Hershey released their third quarter results yesterday and their profits nearly doubled! This is outrageous! How is this fair when everyone is struggling so hard to get by? Many of us can not even afford a candy bar! Congress has been so hot on the oil companies, perhaps they should look at the chocolate industry to hit with a windfall profits tax!
Of course, I am being facicious. The whole idea of a windfall profits tax is ludicrious. There was an excellent article, “What Is a ‘Windfall’ Profit?”, in the Wall Street Journal.
From the article:
The “windfall profits” tax is back, with Barack Obama stumping again to
apply it to a handful of big oil companies. Which raises a few questions: What
is a “windfall” profit anyway? How does it differ from your everyday, run of the
mill profit? Is it some absolute number, a matter of return on equity or sales
— or does it merely depend on who earns it?
Enquiring entrepreneurs want to know. Unfortunately, Mr. Obama’s
“emergency” plan, announced on Friday, doesn’t offer any clarity. To pay for
“stimulus” checks of $1,000 for families and $500 for individuals, the Senator
says government would take “a reasonable share” of oil company profits.
I have to question what is considered reasonable? Isn’t Exxon already hit hard enough with taxes? The article points out that between 2003 and 2007, Exxon paid $64.7 billion in U.S. taxes – far exceeding its after tax income of $19.0 billion. Put another way, they paid the U.S. government an amount in taxes that equaled 77% of their pre-tax U.S. Income. You can read more on how little Exxon actually gets to keep from its earning from my earlier post, “Oil Companies are Not Evil!”
The way the windfall profits tax would generally work (at least the bill that was voted on earlier this year), there would be a 25% windfall tax on a U.S. -based oil company whose profits grew by more than 10% in a single year and they failed to invest enough of it back into renewable energy. By this definition, you have windfall profits when you grow too fast – although 10% seems like a fairly small growth rate compared to many industries. Why is the oil industry singled out? I am sure there are many proponents to this tax that does not want to limit it to oil. Oil is just an easy target because people are upset about the price at the pump and they are looking for someone to blame – and punish.
Where will it stop? First the oil companies will get hit with the tax, then perhaps other public companies. How long will it be before it hits small business? These things always start with baby steps. Is the baby is starting to crawl our way?
Donna Bordeaux, CPA with Calculated Moves
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.