In performing a quick review of SEC filings of large corps with an SEC State Location Code in Delaware, I only found one Big Corp…Dupont.
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 Dupont. Dupont’s weighted average state corporate effective income tax rate paid of only 0.28% is an incredible 97% discount to Delaware’s current state corporate income tax rate of 8.70%.
….……………………...............Current…………………......State
….…………………….................State...Consolidated..Effective
….…………………….................Tax……….Pretax………Tax Rate
….…………………….................Paid……..Income……….Paid
….……………….….................(Millions of Dollars)
..1. DuPont...........................93…….....33,513……...0.28%
In the most recent year, Dupont’s state effective corporate income tax rate was a negative 0.41%.
And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loophole Taken by Dupont for the past twelve years, at least the way I measure it. 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 Delaware Corporate Income Tax Rate of 8.70% by the total Consolidated Pretax Income of Dupont for the last twelve years. Then, I subtracted the actual total State Corporate Income Taxes Paid by Dupont for the same twelve years.
……………………….....................DE…….....State……..Resultant
………………….........….........Corporate…Effective.......Higher
………………….........………….....Tax……..Tax Rate…...State Tax
………………..........………….......Rate……....Paid…....Last 12 Years
…………………………………………………...................(Millions of dollars)
1.. Dupont...…………............8.70%.......0.28%............2,823
I think it makes much more sense to balance a State’s budget by closing some of the Big Corp State Corporate Income Tax Loopholes, rather than by significantly reducing critical state services like education and citizen protection.
In addition, I think it makes sense to use some of the funds from the closing of these Big Corp State Income Tax Loopholes to provide some wise, highly stimulative, directly-targeted, job-creating tax incentives to small and medium-sized businesses.
Also, from a fairness standpoint, the above effective Corporate State Income Tax Rate Paid by Dupont in the past twelve years of only 0.28% is substantially below the Delaware current individual income tax rate, which is 5.55% for income from $25,000 to $60,000, and 6.95% for income above $60,000.
Lastly, since this post relates to the State of Delaware, I should point out that one of the numerous state corporate income tax loopholes that many Big Corps take advantage of to avoid state income tax is what is called the “Delaware Holding Company Tax Loophole”. A Big Corp parent company establishes a wholly-owned subsidiary in Delaware, which is really just a shell company. The Big Corp parent then transfers trademarks and/or other assets to this Delaware Holding Company, and the parent pays fees for the use of the assets transferred….a very slick state corporate income tax avoidance transaction, that I think really has no economic substance other than to avoid state corporate income taxes.
