02-05-2003 22:08									#151
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quote: Originally posted by Kidicious Look at the definition the Mad Monk provided. You have a negative connotation about subsidies which is preventing you from understanding the meaning of the word.

If I buy a newspaper am I subsidizing the paper? No. However, if I donate money to NPR. I am subsidizing them.

I don't care about Monk's definition. I care about the dictionary.

BTW: I didn't see anything "negative". That has nothing to do with the meaning of the word. This is purely a semantic discussion. And you are the one in the wrong.

	03-05-2003 00:51									#152
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quote: Originally posted by GP If I buy a newspaper am I subsidizing the paper? No. However, if I donate money to NPR. I am subsidizing them. I don't care about Monk's definition. I care about the dictionary. BTW: I didn't see anything "negative". That has nothing to do with the meaning of the word. This is purely a semantic discussion. And you are the one in the wrong.

It's no big deal. Some people use the word one way and others use it another way. All government expenditures are benefits to the recipients though, even it there is an exchange at market price.

	03-05-2003 01:11									#153
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It doesn't matter what the government expenditure is, if it benefits society equal to its cost then it's justified. Even if the expenditure involves a purchase for the market price it may not be justified if the benefit to society is not equal to the cost. That's why it really doesn't make any difference what term you use.

	03-05-2003 01:29									#154
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quote: Originally posted by Kidicious A payment by government, perhaps implicit, to the private sector in return for some activity that it wants to reward, encourage, or assist. Here's the best definition I could find. I wish I had my old Public Finance text book. True, the government can encourage the production of a good or service by paying market price.

quote: Originally posted by Kidicious The way I understand the meaning of the term is an expenditure by the government to either alter the production of goods and services or the distribution of goods and services in the economy. Since all government expenditures do that, government expeditures and subsidies are one in the same.

There is a logical jump in there. In the definition you yourself provided, says that a subsidy is paid by a government when it wants to encourage a given activity. The fact that all government expenditures encourage certain activities does not necessarily imply that it wants to encourage those activities.

Creation and maintenance of the interstate highway system encourages smuggling of illegal goods, because it makes transport easier; would you say that implies that the government wants to encourage the smuggling of illegal goods?

In any case, it is not the definition that is being used in this thread.

	03-05-2003 01:40									#155
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since we are just arguing semantics, and no one should be anti-semantic.

I do think that we all agree that for the US government to give Exxon a wad of cash for nothing would be a henious abrogation of it's obligation to the citizens of this country. And I would be of the position that this sort of outright graft is both not pervasive and not of a meaningful magnitude.



This dictionary listing makes Subsidy a gift, not the purchase of a necessary product.

subsidy

\Sub"si*dy\, n.; pl. Subsidies. [L. subsidium the troops stationed in reserve in the third line of battlem reserve, support, help, fr. subsidere to sit down, lie in wait: cf. F. subside. See Subside.] 1. Support; aid; co["o]peration; esp., extraordinary aid in money rendered to the sovereign or to a friendly power.

They advised the king to send speedy aids, and with much alacrity granted a great rate of subsidy. --Bacon.

Note: Subsidies were taxes, not immediately on on property, but on persons in respect of their reputed estates, after the nominal rate of 4s. the pound for lands, and 2s. 8d. for goods. --Blackstone.

2. Specifically: A sum of money paid by one sovereign or nation to another to purchase the co["o]peration or the neutrality of such sovereign or nation in war.

3. A grant from the government, from a municipal corporation, or the like, to a private person or company to assist the establishment or support of an enterprise deemed advantageous to the public; a subvention; as, a subsidy to the owners of a line of ocean steamships.

Syn: Tribute; grant.

Usage: Subsidy, Tribute. A subsidy is voluntary; a tribute is exacted.


Source: Webster's Revised Unabridged Dictionary, © 1996, 1998 MICRA, Inc.

	03-05-2003 01:48									#156
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quote: Originally posted by The Mad Monk There is a logical jump in there. In the definition you yourself provided, says that a subsidy is paid by a government when it wants to encourage a given activity. The fact that all government expenditures encourage certain activities does not necessarily imply that it wants to encourage those activities.

The only other reason the government pays the subsidies is coruption. Obviously, a subsidy payed by coruption is a bad subsidy.

quote: Originally posted by The Mad Monk Creation and maintenance of the interstate highway system encourages smuggling of illegal goods, because it makes transport easier; would you say that implies that the government wants to encourage the smuggling of illegal goods?

Drug smuggling is a cost that is taken account when the decision is made by the political system to make the subsidy, since crime is not something the voters want to subsidies. But hopefully the overall benefit (use of the highways) of the subsidy will be more than the overall cost (crime+cost). If so then then the system works.

quote: Originally posted by The Mad Monk In any case, it is not the definition that is being used in this thread.

In reference to the question that was presented as to whether purchasing oil from Exxon is a subsidy?-Yes

	03-05-2003 01:56									#157
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quote: Originally posted by Sten Sture A grant from the government, from a municipal corporation, or the like, to a private person or company to assist the establishment or support of an enterprise deemed advantageous to the public; a subvention; as, a subsidy to the owners of a line of ocean steamships.

All government expenditures are grants, because the beneficiaries are different from the providers.

	03-05-2003 02:01									#158
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Subsidy. A payment made by the government (or possibly by private individuals) which forms a wedge between the price consumers pay and the costs incurred by producers, such that the price is less than marginal cost.

Dictionary of Modern Economics, p. 422.

Purchasing goods or services at market rates is not a subsidy. Case closed.

	03-05-2003 02:12									#159
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Well, shoot. Now what's there to talk about?

	03-05-2003 02:24									#160
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quote: Originally posted by Adam Smith Subsidy. A payment made by the government (or possibly by private individuals) which forms a wedge between the price consumers pay and the costs incurred by producers, such that the price is less than marginal cost. Dictionary of Modern Economics, p. 422. Purchasing goods or services at market rates is not a subsidy. Case closed.

Ooh, ooh, ooh! (Morton Downey, Jr. audience sounds)

	03-05-2003 02:24									#161
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quote: Originally posted by DanS Well, shoot. Now what's there to talk about?

How do we crack the OPEC cartel? I want 8 dollar a barrel oil.

	03-05-2003 02:37									#162
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$8? That's easy - make OPEC think it is going to $45!

	03-05-2003 02:49									#163
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quote: Originally posted by Adam Smith Subsidy. A payment made by the government (or possibly by private individuals) which forms a wedge between the price consumers pay and the costs incurred by producers, such that the price is less than marginal cost. Dictionary of Modern Economics, p. 422. Purchasing goods or services at market rates is not a subsidy. Case closed.

So income transfers aren't subsidies?

	03-05-2003 02:50									#164
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quote: Originally posted by Sten Sture $8? That's easy - make OPEC think it is going to $45!

I think the issue is more to fragment their ability to act cooperatively.

	03-05-2003 03:08									#165
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Lets play a game.

Match the XOM cost with it's catagory - from 2002 10-K SEC report. Some catagories were excluded...

All figures in Millions US$

1) Operating expenses
2) Selling, general and administrative expenses
3) Depreciation and depletion
4) Interest expense
5) Excise taxes
6) Other taxes and duties
7) Income taxes
8) Operating income


A) 8,310
B) 22,040
C) 33,572
D) 398
E) 6,499
F) 17,831
G) 11,011
H) 12,356


No fair looking up the numbers.

	04-05-2003 01:06									#166
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quote: Originally posted by Sten Sture Lets play a game. Match the XOM cost with it's catagory - from 2002 10-K SEC report. Some catagories were excluded... All figures in Millions US$ 1) Operating expenses 2) Selling, general and administrative expenses 3) Depreciation and depletion 4) Interest expense 5) Excise taxes 6) Other taxes and duties 7) Income taxes 8) Operating income A) 8,310 B) 22,040 C) 33,572 D) 398 E) 6,499 F) 17,831 G) 11,011 H) 12,356 No fair looking up the numbers.

Just to make fertility-monster feel better, I will play. Won't look at my books either. Which means I will likely screw up the basic accounting definitions.

Thinking:




1. Opex (1) = COGS (not shown) + SGA(2) + Depreciation (3). Doesn't include interest tax or income or interest. Not sure about excise taxes.

2. income taxes should be less than income (about 33%)

So....

1) Operating expenses
C
2) Selling, general and administrative expenses
A
3) Depreciation and depletion
G
4) Interest expense
B
5) Excise taxes
B
6) Other taxes and duties
D
7) Income taxes
E
8) Operating income
F

I'm not too satisfied with my answers, but at least I started to try...

	04-05-2003 06:12									#167
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Thanks for playing! (I think I left the answers at the office by the by... so I could make a mistake here.)


#7 = E Income Taxes $6,499MM

These numbers are from the Income Statement detail, so the formula is Revenues - COGS - (#1 thru #7) = #8

	04-05-2003 08:56									#168
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I thought that would be Net Income which is different from Operating Income.

	04-05-2003 23:26									#169
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I think it was titled Net Operating Income... so you are correct. I pulled Op Inc before tax so you couldn't just do the math.

#4 = D Interest Expense = $398MM


But the real reason I posted this stuff is because of the tax lines...

#5 = B Excise Taxes = $22,040MM


That should give you a hint at what Other taxes and duties were...

	05-05-2003 02:21									#170
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quote: Originally posted by Sten Sture Thanks for playing! (I think I left the answers at the office by the by... so I could make a mistake here.) #7 = E Income Taxes $6,499MM These numbers are from the Income Statement detail, so the formula is Revenues - COGS - (#1 thru #7) = #8

I thought Operating Expenses were COGS + SGA + Depreciation. You have Opex as 1. And then have SGA as 2 and Depreciation as 3. So if I use your formula above, I'm subtracting SGA and Depreciation twice.

	05-05-2003 07:11									#171
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Your formula is correct, but...

They broke out a seperate Op Ex line in total Operating Expenses along with COGS and SG&A, not sure why. I'll check the detail on their sub-Op Ex, but it read like they were using it as non-Admin, non-COGS. Maybe transport and/or maintenance and refurbishment. I thought it was a little unconventional, but I am not that familiar with Integrated Oils.

FWIW Revenues were ~200B and COGS were ~90B.

	05-05-2003 07:35									#172
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(working on this)

This is why it is always hard to deal with this stuff in the real world. Wish I really knew how to do this.

Rev: 200B
COGS: 90B
SGA:
(sub) Op EX:
Depr:
Interest: .3B
excise taxes: 22B
other taxes:
EBT*:
income taxes: 6.5B

Net income:


EBT calculated from income tax is ~ (1/.35) times 6.5B ~ 19.5B. Assume 35% corp tax rate.

So net income is 19.6-6.5 = 13B. Closest to that is "H".

So net income is 12.4B

Last edited by TCO on 05-05-2003 at 07:44

	05-05-2003 07:47									#173
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I guess for the remaining, I would assume that SGA>Depr> transportation>other taxes>.

No real good reason. but that's I guess what the oil industry would look like. Wouldn't be surprised if depr>SGA also.

	05-05-2003 08:48									#174
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The reason why I posted this as a question was because it was very different that what I would have guessed...

#3 = A Depreciation and Depletion = $8,310MM

But get this...

The biggest line item was C) $33,572MM and just to make Sava mad, that was #6 Other Taxes and Duties.

#1 = F Operational Expenses = $17,831MM

#2 = H SG&A = $12,356MM

#8 = G Net Profits after Tax $11,011MM


So the company made $11B, and paid $62B in direct taxes. The $30B in Op Ex and SG&A is mostly wages, so you can throw in a good $8-$10B in income and payroll taxes for those funds. A couple billion of the profit is paid out as dividends, taxed at ~30%... I'd say the govy gets a little bit of the revenues of this company.

Just goes to show you that the oil business really is a crap business, and that most of the people that rip on big oil don't understand that the reason the govt loves oil is because of the huge taxes they pay.

	05-05-2003 11:49									#175
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quote: Originally posted by Sten Sture Just goes to show you that the oil business really is a crap business, and that most of the people that rip on big oil don't understand that the reason the govt loves oil is because of the huge taxes they pay.

It works both ways though. They pay high taxes, but they get a lot of benefits. So even though their profits look a little skimpy this year I wouldn't say it were too bad of a business. I wouldn't mind getting into it

	05-05-2003 18:03									#176
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Thanks Sten.

	05-05-2003 18:25									#177
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quote: So the company made $11B, and paid $62B in direct taxes. The $30B in Op Ex and SG&A is mostly wages, so you can throw in a good $8-$10B in income and payroll taxes for those funds. A couple billion of the profit is paid out as dividends, taxed at ~30%... I'd say the govy gets a little bit of the revenues of this company.

Wow!!!

Thanks, Sten! That train of thought alone is worth saving this thread.

Does the $62b include the dividend and payroll taxes?

	05-05-2003 23:07									#178
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quote: Originally posted by JohnT Does the $62b include the dividend and payroll taxes?

No it doesn't. I looked it up and the company paid $6.7B in dividends out of net profit. For those of you counting along at home that means that about 2¢ out of every dollar stays at the company. Taxes on those dividends are difficult to track, because most of the shares are held by custodian banks for the benefit of various mutual funds, retirement plans and individuals.

The retirement funds won't pay taxes on those dividends until the retirees take the money out as regular income, so we can ignore that - even though we know past dividends are being paid out to retirees now, so the figure is greater than zero. Mutual funds pass thru the dividends to fund owners who are taxed at their personal tax rate. My best guess is that around 1/2 of the shares are held indirectly by individuals. At a 30% tax rate, the additional tax would be around-about $1 billion.

I 'guesstimated' payroll taxes and indirect income taxes too high before at $8-10 billion. It is probably more likely around $5B.

So XOM and their employees's total tax bill to the IRS is probably around US$68 Billion.

By the by, the top 17 executives at XOM make (salaries and bonuses) around $30 Million a year in total. This amounts to 0.00015 on every dollar of sales. The CEO does about $5.5MM of that. Eliminating top executive compensation would allow the company to pay each employee a couple of hundred dollars a year.

I am not arguing that XOM's management makes too much or too little, or that the company is struggling to survive. However, it would behoove reporters, who publish stories about rich companies and their fat cat execs to put the dollar figures into context instead of sensationalizing the stories.

	05-05-2003 23:37									#179
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I don't think this reporter was doing that. Sava was just using his article as a source for the data.

	06-05-2003 00:11									#180
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The reason why I posted this as a question was because it was very different that what I would have guessed...

#3 = A Depreciation and Depletion = $8,310MM

You were wondering where the big, fat tax break was for depletion, no?