Actually, Let’s Do Talk About Windfall Profits

Elizabeth Warren continues her fixation with Big Oil. After examining the status of Big Oil profits, a completely contradictory set of conclusions emerged.

Let’s just say that Elizabeth Warren is about as clueless about Windfall Profits as she is her Native American Heritage.

Net Income

I sourced most of my information from Macrotrends.net, into a database format, then started visualizing.

Over the past seven years, Big Oil collectively made $175 billion in net income. Meanwhile, Apple raked in $414 billion all by itself and Google realized $229 billion. Individually, BP reported a $2 billion LOSS over the period. Big Communications also netted $30-46 billion more than the largest of the Big Oil companies, ExxonMobil. Even Pfizer made more than Exxon.

Income Taxes Paid

It would then stand to reason that Big Tech, Big Pharma, and Big Comms should be paying their fair share. However, that’s not anywhere close to reality.

From 2017-2021, Big Oil collectively paid $75 billion in taxes to the federal government on $147 billion in reported net income for an effective tax rate of 51%. During the same period, AT&T reported net income of $84 billion, Pfizer $80 billion, and SalesForce $6 billion - yet not one of them paid taxes! In fact, they reported tax revenue of $6 billion, $6 billion, and $1 billion respectively. Verizon paid $9 billion in taxes on $105 billion in net income, effectively taxed at 9% over the past five years.

Property Plant & Equipment

David Ramsden-Wood deserves a mention for turning me onto this metric. If you don’t run your own company or understand PPE, it is a metric reporting how much the company has invested in current, non-depreciated tangible assets.

As you’ll notice, Big Oil companies are atop this chart with hundreds of billions of dollars worth of PPE on their books in the most recent full year of fiscal reporting, 2020. This chart is nearly inverse to that of Net Income reported by the various industries with Big Oil at the top and Big Tech at the bottom.

Effective Tax Rate

Now let’s tie it all together and put a bow on the previous three sections. How much do the various industries actually pay as a percentage of their net income?

In the fiscal year 2021, BP led the way at a nearly 90% effective tax rate. Remember, this is the company that has lost a net $6 billion over the last seven years combined. All the Big Oil companies paid a higher effective tax rate than that of any other industry, with Big Pharma’s Pfizer paying in the single-digits. The picture is worse when you examine the past half-decade of data, too.

Big Oil has averaged nearly 40% effective tax rate over the past five years! Meanwhile, AT&T and Pfizer actually report negative effective tax rates on their $84 billion and $80 billion in reported net income, respectively. Tesla averaged in the single-digits while Verizon and Nike paid slightly more than a 12% effective tax rate on $105 billion and $15 billion in net income, respectively.

Who are we supposed to be taxing again? The companies that already pay the highest effective tax rate in the United States, one of which hasn’t made a dollar of net income in the last seven years?

Return on PPE

The effective tax rate is just one measure of how punitively Big Oil has been punished in this country. Sadly, return on PPE is even more egregious.

As our research found, Big Tech, Big Pharma, and Big Comms have realized TRIPLE-DIGIT returns, on average, for more than a decade! Stated differently, they are netting more every single year than they have invested in property, plant, and equipment. As the PPE section of this article already illustrated, Big Oil has invested far more than these other industries. Big Oil has averaged just 8% average return on PPE over the same timeframe.

The story holds true in the most recent year of reporting, too.

In Conclusion

If Elizabeth Warren and her followers want to place a tax on any industry, it certainly shouldn’t be looking to the oil and gas industry!