Ed Rendell wants to tax the profits of the big oil companies with what is commonly referred to as a windfall tax. A windfall tax is implemented by the government on businesses in specific industries (usually commodities). These taxes are implemented simply because the government feels these companies are making too much money, so they need to give some of the profit back to the government, over and above what they are already paying in income or other taxes.
My analysis focuses on Exxon-Mobil. All data is taken from their 2005 Summary Annual Report. Last year they made a profit of $36 billion ($36,130,000,000). Their total revenue was $370,680,000,000. Their total taxes were $95,598,000,000. This includes excise, duties, income, and other taxes. The percentage of taxes paid for 2005 equals 25.79%. In other words, on their revenue of $370 billion they paid about 26% of it in taxes.
It is interesting to note that in 2003 they paid about 29% of their revenue in taxes. In 2004, they paid about 28% of their revenue in taxes. The tax rates are similar to other business and industries. The businesses would probably argue they are too high, whiles government would say they are not high enough. In reality, they are probably reasonable amounts.
While a PA windfall tax probably would not significantly hurt the financials of the oil companies, it will not help the people of PA. The oil companies will simply charge more for their oil. The local gas stations will simply pass that cost on to the consumers. The only winner would be the government who would get the tax. Thereby enabling the government to grow bigger and bigger, wasting more of the working classes hard earned money.
Remember the Johnstown Flood of 1936? Of course not! Most of us weren’t born, but we are still paying for it through an alcohol tax. My point is, once taxes are created, people often forget about them and the government uses that money for its own interests, not for the reason the tax was established in the first place.
The government of Pennsylvania doesn’t need any more money, they just need better management of the money they have! The only way the people can get this is to vote for fiscally responsible representatives. May is the next voting opportunity for PA residents. Don’t miss it! There will be at least one topic on the ballot that WILL directly affect you! See my ACT 1 discussion for more information.