Sunday, March 27, 2011

Thoughts on Bending Statistics and Taxes

Recently, a friend blogged about good versus evil in the world, about not being the tempted by the devil. An example was given: she claimed that in 2010 Exxon Mobil, Bank of America and General Electric combined didn’t pay three dollars total in income taxes to the government. Yes I said $3 not $3 million or $3 billion. When I hear statistics that are sound so outrageous my curiosity is piqued. They say statistics don’t lie but people lie and use statistics to try to make their point. By selectively pulling certain statistics a picture different than reality can be painted. When people do that there is a reason: they want to prove some point. When I read that blog post, I didn’t quite know what the point of the original person who said it, or what the point of that friend of mine was. Was the point to demonize those three American corporations and if so, for what reason? Was it being said that business is bad, or that capitalism is bad, or what? I was curious and wanted to look into the matter.

It wasn’t hard to find the data, but I did ask the help of my husband whose career is in finance. I share here some statistics about the taxes paid by Exxon Mobil to governments. One reason I chose that company to investigate was that one of the first things I saw when doing an Internet search for the source of that statement was a CNN article that reported that Exxon Mobil was the largest taxpayer in the country, so how could it be said they paid less than $3.00 to the American government in income taxes? Something didn’t seem to add up. At that point, I stopped researching who said it and went to the source for the statistics.

Let’s look at some statistics as reported per federal law that Exxon Mobil made to the SEC in the 10-K filed on 2/25/11 (a public document) about Exxon Mobil’s 2010 finances. I note that income earned outside of the U.S. has income taxes paid to the country where the income was generated. Need I state that Exxon Mobil drills for oil in countries outside if the U.S. as well as domestically, thus they also pay taxes to other countries.

From page 99:

Income tax paid to the US Government: $1.319 billion

Income tax paid to US States: $340 million

Total paid to US States and federal government: $1.659 billion

Income tax paid to other countries: $19.902 billion

Here are some other taxes (non income tax type taxes) that are collected from customers from sales of their product, that then are paid to the US Government (i.e. excise tax): $36.1 billion plus another $28.5 billion in sales tax. In other words due to the sale of their products, by following US tax laws, the US Government has collected $64.6 billion which helps run our government.

Additionally it should be noted that Exxon Mobil paid $1.188 billion in taxes to the Federal and state governments in the U.S. as severance tax for the production of oil and gas extracted from U.S. land (on land either owned by Exxon Mobil or on government land). They paid $3.112 billion to governments elsewhere in the world as severance to produce oil and gas drilled in those countries. (Reference: page 103)

Does this sound like a company who is not paying a “fair share”? If the US Government suspected a corporate giant like Exxon Mobil was not following tax code and was cheating them, do you not think that they’d go after them to extract even more? I bet they would! They’d be stupid not to!

As to what is done with some of the monies left over after taxes are paid they invest a lot into doing business which helps the American and world economy and produces jobs. Per this same report, they spent $8.5 billion in the United States to find oil and gas. They spent more than $18 billion elsewhere in the world on finding oil and gas. The refining and chemicals arm of their business spent $4 billion worldwide. Exxon Mobil provides jobs and employs 83,600 employees globally. The book value of their assets on their balance sheet is $200 billion globally. They find and produce a resource that many people want and use daily.

I’m not going to take the time to analyze the financials of Bank of America or General Electric, but I’d really like to know how someone came up with the figure that those three corporations paid a total of less than three dollars in income taxes to the American government. Bank of America and GE both had large losses associated with the economic melt-down of the last couple of year. I suspect those losses could be impacting their tax bill.

If you are wondering why Exxon Mobil paid more to other governments in income tax than to the American government it is because they drill in other countries more than they drill here. They follow the laws of those countries and have contractual obligations, such as in Africa they pay 85% of profits made from the sale of oil products which were extracted on their land. Income taxed in other countries is generally not taxed again by the US Government. Perhaps a person thinks because they pay more money to other country’s governments they must be cheating the US Government, when the reality is the majority of their business takes place outside the USA with natural resources from those countries so more taxes are paid to other countries.

When you hear an outrageous figure that seems completely illogical your suspicions should be aroused. I wish people would think a bit rather than just believing something they hear just because it suits their world view. The only people who would believe that a large company like Exxon Mobil pays less than three dollars in income tax to the federal government is a person who wants to believe that the corporation is evil. Perhaps the accuser is combining a large taxpayer like Exxon Mobil with companies who got tax breaks, but the only reason to drag Exxon Mobil down would be what? It is just taking the opportunity to slam an oil company, if the person has something against oil or oil companies?

What would you call a person who is so easily tricked with a figure like that without any reference citations? Would you call them a fool? Do you really want to be a fool manipulated by a lie constructed by a biased source in the media or some press release by a source whose credibility is questionable (due to lacking reference citations)?

So, where did that $3 accusation come from?

Here is a quote I found about the $3 accusation from a press release by US Uncut dated 2/28/11, (an organization I'd never heard of until today) whose message seems to be that American corporations cheat the government out of taxes that are due, and they don’t pay their fair share leaving the American citizen income tax payers to pay instead. They say if the corporations were not able to “cheat the government”, then the government would not have to cut spending. I note that the press release has no references cited to support their financial figure claims, thus I don't consider this to be a credible source of data.

"The $3 in my wallet is more than ExxonMobil, GE and Bank of America paid in taxes last year, combined," said Carl Gibson, founder of US Uncut Mississippi. "There's a direct connection between corporate tax dodging and what's happening to real people’s lives. Because of overseas tax havens and other tax loopholes, US corporations are making profits in America but barely paying taxes here. If we close those loopholes, we wouldn't have to be cutting back on firefighters, library hours and student loans."

US Uncut calls for an end to corporate tax avoidance instead of cuts to valuable public services. Anger is rising as Americans are being forced to endure brutal budget cuts at both the federal and state-level. Recent events in Wisconsin have inspired hard-working Americans to make their voices heard, and this populist message is spreading like wildfire across the country.

"If Bank of America alone paid their taxes, we could 'uncut' $1.7 billion in early childhood education," said Ryan Clayton, a DC-based media analyst, "Big corporations dodge up to $100 billion every year, and if they paid their taxes this year like the rest of us do, we could stop the $100 billion in cuts to college loans too."

How much is enough?

In 2009 the U.S. federal government collected $2.33 trillion in taxes. That works out to about $7800 per person in the U.S. (that is man, woman, and child). The federal government ought to be able to function on that kind of money (and that is not including state and local taxes). All the agitation lately about cuts to programs stems for the fact that despite the hefty tax collection, the government has still managed to spend more, by some accounts nearly double, what they collected.

Note: I do not usually blog about politics and the government. There are far too many blogs who already do that. To me the larger issue here is about thinking and not being pursuaded by others without questioning the source. I have always sought truth. As a parent and a homeschooling parent I seek to raise thinking kids who are not easily duped or pursuaded by others, whether they are salespeople or politicians or political activists.


Maureen said...

I recently came across your blog and I’m very impressed. I love the whole concept of the “Thinking Mother”. I’m a mother of two (ages 12 and 15). I loved this post on “Thoughts about Bending Statistics and Taxes”, especially your note at the bottom. I have always stressed the importance of thinking for yourself - not only to my children but also to friends and co-workers. I think it’s especially important in this day and age when professional news people don’t seem to care about reporting an unbiased account of issues anymore.

Sandstone Coast said...

"It wasn’t hard to find the data, but I did ask the help of my husband whose career is in FINANCE."

I love that you say "By selectively pulling certain statistics a picture different than reality can be painted. When people do that there is a reason: they want to prove some point." Yes, they do.

Look, I paid taxes every quarter last year. And at the end of the year, I got money BACK. I over paid so I got a return. Sound familiar? And I do not have former IRS folks doing my taxes for me. I don't employ THOUSANDS of former government employed tax attorneys to do my taxes. And my tax return wasn't thousands upon thousands
of pages long filled with loop holes and tax havens.

So, respectfully agree to disagree. And thank you for the dialog and thank you for your blog. These conversations are what make this country great.

With the utmost respect, good day to you and peace be with you.

ChristineMM said...

Dear Sandstone Coast, You lost me on your notation of my husband's career. Are you concerend that I am biased because I said he works in the general field of finance? If so I will clarify:
1. He does not work and never has worked for the 3 corporations mentioned in the press release and on my friend's blog.
2. He has never had a job having anything to do with taxes such as being an accountant or lawyer or whoever helps corporations do whatever it is they do to get tax breaks.
3. He is not an attorney who works in tax law (so we have never profited from this country's complicated tax system).
4. He is not a politician who has made any of these laws.
5. He is not a lobbyist.

However he does read annual reports on a regular basis and can quickly find data buried in their pages.

I'm wondering, if to simplify the matter are you interested in more of a flat tax for corporations?

The article you linked to makes GE sound like the devil. So long as what they do is legal who can accuse them of doing wrong, if they are within the law? If the laws are bad why not fix them so that no one can do what they allow? If the tax code is so convoluted can you blame a company for trying to figure it out?