In performing a quick review of SEC filings of large corps with an SEC State Location Code in Michigan, I found six corps with healthy State Corporate Income Tax Loopholes Taken, at least the way I measure them, in the last dozen years.
General Motors was excluded from this below list because of its huge pretax losses, which totaled $58.5 bil for the four years from 2005 to 2008. GMAC was also excluded, even though it registered total pretax profits of $24.8 bil in the years from 1998 to 2005, when it was 100% owned by GM. However, all of these GMAC profits were already included in GM’s total earnings. Since GM sold 51% of GMAC in November 2006, GMAC has generated pretty hefty aggregate losses.
Ford was included in the below list, even though it generated $33.4 bil of pretax losses in the three years from 2006 to 2008. Ford more than made up for those losses, when in the three years from 1998 to 2000 (ahh, those Clinton Economic years), Ford registered pretax profits totaling $42.4 bil. In those same three Clinton years, even General Motors generated pretax profits, which totalled $21.1 bil.
The many publicly-held auto suppliers in Michigan were also excluded from the list. Nearly all of them generated substantial losses. More on that later.
DTE Energy generated Total Pretax Income of $7,089 mil for the past 12 years. It was excluded from the below list of Michigan Big Corps since it did not disclose its State Corporate Income Tax Paid in all 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 Big Michigan Corps. These six Big Michigan Corps below had a weighted average state corporate effective income tax rate paid of a very modest 2.15%. This is substantially below Michigan’s current state corporate income tax rate that starts at 4.95% of income, but then added to this 4.95% tax rate is the lesser of $6 mil or of another 22% of 4.95% of income, or an additional 1.09%.
….……………………...............Current…………………..........State
….…………………….................State.....Consolidated....Effective
….…………………….................Tax………...Pretax………..Tax Rate
….…………………….................Paid……....Income………...Paid
….……………….…...................(Millions of Dollars)
..6. Masco...........................366……......9,593…….......3.82%
..5. Stryker….......................265............9,333.…........2.84%
..4. Kellogg……………….........338…….....14,419…….......2.34%
..3. Whirlpool……................116.............6,071….........1.91%
..2. Ford…...........................210……....12,078…..........1.74%
..1. Dow Chemical...............422…….....28,200…….......1.50%
Total all 6………...............1,717…........79,694…….......2.15%
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.
But also, I think it makes sense to use some of the funds from the closing of these Michigan Big Corp State Income Tax Loopholes to provide some wise, highly stimulative, job-creating tax incentives to small and medium-sized businesses, and particularly ones targeted at the severely depressed auto supplier industry.
After reviewing tons of the SEC filings of Michigan auto suppliers, with substantial losses after losses, years on end, it is pretty clear to me why there was such widespread dissatisfaction with both the Federal and State Governments, as shown in the recent November 2010 election.
What the Obama Administration did to prop up General Motors was absolutely necessary, or else the country’s unemployment rates would have increased substantially, and particularly so in states with a heavy automobile and automobile supplier industry like Michigan. And for many US citizens to now be so visibly upset that the recent General Motors IPO was successful is frankly unpatriotic.
But the problem in the US auto industry is much too severe to be solved by a somewhat rejuvenated General Motors, which was revived from the ashes. What I think is needed are substantial smartly-designed business tax incentives to help rescue all of these auto suppliers, who are now on life support. Their losses have just been so substantial, and for so many years, while the Government just ignored this massive problem.
I would prefer seeing something like the investment tax credit, but with a bonus percentage in very hard hit areas of the country like Detroit, and some other parts of Michigan. And other places hit hard by offshoring of manufacturing jobs should also get the benefit of a bonus investment tax credit. And places like New Orleans, ravished by both Katrina and the BP oil spill, should get this bonus investment tax credit, as well.
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, with a bonus percentage for capital expenditures made by the very troubled Rust Belt manufacturers, like those in Michigan. I wouldn't give the bonus investment tax credit percentage to huge companies.
A healthy business research tax credit program is also needed for Michigan. There are all of these very bright, innovative people connected with the second best public research university in the world, the University of Michigan….second only to Cal-Berkeley…..and somehow this Wolverine think tank should be better utilized to foster Michigan’s economic recovery. There should be some strong government incentives to make this happen.
And until this happens, I can’t understand why elected members of the US House and the US Senate are being so mean-spirited with some of these many unemployed by cutting off their unemployment compensation benefits. It’s not the fault of the Michigan unemployed that the US auto industry went down the tubes. It’s really the fault of many in the laissez-faire US government who ignored this problem for so many years. And at the same time, these same US politicians were fostering the offshoring of Michigan manufacturing jobs, which added substantial amounts of kindling to this ravishing fire.
And the hypocrisy of voting down unemployment benefits under the pretense of Deficit Reduction! Just looking at a couple of the Dow Industrials, these same US politicians strongly support measures that permitted:
…..Exxon Mobil to pay no federal income taxes in 2009, instead letting them get a federal income tax refund of more than $800 mil, when in the same year, Exxon Mobil earned consolidated pretax income of more than $35 bil.
….. Verizon Communiations to pay no federal income taxes in 2009, instead letting them get a federal income tax refund of more than $600 mil, when in the same year, Verizon earned pretax income of more than $11 bil.
….. Merck to pay no federal income taxes in 2009, when in the same year, it earned consolidated pretax income of more than $15 bil.
…..GE to pay no federal income taxes in 2009, instead letting them get a federal income tax refund of more than $800 mil, when in the same year, GE earned consolidated pretax income of more than $10 bil.
…..GE to pay no federal income taxes in 2008, instead letting them get a federal income tax refund of more than $700 mil, when in the same year, GE earned consolidated pretax income of more than $19 bil.
…..GE to pay no federal income taxes in total for the four years 2006 through 2009, instead letting them get a federal income tax refund of more than $1.5 bil, when in those same four years, GE earned consolidated pretax income of more than $82 bil.
And further, these same US politicians protect the so many, huge Big Corp federal and state corporate income tax loopholes. By closing many of these tax loopholes, both the US and State Budgets would be substantially strengthened.
Also, these same US politicians, and even including some Democrats, are trying to pass all of these annual Tax Extenders, clearly being lobbied by special interest groups to do so. And what is their proposal to pay for this massive cost? Well, it is not paid for, instead their proposal is to increase the US Deficit. They won't extend unemployment compensation for the unfortunate because it increases the US Deficit. But they will pass Tax Extenders for Corporate special interests, and for the wealthy, without paying for it. These mean-spirited politicians must get called out, and even better yet, must be voted out of office.
And now these same US politicians want to reduce the top individual income tax rates, which would benefit the very wealthy to the tune of $700 bil over the next ten years, which would also, at the same time, substantially increase the US Deficit. So the logic here is that it is OK to increase the US Deficit for tax cuts for the rich, who don't need the money, but it is not OK to increase the US Deficit for paying for unemployment benefits for the poor, who desperately need the money to survive? Give me a break! What kind of a society have we become?
And then lastly, from a fairness standpoint, the above weighted average effective Michigan Corporate State Income Tax Rates Paid by these six Big Corps in the past twelve years of 2.15% is low in comparison with Michigan’s current individual income tax rate of 4.35%.
