In performing a quick review of SEC filings of large corps with an SEC State Location Code in Nevada, I found 3 large corps with Total Core Consolidated Pretax Income of more than $3 bil each, for the most recent 12 years. Core Pretax Income is exclusive of both large Asset Impairments Charges and large Gains from Early Extinguishment of Debt.
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 core pretax income, both in total for the past twelve years for each of these 3 large Nevada Corps. These 3 large Nevada Corps below had a weighted average effective state corporate income tax rate paid of 2.92%.
….……………………...............Current……………….............State
….…………………….................State.......Consolidated..Effective
….……………………............Income Tax……..Pretax…..Income Tax
….……………………..................Paid……......Income……Rate Paid
….……………….…....................(Millions of Dollars)
..3. Harrah's Entertainment..197.............3,540...........5.56%
..2. Intl Game Technology....173……........5,643…….....3.07%
..1. MGM Mirage.....................48…...........5,125…….....0.94%
Total all 3……….....................418….........14,308…….....2.92%
Only six of the 50 US States now don't have state corporate income taxes. Nevada is one of the six. The 44 US States plus Washington DC, which do have state corporate income taxes, have an average statutory Corporate State Income Tax Rate of 7.44%, which is close to the related median tax rate of 7.30%.
But let me focus on how Nevada’s Big Corps have been economically crushed in the Great Recession.
Here’s International Game Technology’s Pretax Income for the nine years from Sept 1999 to Sept 2007:
1999…..$101 mil
2000…..$245 mil
2001…..$339 mil
2002…..$409 mil
2003…..$599 mil
2004…..$654 mil
2005…..$681 mil
2006…..$747 mil
2007…..$805 mil
Now the above is an amazingly consistent uptrend. But what has happened since 2007 during the Great Recession?
2007…..$805 mil
2008…..$590 mil
2009…..$238 mil
But even more telling is just what has happened to the two large Nevada Casino Corps before and during the Great Recession?
…………………………..........1998-2007……………..2008-2009
…………………………....Core Pretax Income….Core Pretax Loss
MGM Mirage…………….....$6,079 mil……………....$(954) mil
Harrahs Entertainment…$5,283 mil……………..$(1,743) mil
So what is the best way to turn Nevada’s economic devastation around? Well, fixing the housing crisis is key. But just as important is for its customers….mostly the rest of the country, and particularly California…..to dramatically improve their dismal economic status.
Reducing the top income tax rates will do very little to help Nevada, or the dismal US economy, and the jobless recovery. What will help is something like President Obama has proposed….a combination of permanent research tax credits, 100% expensing of capital expenditures, and substantial infrastructure investments.
To make it even more effective, I would give businesses a choice….they can either get 100% expensing, or a refundable investment tax credit, for their capital expenditures, perhaps for a two-year period. This is a substantially better use of funds then simply cutting the top income tax rates, and hoping that will trickle down. Also, I would add on some energy tax credits for clearly green investments made by businesses.
And to make President's Obama economic recovery plan even more effective, I'm sure that many businesses have sound ideas for how best to fix the US jobless recovery.
