In performing a quick review of SEC filings of large corps with an SEC State Location Code in Iowa, I only found two Big Corps…..Principal Financial Group and Rockwell Collins…and then there’s quite a gap to the third largest.
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 both of these large Iowa Corps. These two larger Iowa Corps below had a weighted average state corporate effective income tax rate paid of only 2.65%, or a huge 78% discount to Iowa’s current state corporate income tax rate of 12.00%. Iowa has the highest state corporate income tax rate in the country, and by quite a bit, with all the others being below 10%.
….…………………….....................Current…………………......State
….…………………….......................State...Consolidated..Effective
….…………………….......................Tax……….Pretax………Tax Rate
….…………………….......................Paid……..Income……….Paid
….……………….….......................(Millions of Dollars)
..2. Principal Financial Group....390*……...9,622……...4.05%
..1. Rockwell Collins....................48…….....6,900……...0.70%
Total of both……….....................438…......16,522……...2.65%
* Principal Financial Group combined its state corporate income tax paid or currently payable and its foreign income tax paid or payable together. Thus, its state income tax paid should be even lower than the above $390 mil.
For the most recent year, the total weighted state effective corporate income tax rate for these two Iowa Corps was an even lower 1.10%.
And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loopholes Taken by these two larger Iowa 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 Iowa Corporate Income Tax Rate of 12% by the total Consolidated Pretax Income of both of these larger Iowa Corps for the last twelve years. Then, I subtracted the actual total State Corporate Income Taxes Paid by these two Corps for the same twelve years.
………………………........................IA…….....State……..Resultant
………………….........…............Corporate…Effective.......Higher
………………….........…………........Tax……..Tax Rate…...State Tax
………………..........…………..........Rate……....Paid…....Last 12 Years
………………………………………………….....................(mils of dollars)
1.. Rockwell Collins................12.00%......0.70%............780
2.. Principal Financial Group..12.00%......4.05%............765
Total of 2………………………………………….1,545 (yeah, $1.5 bil)
For the past six years, the estimated total State Corporate Income Tax Loopholes Taken by these two Iowa Corps was $1.0 bil, as compared to $1.5 bil for the past twelve years.
I think it makes much more sense to balance a State’s budget by closing some of the larger Corp State Corporate Income Tax Loopholes, rather than by significantly reducing critical state services like education and citizen protection.
Also, I think it makes sense to use some of the funds from the closing of these larger Corp State Income Tax Loopholes to provide some wise, highly stimulative, directly-targeted, job-creating tax incentives to small and medium-sized businesses.
Having a daughter who recently worked in Iowa for AmeriCorps on green initiatives, it seems to me that Iowans are a hearty bunch, very hard-working, and exceptionally self reliant. Thus, I think some wise tax investment incentives, particularly the investment tax credit, would go a long way to spurring Iowa’s economy, and markedly help job creation there.
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.
