In performing a quick review of SEC filings of large corps with an SEC State Location Code in New Jersey, I found thirteen corps with State Corporate Income Tax Loopholes Taken, at least the way I measure them, of at least $300 mil each, 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 thirteen Big New Jersey Corps. These thirteen Big New Jersey Corps below had a weighted average state corporate effective income tax rate paid of a very modest 2.02%, or a huge 78% discount to New Jersey’s current state corporate income tax rate of 9.00%.
….…………………….....................Current…………………......State
….…………………….......................State...Consolidated..Effective
….…………………….......................Tax……….Pretax………Tax Rate
….…………………….......................Paid……..Income……….Paid
….……………….…......................(Millions of Dollars)
13. Bed Bath & Beyond..............330…........7,349……...4.49%
12. NRG Energy……...................287…........7,201....…..3.99%
11. Automatic Data Processing..527.........18,616…......2.83%
10. Merck..............................2,703….....105,533……..2.56%
..9. JNJ…...............................2,980*…...130,055……..2.29%
..8. Campbell Soup....................232…….....12,192……..1.90%
..7. Trane….................................76….........4,200……..1.81%
..6. Honeywell..........................406…….....24,544……..1.65%
..5. Schering-Plough…...............258..........15,995.…....1.61%
..4. Becton Dickinson.................145……....10,413……..1.39%
..3. Prudential Financial............297……....21,988……..1.35%
..2. Wyeth…………........................88……....34,285……..0.26%
..1. Chubb.....................................0….......20,513.…….0.00%
Total all 13……….....................8,329….....412,884……..2.02%
* Current and Deferred State Income Tax Combined…..JNJ didn’t disclose its Current State Income Tax Paid separately, which should be markedly lower than the above $2,980 mil combined amount
For the most recent year 2009, this weighted average effective state corporate income tax rate paid was an even lower 1.44% for these large New Jersey Corps.
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 thirteen large New Jersey 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 New Jersey Corporate Income Tax Rate of 9.00% by the total Consolidated Pretax Income of each large New Jersey Corp for the last twelve years. Then, I subtracted the actual total State Income Tax Paid, and in some cases also Local Income Tax Paid, and for JNJ, also Deferred State Income Tax Expense, by each of these Corps for the same twelve years.
……………………….........................NJ……......State……..Resultant
………………….........….............Corporate..Effective.......Higher
………………….........………….........Tax……..Tax Rate…...State Tax
………………..........…………...........Rate……....Paid…....Last 12 Years
…………………………………………………....................(Millions of dollars)
1.. JNJ………….......…………........9.00%.......2.29%...........8,725
2.. Merck.................................9.00%.......2.56%...........6,795
3.. Wyeth……….........................9.00%.......0.26%..........2,998
4.. Chubb…………………..............9.00%.......0.00%..........1,846
5.. Honeywell…………................9.00%.......1.65%...........1,803
6.. Prudential Financial………....9.00%.......1.35%...........1,682
7.. Schering-Plough......………….9.00%.......1.61%...........1,182
8.. Automatic Data Processing..9.00%.......2.83%...........1,148
9.. Campbell Soup……...............9.00%.......1.90%..............865
10. Becton Dickinson………….....9.00%.......1.39%..............792
11. NRG Energy……...................9.00%.......3.99%..............361
12. Bed Bath & Beyond…...........9.00%.......4.49%..............330
13. Trane…………………...............9.00%.......1.81%..............302
Total all 13…………………………………………28,831 (yeah, $28.8 bil)
For the most recent six years, the related estimated total State Corporate Income Tax Loopholes Taken, as I have defined them above, by these thirteen large New Jersey Corps, was $17.9 bil, as compared to $28.8 bil for the past twelve years.
The four Big Pharma New Jersey Corps included in the above list comprise $19.7 bil, or a very high 68% of the total $28.8 bil of State Corporate Income Tax Loopholes Taken by all thirteen of these Big New Jersey Corps in the most recent dozen years.
At first glance, New Jersey’s statutory corporate income tax rate of 9.00% seems high. However, it hasn’t prevented many of New Jersey’s Big Corps from paying much lower effective tax rates, which averaged just 2.02% in the past twelve years for the above thirteen large corps. My hunch is that many profitable small and medium-sized New Jersey Corps are actually paying much higher than this average 2.02% tax rate paid by these thirteen New Jersey Big Corps, but also they are paying lower than the 9.00% New Jersey statutory tax rate.
Also, from a fairness standpoint, the above effective New Jersey Corporate State Income Tax Rates Paid by these thirteen Big Corps of 2.02% is very low in comparison with New Jersey’s current individual income tax rate of 5.525% for income above $40,000 and up to $75,000, and of 6.37% for income above $75,000 and up to $500,000.
It looks to me like the State of New Jersey has an opportunity here to significantly reduce its severely-stressed fiscal status by closing some of these huge Big Corp State Income Tax Loopholes.
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.
