Beldar notes that ExxonMobil in the second quarter of 2008 paid three times as much in taxes as its after-tax profits.
You know, if there is one thing – one thing – that will encourage the development of alternative fuels, it’s the same thing that led to the mad scramble of capital into internet and telecom in the 1990s: the belief by investors that whoever got ahead in the race to market would reap fabulous profits.
The best possible way to blunt that belief is to slap additional taxes on today’s energy producers for being too profitable. Especially when they aren’t even all that profitable on a returns-on-investment basis; those humongous profit figures are just due to massive market share:
Exxon’s profit margin stood at 10% for 2007, which is hardly out of line with the oil and gas industry average of 8.3%, or the 8.9% for U.S. manufacturing (excluding the sputtering auto makers).
If that’s what constitutes windfall profits, most of corporate America would qualify. Take aerospace or machinery — both 8.2% in 2007. Chemicals had an average margin of 12.7%. Computers: 13.7%. Electronics and appliances: 14.5%. Pharmaceuticals (18.4%) and beverages and tobacco (19.1%) round out the Census Bureau’s industry rankings.
(That WSJ editorial also notes that Google had a 25.3% profit margin).
Anyway, I’ll probably get into this further when I have time for a longer post on energy, but I laid out the case in 2006 for some ideas on how government can do more to strengthen the confidence of investors that the winners of any alternate-fuel gold rush actually get to enjoy the spoils of their investment and labor.