Liberals applaud President Obama for embracing the perpetual populist canard of eliminating oil industry tax benefits and demanding they pay a fair share in taxes. The argument is false because corporations do not pay but instead collect taxes from customers for government coffers. Corporations, partnerships and individual proprietorships of any significant size prepare a budget in which taxes are a cost of doing business.
If, in fact, taxes cannot be passed to the customer, companies either leave the business or suffer an anemic presence compared to competitors. A company like ExxonMobil has enough sophistication and size to compare benefits available from a multitude of countries and choose those maximizing profitability for the next dollar invested. They would never continue investing money in a country where they paid taxes and did not receive benefits comparable to other countries.
People should be either bemused or amused with expressions of outrage that ExxonMobil reported first-quarter profits up nearly 70 percent to $10.7 billion. That profit was worldwide for the world’s largest company, with only one-quarter of sales from U.S. operations. The fact is, its profit margin is just over a modest 9 percent.
For balance, let’s juxtapose General Electric, which in 2010 earned $14.2 billion, received $3.2 billion in benefits and paid no U.S. taxes. Another way to look at it is G.E. had no federal taxes to pass along to its customers, although consumers paid their fair share of $3.2 billion in subsidies.
Corporations are neither inherently evil nor good, but instead are pragmatic.