Cause and Effect

Democrats in Congress will have you believe (and according to an opinion poll, their story is widely believed) that profits earned by Exxon (and other large oil companies) is a leading cause of high gas prices. The wailing and gnashing of teeth by Democrats over this is easy enough to find.

What you might not hear is that, while Exxon earned $11.68 billion in net profit in the second quarter of 2008, they paid $32.36 billion in taxes during the same quarter.

If, then, $11 billion in profit is an unconscionable drain on the American people... what is the effect of nearly 3 times as much being paid in taxes? For every dollar in profit Exxon earned, it paid three dollars to the government. And given a roughly 10% profit margin, that means it spent another six dollars on neither taxes nor profit, but simply in the expense of doing business.

So, of costs, taxes, and profit... the smallest share of all (and, therefore, the smallest contributor to high prices of the three broad categories listed) goes to profit.

Total Revenues: $138 billion
Total Costs (including sales and "other" taxes): $116 billion
Total Income Taxes: $10.5 billion
Total Profit: $11.7 billion

For the government that extracts 3 times as much in taxes to wag its finger over the profit that gives Exxon a reason to be in business to begin with... I find it hypocritical, shallow, and alas - all too convincing to the American public.