What makes corporate profits ‘evil?’
Here’s an interesting thought question: Given two companies that both make products and both make a profit, what makes one company’s profits “evil” and the other company’s profits “cool?” In this particular example, we have ExxonMobil in one corner and Apple in the other. Gasoline vs. computers, iPads, and iPhones. Apple is making money hand over fist, yet where is the outrage. ExxonMobil is making money simply because people worldwide buy so much gasoline. And this is outrageous?
The other day, Fox News had an interesting discussion on the so-called “evil” corporate profits. However, as several commentators noted, the outrage is clearly selective. Apple can put huge mark-ups on their products, yet the public keeps buying, and there is no outrage. ExxonMobil has a much lower mark-up, the public keeps buying, and there is a ton of outrage, particularly generated by Barack Obama and his left-wing followers.
As noted in the video below, ExxonMobil paid $31 billion in taxes last year for an effective tax rate of 42%. This compares to Apple’s $8 billion in taxes paid or a 24% tax rate.
As noted in a CNN Money report from two years ago, Apple can build a $500 iPad for about $240.
Based solely on parts and manufacturing, iSuppli estimates that Apple’s mark-up ranges from 117% for the low end unit to $147% for the high. The most profitable model would appear to be the mid-range, 3G-ready 32-GB iPad, with a sticker price of $729 and an estimated manufacturing cost of $287.15.
Now, lets compare with ExxonMobil. As noted in the column by Mark Perry of DailyMarkets.com, ExxonMobil averages about 2 cents of profit for each gallon of gasoline sold. Within that same gallon of gasoline, the government (local, state, and federal taxes) take in on average 48.1 cents. So… who is really making money off of gasoline sales?
The main point is that businesses exist for one reason and one reason only: to make a profit. If someone came up with a great idea for a product or service and decided to just give it away for free, then that person does not run a business. He or she runs a charity. Thus, if we are just talking about a business, why is one’s profits “evil” while another business’s profits aren’t?
I love Apple. It’s the only computers I’ve ever owned. Couple my laptop and my desktop iMac with my iPad and iPhone, and you could easily call me an Apple junkie. In addition, anyone who knows me knows that I love to drive and race. Thus, I need gasoline. Lots of it. Do I like paying for either? No. I wish my computer were free along with my gasoline. But that’s not the real world.
Obama may blast “big oil” until the cows come home, but it doesn’t change the fact that it is a business that sells a product that people buy… just like Apple computers and iPads and iPhones. When the “occupy” movement starts camping out and protesting in front of Apple stores, then give me a call. Until then, I’m going racing!