In performing a quick review of SEC filings of large corps with an SEC State Location Code in Washington, I found 9 large corps with Total Consolidated Pretax Income of more than $4 bil each, for the most recent 12 years.
Below here is the effective state and local corporate income tax rates paid, which are computed by dividing the current state and local corporate income tax paid by the consolidated pretax income, both in total for the past twelve years for each of these 9 large Washington Corps. These 9 large Washington Corps below had a weighted average effective state and local corporate income tax rate paid of a modest 1.90%.
….……………………...............Current……………….......State & Local
….……………………..........State & Local..Consolidated..Effective
….……………………...........Income Tax………Pretax…..Income Tax
….……………………..................Paid……......Income……Rate Paid
….……………….…....................(Millions of Dollars)
..9. Starbucks......................443……….....7,197…….....6.16%
..8. Nordstrom………............375……….....6,790………..5.52%
..7. Costco...........................782………...17,413…….....4.49%
..6. Washington Mutual……1,531....……..39,487…….....3.88%
..5. Weyerhaeuser...............309..............8,025(3)......3.85%
..4. Paccar............................185………....12,596…….....1.47%
..3. Boeing............................449............34,831...........1.29%
..2. Microsoft….................2,094(1)…….192,455…….....1.09%
..1. Safeco................................0(2)….......5,591(3)…….0.00%
Total all 9……….................6,168…........324,385…….....1.90%
(1) The earlier four year amounts were estimated based upon more recent percentage mix trends, since there was no separate disclosure of Current State and Local Income Tax Paid for these four years
(2) No State Income Tax disclosures, therefore I assumed none were paid
(3) Exclusive of large Asset Impairment Charges
For the most recent 6 years, the weighted effective state and local corporate income tax rate paid by these 9 large Washington Corps was an even lower 1.59%.
As you can see from the above list, Washington’s retailers have substantially higher effective state and local corporate income tax rates paid than does the giant Microsoft. Frankly, it just doesn’t seem fair to me to have all of these US citizens hurting so much economically and, at the same time, for huge Corps like Microsoft to be paying such an incredibly low effective state and local corporate income tax rate.
Only six of the 50 US States now don't have state corporate income taxes. Washington is one of the six. However, as you can see from the above list, many Washington Corps still pay Corporate State and Local Income Taxes to other states. These 44 US States plus Washington DC, which do have state corporate income taxes, have an average Corporate State Income Tax Rate of 7.44%, which is close to the related median tax rate of 7.30%.
In these very troubled economic times, it seems to me that one really good argument for Washington to now adopt a State Corporate Income Tax is that when Microsoft repatriates any of its massive amounts of presently Unremitted Foreign Earnings, the State of Washington’s financial coffers would be demonstrably enhanced.
At June 30, 2010, Microsoft had $29.5 bil of Unremitted Foreign Earnings, up $11.5 bil from $18.0 bil at June 30, 2009, which were up another $10.5 bil from the $7.5 bil at June 30, 2008. Now that is what I call huge growth. Just think what Microsoft’s Unremitted Foreign Earnings will be down the road.
When you think about it, the Seattle area is a hotbed that attracts very bright, very technically proficient citizens. However, with the horrible economy, the Seattle area has all of this incredible innovative expertise that is presently much more dormant than it should be. 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 Government, need to create the strong stimulative environment to permit the key Seattle area to thrive economically. 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.
