In performing a quick review of SEC filings of large corps with an SEC State Location Code in Connecticut, I found 9 corps with State Corporate Income Tax Loopholes Taken, at least the way I measure them, of at least $200 mil each, in the last dozen years.
Below here is the effective state corporate income tax rates paid, which are computed by dividing the current state corporate income tax paid by the consolidated pretax income, both in total for the past twelve years for each of these 9 Big Connecticut Corps. These 9 Big Connecticut Corps below had a weighted average state corporate effective income tax rate paid of an incredibly low 1.40%, or a massive 81% discount to Connecticut’s current state corporate income tax rate of 7.50%.
….……………………..................Current…………………......State
….……………………....................State...Consolidated..Effective
….……………………....................Tax……….Pretax………Tax Rate
….……………………....................Paid……..Income……….Paid
….……………….…....................(Millions of Dollars)
..9. Pitney Bowes....................411............8,793.........4.67%
..8. UST..................................214............6,367.........3.36%
..7. Aetna…………………….........462…….....16,827……..2.75%
..6. Xerox……………..................126……......7,590………1.66%
..5. GE..................................3,156........235,906.….....1.34%
..4. United Technologies.........487……....48,572……...1.00%
..3. Praxair...............................94…….....11,952…......0.79%
..2. Interactive Brokers Grp……..8….........5,550……...0.14%
..1. Hartford Financial Services…0….......12,528……...0.00%
Total all 9………....................4,958….....354,085……...1.40%
For the most recent six years, the weighted state corporate effective income tax rate paid by these 9 Big Connecticut Corps was an even lower 1.11%.
For the seven larger States I have studied so far, Connecticut clearly gets the booby prize for having by far both the lowest effective state corporate income tax rate paid by its largest Corps for the last twelve years, and also the highest discount from the current State Corporate Income Tax Rate. The State of Connecticut has clearly underperformed the other States in this key metric, which bears so importantly on the critical fiscal status of each State.
…………………...State Tax Rate……...State
………………………….Paid By……...Corporate
……………………………State………...Income…….Percentage
…………………………Big Corps…....Tax Rate……..Discount
Maryland…………….4.44%.............8.25%...........46%
Massachusetts……..3.16%.............8.80%...........64%
Minnesota……………2.76%.............9.80%...........72%
California……………..2.39%.............8.84%...........73%
Illinois………………...1.97%.............7.30%...........73%
Pennsylvania………..2.25%.............9.99%...........77%
Connecticut………....1.40%.............7.50%………...81%
And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loopholes Taken by each of these 9 Big Connecticut Corps for the past twelve years. In estimating what I think is a fair measurement of State Corporate Income Tax Loopholes Taken, for ease of computation, I started by multiplying the current Connecticut Corporate Income Tax Rate of 7.50% by the total Consolidated Pretax Income of each Big Connecticut Corp for the last twelve years. Then, I subtracted the actual total State and Local Corporate Income Taxes Paid by each of these Corps for the same twelve years.
………………………........................CT…….....State……..Resultant
………………….........…............Corporate…Effective.......Higher
………………….........…………........Tax……..Tax Rate…...State Tax
………………..........…………..........Rate……....Paid…....Last 12 Years
…………………………………………………….................(Millions of dollars)
1.. GE………..............................7.50%.......1.34%.........14,537
2.. United Technologies ..........7.50%.......1.00%..........3,156
3.. Hartford Financial Services.7.50%......0.00%.............940
4.. Praxair….............................7.50%......0.79%.............802
5.. Aetna…...............................7.50%......2.75%..............800
6.. Xerox……………………............7.50%......1.66%..............443
7.. Interactive Brokers Group…7.50%......0.14%.............408
8.. UST.....................................7.50%.......3.36%.............264
9.. Pitney Bowes.......................7.50%.......4.67%.............248
Total all 9………………………………………….21,598 (yeah, $21.6 bil)
For the most recent six years, the estimated total State Corporate Income Tax Loopholes Taken by these 9 Connecticut Big Corps was $13.2 bil, as compared to $21.6 bil for the past twelve years.
Also, from a fairness standpoint, the above effective Connecticut Corporate State Income Tax Rates Paid by these 9 Big Corps in the past twelve years of only 1.40% is substantially below the Connecticut current individual income tax rate, which is 5.00% for income above $10,000 and up to $500,000.
It looks to me that the State of Connecticut has the opportunity to significantly improve its financial coffers by closing some of these Big Corp State Income Tax Loopholes.
For maximum positive effect to the US economy and to US job creation, I think the US government should let businesses have a choice on the capital expenditures they make.....they could either take 100% first year expensing, or they could instead choose a refundable investment tax credit.
