Why Exxon's Lower Profit is Bad for Taxpayers
When Exxon Mobil falls short on profits, it's not only its investors who suffer.
Taxpayers do, too.
Exxon this morning reported earnings of $1.55 a share, missing analysts' estimates of $1.90 a share. It was the lowest per-share profit for the company since September 2010. Truth is, among large companies -- and Exxon Mobil is among the largest in the world -- Exxon has an uneven track record of meeting analysts' profit estimates.
Still, Exxon almost always reports a big profit, which leaves it vulnerable to criticism about "Big Oil" and how corporations are gouging good, honest folk who can't afford to fill up their SUVs anymore.
But Exxon's earnings are also a reminder of how, while some lawmakers are quick to join in the chorus of complaints about profitability, it is companies like Exxon that send the bags of cash to Washington for Congress to squander.
Exxon, based in Irving, Texas, is one of the few companies that gets granular about its tax payments. And those payments are big, especially in dollar terms. In the second quarter, the company reported revenue of $106.47 billion, for net income of $6.68 billion. Both figures were down from the same period a year ago, which came in at $127.36 billion and $15.91 billion, respectively.
Those profits, which often draw the ire of activists, are dwarfed by the taxes, for which seldom is heard a discouraging word.
In the second quarter, Exxon Mobil -- one company, mind you -- paid $5.79 billion in income taxes. Then, it paid $7.55 billion in sales taxes. On top of that, it paid a range of other taxes, to the tune of $8.97 billion. That's total taxes paid in the quarter of $22.33 billion.
So far this year, the company has paid income taxes of $12.07 billion, sales taxes of $15.04 billion and other taxes of $17.77 billion. That's $44.88 billion in taxes. For just six months. And for just one company.
As big as those numbers are, they are down from a year ago. This time last year, Exxon had already paid $54 billion in taxes. So it is $9 billion short of last year's pace.
That's why policymakers should be a little more circumspect before blasting profits from oil companies or any business. When a company's earnings fall, so does its tax bill. Governments now have $9 billion less to play with from this one company than they had last year. Shouldn't that be a reason to cheer companies' predilection for profits rather than pan them?
Ray Hennessey is the former editorial director of Entrepreneur.