In performing a quick review of SEC filings of large corps with an SEC State Location Code in New York, I found 30 New York 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. I excluded two large companies which Fortune Magazine says are headquartered in New York (Alcoa and Travelers), because their SEC State Location Codes were in Pennsylvania and Minnesota, respectively.
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 exclusive of huge Asset Impairment Charges, both in total for the past twelve years for each of these 30 Big New York Corps. These 30 Big New York Corps below had a weighted average state corporate effective income tax rate paid of a very modest 2.52%, or a 65% discount to New York’s current state corporate income tax rate of 7.10%. This discount would be even significantly higher if the New York City Statutory Corporate Income Tax rate were added to the 7.10% New York State Corporate Income Tax Rate. Many of these 30 huge New York Corps are headquartered in New York City.
….……………………...................Current…………………......State
….…………………….....................State..Consolidated..Effective
….…………………….....................Tax……….Pretax………...Tax
….…………………….....................Paid……..Income……….Rate
….……………….….....................(Millions of Dollars)
30. Bank of New York Mellon..1,183……..21,569……..5.48%
29. Marsh & McLennan……….....628……..13,961……..4.50%
28. Loews……………….................849.…….18,971……..4.48%
27. Time Warner....................1,237........28,134........4.40%
26. Time Warner Cable.............445........10,558........4.21%
25. Verizon Communications.3,372……133,814……..4.01%
24. Morgan Stanley………….....2,652…….67,759……..3.91%
23. JP Morgan Chase………......4,289…...121,908……..3.52%
22. Altria Group…………….......4,371…...143,203……..3.05%
21. Citigroup….......................4,081…...140,068……..2.91%
20. Goldman Sachs…………......2,553…….96,605……..2.82%
19. News Corp…………….............577…….22,798……..2.53%
18. American Express…………....990….....45,364……..2.18%
17. Pepsi Bottling………..............131….......6,650……..1.97%
16. M&T Bank………...................175…….....8,962……..1.95%
15. Estee Lauder……..................128….......6,662……..1.92%
14. Omnicom Group……………....248….....13,525....….1.83%
13. Consolidated Edison………….242….....13,344……..1.81%
12. Pfizer……..........................1,920…...109,196……..1.76%
11. Forest Labs………..................136……....8,691……..1.59%
10. Dover……………......................92……....6,493……..1.42%
..9. PepsiCo…………....................868……..63,882……..1.36%
..8. Colgate-Palmolive…............286*……24,982……..1.14%
..7. MetLife...............................309……..28,117……..1.10%
..6. IBM..................................1,510……147,733……..1.02%
..5. Bristol Myers Squibb...........392*……48,462……..0.81%
..4. Avon Products…………...........66……..10,150……..0.65%
..3. ITT……...................................16……….6,779……..0.24%
..2. Phillip Morris International..(15)…….28,064…….(0.05)%
..1. Hess………............................(123)…….21,762…….(0.57)%
Total all 30………....................35,610…1,412,166…….2.52%
* For both Colgate-Palmolive and Bristol Myers Squibb, the above State Corporate Income Tax Paid amounts also include Deferred Income Tax Expense. These two companies decided to not disclose the amount of their State Income Tax Paid, which should be markedly lower than the above combined amounts shown.
For the most recent 2009 year, the weighted state corporate effective income tax rate paid by these Big New York Corps was an even lower 2.13%.
Health Insurance company Assurant generated Total Pretax Income of $5,407 mil in the past 9 years. It was excluded from the above list of New York Big Corps because it didn't disclose its State Income Tax Paid in the most recent three years.
Nine Corps were excluded from the above list of New York Big Corps, even though they generated Total Pretax Income for the past 12 years of more than $5 bil. These nine Corps were excluded because their Total State Corporate Income Tax Loopholes Taken were less than $300 mil each. These nine Corps were CBS, Viacom, McGraw-Hill, Moody's, L-3 Communications, Paychex, Coach, Blackrock, and Eastman Kodak.
I find that by listening to Alicia Keys' Empire State of Mind while reviewing all of these New York numbers…..that the statistics start jumping off the computer screen and start talking to me. Here’s very briefly what they are saying:
…..For a Big Oil company like Hess to be paying no state corporate income taxes in the past 12 years, and instead getting $123 mil in State Corporate income tax refunds, is flat out wrong. I need to later do a more in-depth study of all of Big Oil and its related role in helping (?) US States all over the country get out their horrible fiscal jams.
…..For Phillip Morris International to be paying no state corporate income taxes since it was spun off from the Altria Group is also flat out wrong. So US States reward the company that is exporting overseas all of these health problems caused by their cigarettes?
…..After reviewing hundreds of large companies, the only other highly profitable US Corp that has not paid any State Corporate Income Tax in the past 12 years, and instead got State tax refunds, is Indianapolis-based Eli Lilly.
…..Just like New Jersey Big Pharma, New York’s two Big Pharma (Pfizer and Bristol Myers Squibb) also all have incredibly low state effective corporate income tax rates paid. Big Pharma's shifting of its income overseas has not just hurt the US Government financial coffers, but it also has severely damaged the financial status of US States.
.....I have a gut feeling that in all fairness, many US States should be getting a lot more in State Corporate Income Taxes from New York Big Corps, and frankly from Big Corps of other US States, as well. New York, with its many exceptionally bright, greedy, shady and reckless financial wizards, was a major cause of the country’s severe financial crisis. It only makes sense to me this same kind of financial recklessness also infiltrated the State Corporate Income Tax planning ranks, with the myriad of creative tax loopholes designed by some really bright financial minds. But this was all orchestrated to the severe detriment of both State Government financial coffers and State citizens, many of whom are financially desperate.
…..I think it is high time for New York Big Corps, and all Big Corps all throughout the country, to step up and help US States get out of their horrible financial messes. Big Corps, their stockholders, their bondholders, their Boards of Directors, their executives, and their employees are all getting so many advantages from critical services provided by State and Local Governments, and it is only right that these Big Corps pay a fair amount of State Corporate Income Taxes for these services.
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 30 Big New York 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 York Corporate Income Tax Rate of 7.10% by the total Consolidated Pretax Income of each Big New York Corp for the last twelve years. Then, I subtracted the actual total State and Local Corporate Income Taxes Paid by each of these Corps for the same twelve years. I have excluded from the 7.10% NY Statutory Corporate Income Tax Rate, the NY City Corporate Income Tax Rate. If this NY City Corporate Income Tax Rates were included, the amounts of total New York Corporate Income Tax Loopholes Taken would be substantially higher than what is shown below. Many of these Big New York Corps are headquartered in New York City.
……………………….........................NY…..........State……....Resultant
………………….........…..............Corporate…...Effective.......Higher
………………….........…………..........Tax…….....Tax Rate…....State Tax
………………..........…………...........Rate……........Paid…...Last 12 Years
…………………………………………………....................(Millions of dollars)
..1. IBM………….......…………….....7.10%..........1.02%...........8,979
..2. Citigroup………….........………7.10%..........2.91%............5,864
..3. Pfizer……………...........……....7.10%..........1.76%............5,833
..4. Altria Group......……….........7.10%..........3.05%............5,796
..5. JP Morgan Chase…………......7.10%..........3.52%............4,366
..6. Verizon Communications…..7.10%..........4.01%...........4,129
..7. Goldman Sachs…….......……..7.10%..........2.82%...........3,880
..8. PepsiCo…………......………......7.10%..........1.36%...........3,668
..9. Bristol Myers Squibb………...7.10%..........0.81%...........3,049
10. American Express……………..7.10%..........2.18%...........2,231
11. Morgan Stanley……........…….7.10%..........3.91%...........2,159
12. Phillip Morris International.7.10%........(0.05)%..........2,008
13. MetLife………………………….....7.10%..........1.10%...........1,687
14. Hess…………………………….......7.10%........(0.57)%..........1,668
15. Colgate-Palmolive…………......7.10%.........1.14%............1,488
16. News Corp………….......………..7.10%.........2.53%............1,042
17. Time Warner........................7.10%..........4.40%..............761
18. Omnicom Group…......………..7.10%.........1.83%...............712
19. Consolidated Edison……….....7.10%.........1.81%...............705
20. Avon Products……………….....7.10%.........0.65%..............655
21. Loews…………......……………...7.10%..........4.48%..............498
22. Forest Labs………….....………..7.10%..........1.59%..............479
23. ITT……………………………........7.10%..........0.24%.............465
24. M&T Bank…………………….......7.10%.........1.95%..............461
25. Dover………………………….......7.10%..........1.42%.............369
26. Marsh & McLennan…………....7.10%.........4.50%.............363
27. Bank of New York Mellon…...7.10%.........5.48%.............348
28. Estee Lauder……………………..7.10%….......1.92%.............345
29. Pepsi Bottling…………………....7.10%..........1.97%.............341
30. Time Warner Cable...............7.10%.........4.21%.............305
Total all 30………………………………………64,654 (yeah, $64.7 bil)
For the most recent six years, the estimated total State Corporate Income Tax Loopholes Taken by these 30 New York Big Corps was $37.6 bil, as compared to $64.7 bil for the past twelve years.
I think it would be helpful to focus on the four huge New York financial corps severely impacted by the financial crisis, and specifically on the period of time before the financial meltdown in 2008. Thus, below here is some key information related to these four firms for the ten-year period from the beginning of 1998 to the end of 2007.
…………………………...............Consolidated…...Effective…..Estimated
…………….........State Corp..…....Pretax……....State Corp…..State Tax
……………….......Tax Paid……....Income……....Tax Rate…...Loophole
…………………………………………….......................Paid………...Taken
…………………………...........10 Years 1998-2007………………............
………………...........(Millions of dollars)……………...........(mils of $s)
Citigroup………...4,466…….....200,222……......2.23%..........9,750
AIG…………….........436*……....112,206…….....0.39%...........7,531
Merrill Lynch……..630…….......33,488……......1.88%...........1,748
Lehman Bros......1,283…….......31,210……......4.11%..............933
Totals………….....6,815….........377,126…….....1.81%..........19,961
*AIG includes both Current and Deferred State Corporate Income Tax combined
Just looking at the above list, I suggest that the rampant financial creativity here doesn’t just happen on a pretax basis. And in the Corporate Income Tax area, it just doesn't happen with Federal Income Taxes.
I think it makes more sense to balance a State’s severely stressed budget by closing some of the huge Big Corp State Corporate Income Tax Loopholes, rather than by either drastically reducing critical state services like education and citizen protection, or by drastically increasing state university tuition.
Also, I think it makes sense to use some of the funds from the closing of these Big Corp State Income Tax Loopholes to provide some wise, highly stimulative, directly-targeted, job-creating tax incentives to small and medium-sized businesses. By far the most effective way to reduce a State’s deficit in the long run is to improve significantly State long-term real economic growth, along with the carefully crafted resultant substantial reduction in State unemployment and underemployment rates.
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.
Also, from a fairness standpoint, the above effective New York Corporate State Effective Income Tax Rates Paid by these 30 Big Corps are very low in comparison with New York State’s current individual income tax rates, which for income amounts above $20,000 and up to $200,000, is a substantially higher 6.85%, and then there’s New York City individual income tax, to boot. Granted the stated New York Corporate State Income Tax Rate is a much closer 7.10%, but the state corporate income tax rate actually paid by these Big New York Corps averaged only 2.13% in the most recent year. That substantial tax rate paid variance between New York Big Corps and New York individuals just doesn’t make any sense to me.
