $100 million a day in income taxes—and $300 billion in total income taxes between 2004-2008—the oil and natural gas industry tax expenses averages 48 percent, compared to 28 percent for other S&P Industrial companies. This number does not include an additional $60 billion in non-income taxes or $350 in excise taxes paid on petroleum products.
Supporting more than 9.2 million domestic jobs, America’s oil and natural gas producers are a pivotal part of the American economy. Repealing this industry’s tax policies won’t put a dent in the deficit but will kill thousands of jobs, and encourage Washington’s reckless spending habits.
Why NMB Union Elections are Different than Congressional Elections
Originally posted at WorkerFreedom.org.
Click here for a PDF copy.
With the imminent FAA Reauthorization bill containing a provision to annul the National Mediation Board’s (NMB) Minority Rule decision, it is imperative that Members understand what exactly Title IX in the FAA bill does. In short, it reflects the principle that Congress should determine and legislate significant changes in labor law, not unelected agency appointees.
The three-member NMB—two of whom are former union officials—ruled in 2010 that a majority of voting members were required to certify a union at airlines and railroads, not a majority of all members of a workforce. This move to facilitate unionization and overturn seventy-five years of labor law, supported by both parties, encapsulates concerns about federal overreach.
the FAA Reauthorization Bill
Union v House Republican Showdown Scheduled for Next Week
Orginally posted at BigGovernment.com
Ever since Obama was sworn in, obscure federal agencies have been churning out pro-labor, anti-worker rulemakings in an attempt to reverse declining unionization numbers. Indicative of this unionization through regulation strategy is the National Mediation Board’s (NMB) minority rule decision promulgated in 2009.
The NMB is a three-member board comprised of one Bush holdover and two Obama appointees—both of which are former union officials—tasked with overseeing union-employer relations in the transportation industry. The makeup of the board effectively gives the pro-union board members fiat to enact whatever policies or regulations they see fit. Unsurprisingly, the NMB’s first major decision was a move to facilitate unionization in the transportation industry.
Overturning seventy-five years of precedent and two Supreme Court rulings, the NMB ruled that a majority of voting members were required to certify a union, not a majority of all members of a workforce. For two years now, conservative activists and Members of Congress have written letters and introduced legislation attempting to annul this blatant federal overreach. These efforts have finally culminated in tangible legislation, Title IX of the FAA Reauthorization bill, which would overturn the NMB’s minority rule decision.