In performing a quick review of SEC filings of large corps with an SEC State Location Code in Massachusetts, I found 12 Corps with healthy State Corporate Income Tax Loopholes Taken, at least the way I measure them, 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 12 larger Massachusetts Corps. These 12 larger Massachusetts Corps below had a weighted average state corporate effective income tax rate paid of a modest 2.92%, or a 67% discount to Massachusetts’ current state corporate income tax rate of 8.88%.
….……………………...............Current…………………......State
….…………………….................State...Consolidated..Effective
….…………………….................Tax……….Pretax………Tax Rate
….…………………….................Paid……..Income……….Paid
….……………….….................(Millions of Dollars)
.12. TJX…..............................684……..13,211……...5.18%
.11. State Street Corp...............97…....17,793……...4.60%
.10. Boston Scientific.............225.........5,141*.......4.38%
..9. Genzyme..........................161.........4,604*.......3.50%
..8. Staples………………….........315........10,643.….....2.96%
..7. Biogen.............................138……....5,003*…….2.76%
..6. Thermo Fisher Scientific..116……....4,773……...2.43%
..5. Covidien plc**(2004-09).228.........9,561.........2.38%
..4. Gillette(1998-2004)........175........12,298.........1.42%
..3. EMC.................................165……..13,575……....1.22%
..2. Waters…………....................28……....2,953……....0.95%
..1. Analog Devices..................28……....5,910……....0.47%
Total all 12………..................3,081…...105,465……...2.92%
* Exclusive of Acquired In-Process R&D and Goodwill Impairment
**Covidien plc is an Ireland Corp now, was previously a Bermuda Corp, and has a Boston, MA CPA firm
For the most recent 2009 year, the weighted state corporate effective income tax rate paid by these 12 larger Massachusetts Corps was an even lower 2.39%.
The huge Raytheon was not included above, even though it generated a massive $16.5 bil of pretax income in the past twelve years. Raytheon did not disclose the amounts of state income tax it paid. It passes on these costs to the US Government in its federal contracts.
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 12 larger Massachusetts 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 Massachusetts Corporate Income Tax Rate of 8.88% by the total Consolidated Pretax Income of each larger Massachusetts Corp for the last twelve years. Then, I subtracted the actual total State Corporate Income Taxes Paid by each of these Corps for the same twelve years.
……………………….....................MA…….....State……..Resultant
………………….........….........Corporate…Effective.......Higher
………………….........………….....Tax……..Tax Rate…...State Tax
………………..........………….......Rate……....Paid…....Last 12 Years
…………………………………………………...................(Millions of dollars)
1.. EMC………….......…………....8.88%.......1.22%...........1,030
2.. Gillette............................8.88%.......1.42%.............907
3.. State Street Corp..............8.88%.......4.60%............748
4.. Staples……………...............8.88%.......2.96%.............622
5.. Covidien plc....................8.88%.......2.38%..............613
6.. Analog Devices………….....8.88%.......0.47%.............492
7.. TJX……………....................8.88%.......5.18%.............479
8.. Thermo Fisher Scientific..8.88%.......2.43%.............304
9.. Biogen.............................8.88%.......2.76%.............302
10. Genzyme.........................8.88%.......3.50%.............244
11. Waters......…………………...8.88%........0.95%.............232
12. Boston Scientific…..........8.88%........4.38%.............227
Total all 12…………………………………………6,200 (yeah, $6.2 bil)
For the past six years, the estimated total State Corporate Income Tax Loopholes Taken was $3.9 bil, as compared to $6.2 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.
When you think about it, Massachusetts and California’s Silicon Valley, have all of this incredible innovative expertise that is presently dormant, for the most part. It needs to be unleashed in order to make the US more competitive on the world scene. And it also needs to be unleashed to bring the country out of its horrible jobless recovery. Principally the US government, but also the State Governments, need to create the strong stimulative environment to permit these two key areas of the country to thrive. Clearly, smart tax incentives are needed here, primarily targeted at research and technology, and particularly at computer software, computer infrastructure, green energy and medical science.
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, including computer software investments, they make.....they could either take 100% first year expensing, or they could instead choose a refundable investment tax credit.
And since 40% of the graduate students in the country’s very best research universities are foreign students, then the last thing we should be doing is kicking these foreign students out of the country after they get their graduate degrees. They are needed here to grow the US economy. They are prime job creators.
Also, from a fairness standpoint, the above effective Massachusetts Corporate State Income Tax Rates Paid by these 12 larger Corps in the past year of 2.39% is extremely low in comparison with Massachusetts' current individual income tax rate of 5.30%.
