Big Oil Windfall Profits Tax a Bad Idea

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 0

I was catching up on some email tonight and came across a good point made by Steve Sjuggerud of DailyWealth.  He compares the tax rate and profit margins of Microsoft vs Exxon Mobile providing a clear example of why gouging big oil further would be a bad idea and most likely lead to higher prices at the pumps.  This article reprinted with permission.

THE DUMBEST TAX POLICY YOU COULD POSSIBLY SUPPORT

Oil is skyrocketing… and Chevron and Exxon should be making outrageous profit margins. So let’s tax those “windfall” profits! But… hold on a minute…

From March 2007 to March 2008, Exxon’s profit margin was just 10%. Meanwhile, its income tax rate was about 43%.

Compare this with Microsoft: Microsoft’s profit margin was over 28%. And Microsoft’s tax rate was under 30%.

 

microsoft_exxon_margins

Microsoft makes a much bigger profit margin than Exxon. And it’s taxed way less. Heck, if anyone deserves an “excess profits tax,” it’s Microsoft, not Exxon, right?

Do you think Microsoft’s Office software is outrageously expensive? And if so, is the right solution to tax Microsoft more? Does that fix the problem for consumers?

Right now, people just want to hear that the government is doing something to fix high gas prices. Many people naively believe the gas stations and Big Oil companies like Exxon are gouging them.

But calling for a windfall tax on Big Oil is among the dumbest policies you can possibly support… and there are a lot of dumb ones to consider.

For more on Oil Prices and Oil ETF Trading see our sister site Oil ETF Central

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