This is going to be an interesting summer. Clearly, we are headed toward some kind of epic budget impasse, driven by the need to raise the debt ceiling (something acknowledged by most in both parties) and the Republican desire to use that need as a lever to gain spending cuts.
Into the fray step Joe Lieberman and Tom Coburn with a plan to cut $600B in Medicare spending in the next decade, in no small part by raising the Medicare age to 67 from its current 65.
Democratic reaction was predictable. Here is Madame (Former) Speaker Pelosi: “It is unfair to ask seniors to get less in benefits and wait longer to get onto Medicare — all while Republicans back tax breaks for big oil and corporations that ship American jobs overseas,” Pelosi said. Yawn.
We have come to a lamentable place in the evolution of this country when a political party cannot bring itself to cut benefits for people who aren't even receiving them yet, or to delay benefits for people who do not qualify for them.
Every time I hear Pelosi talk about "tax breaks for big oil", I want to see statistics on the profit margins for companies operating in and near her district--you know, San Fran, Silicon Valley.....where margins DWARF those earned by the oil companies.
Wednesday, June 29, 2011
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Right you are my water-logged friend. Check out the profit margins of Apple, Cisco and Oracle.
Does this psychotic, leather faced crone actually think the super-rich are going to stand by and let her confiscate their wealth? They'll have that money offshore faster than she can count the liver spots on her shriveled ass.
"I want to see statistics on the profit margins for companies operating in and near her district--you know, San Fran, Silicon Valley.....where margins DWARF those earned by the oil companies."
There are only two "silicon valley" companies in the top twenty on Fortune magazines profitability list, HP and Google.
With a combined 2010 total of $30 billion in earnings the two largest oil companies ( EM and Chevron ) dwarf HP and Google's earnings of $14 billion. You could make the argument that Wells Fargo is a "silicon valley" company based on location, but I think that is a stretch considering it is not a tech company. Even if you include Wells Fargo, EM and Chevron are still ahead of the bay area by a slight margin.
Greater NY/NJ is home to the greatest profit margins in the world. With Goldman, Merck, JP Morgan, BMS, J&J, IBM and Phizer,they to account for nearly $50 billion is profits.
Interesting that we are angrily debating health care, while the top phamra and PC companies made more than any other segment in the top twenty.
Profitability and profit margin are two different animals altogether. Profit margin is net profit as a percentage of revenue. My point is that while the oil companies make great profit, their costs are enormous, hence my use of profit margin.
The issue isn't profitability it's crony capitalism. It's about Pelosi demonizing companies for whatever stupid bird-brained reason, so as to score cheap political points.
"Profitability and profit margin are two different animals altogether. Profit margin is net profit as a percentage of revenue. My point is that while the oil companies make great profit, their costs are enormous, hence my use of profit margin."
What "profit margin" would you like to compare? Gross margin after COGS, net margin after SE, EBITA, individual unit margins, individual unit fixed, fixed plus variable vs selling factored for sales to calculate elasticity, with one time events, before one time events?
There is a whole heck of a lot more to "profit margin" than Net as a % of Rev.
From a managerial accounting standpoint there about 100 ways to analyze "profit margin".
What relevance does margin have in a discussion of corporate taxation anyway?
Google had 33% profit of sales. But they only made $10B compared to Exxon/Mobile's $30 billion at 8%. EM invests billions in future assets, so looking at their "profit margins" is not a clear picture. They invest billions in developing future business, while reducing their tax liability. It's good corporate governance, I own their stock.
I can assure you with absolute certainty that Exxon/Mobile is not interested in margin. ( * see disclaimer)
Exxon/Mobile is interested maximizing shareholder value. Revenue is one vehicle to get there, but they would certainly reduce revenues if it meant that they could increase net profit, and or reduce tax liability while simultaneously investing for growth.
I am not a tax accountant so feel free to correct me if I'm wrong but corporate taxes are not based on profit margins as a percent of revenue.
In my current employ, I am responsible for cost analysis and forecasting of global manufacturing and logistics costs for a specialty chemical company. Once you get past direct COGS and associated applied burden, the accounting is out of my hands.
Right now we are running 4.4% below forecast on GM, as a result of stronger than expected EU sales. We are also at a 12% upside in NBT over forecast overall corporately. Again, I can assure you that by the time the accountants are done, and YE budgets and accruals are finalized; we will be right at forecast, we will have minimized tax liability, and we will have invested in our developing markets.
The point is that if we are to have a discussion about corporate taxes, profits not margins, are all that matters. You can change the tax structure however you want. Corporations will still do everything in their power to limit tax liability.
You asked for data, I provided what I felt was relevant data. I disagree with the premise that the "Silicon Valley" somehow produces more income than any other sector. I also disagree with Pilosi's vilification of the energy industry. Most corporations are no better or worse than the others. Looking at the top 100 companies in the US by profits, there is not much difference between sectors. Pharma, Finance, Energy, PC and Technology are all very well represented.
That was my point.
*( disclaimer ) I spent the first six years of my 28 years in the chemical industry working for Exxon Corp. The last four of the six I spent part of my time doing cost, elasticity, and margin analysis for Exxon. Fantastic company to work for. I would still be working there, except my division was not profitable enough and Exxon broke it up and sold it.
Ok--my blog, my last word. Sorry, but that's how it works.
"What relevance does margin have in a discussion of corporate taxation anyway?" Tons of relevance. Democrats are SCREAMING about "excess profits" that oil companies are making--because they look only at the total amount of profit. But these are HUGE companies, with INCREDIBLE expenses/costs. If Exxon books $10B in profit on $100
B in revenue--Dems think they are crooks.
Why is a company booking $100m in profit on $400m in revenue not a bigger crook? After all, a greater portion of their business is reflected in profit.
The scale of oil companies is immense--that means jobs and influence in the economy. That they may pull out 10% in profit does not strike me as profligate.
My comparison early on to Silicon Valley firms was not in the total amount of revenue--but the profit as a percentage of the "size" of the business. That's where many tech firms have the oil companies beat by a long shot--but you won't hear pelosi screaming about them...
This discussion is over.
I'd like to add my two cents worth here...
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