In performing a quick review of SEC filings of large corps with an SEC State Location Code in Alabama, I found four 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 income tax paid by the consolidated pretax income, both in total for the past twelve years for each of these four large Alabama Corps. These four large Alabama Corps below had a weighted average state corporate effective income tax rate paid of 2.94%, or a 55% discount to Alabama’s current state corporate income tax rate of 6.50%.
….……………………..................Current………………….....State & Local
….…………………….............State & Local..Consolidated...Effective
….……………………....................Tax………......Pretax………Tax Rate
….……………………....................Paid…….......Income………..Paid
….……………….…......................(Millions of Dollars)
..4. Caremark RX....................271…….........5,517…........4.91%
..3. Vulcan Materials..............183…….........4,255……......4.30%
..2. Regions Financial……….....194…….......10,112*….......1.92%
..1. Compass Bancshares..........60...............4,215……......1.42%
Total of all 4………...................708….........24,099…….....2.94%
* Exclusive of Goodwill Impairment Charge of $6.0 bil
For the most recent year, the effective state and local corporate income tax rates paid by these large Alabama Corps was an even much lower negative 0.89%.
As you can see from the above list , just as is the case consistently throughout the country, financial companies have very low effective state corporate income tax rates paid.
Also from my quick review, it appears that Birmingham life insurance company Protective Life might be the next largest Alabama company. It generated Pretax Income in the past 12 years of $3,503 mil, and paid State Corporate Income Tax of $26 mil, thus a very modest effective state corporate income tax rate of 0.74%, similar to many other life insurance companies all throughout the country.
I think it makes much more sense to balance a State’s severely stressed budget by closing some of the large Corp State Corporate Income Tax Loopholes, rather than by drastically reducing critical state services like education and citizen protection.
Also, I think it makes sense to use some of the funds from the closing of these larger Corp State Income Tax Loopholes to provide some wise, highly stimulative, directly-targeted, job-creating tax incentives to small and medium-sized businesses.
Regarding the present US tax deal negotiations, 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 and upgrades, they make.....they could either take 100% first year expensing, or they could instead choose a first-year tax equivalent 35% refundable investment tax credit.
The first-year refundable 35% investment tax credit option is needed because, with the Great Recession, there are so many businesses that now have a US tax loss position, and thus they can’t take advantage of 100% tax expensing. Also, the refundable 35% investment tax option will make it much easier for both smaller and larger, at least somewhat financially troubled businesses to get financing for this equipment purchase. And further, there should be no ten-year CBO-scored cost for this initiative, since when a business elects the 35% investment tax credit option, it will not be allowed any tax depreciation.
Economists have really missed the US economic explosion from this 100% tax expensing of equipment, especially when it is laced with a refundable 35% investment tax credit option.
Both smaller businesses and larger financially troubled businesses will benefit greatly from very large, highly profitable Corps spurred to buy equipment from them, due to the 100% tax expensing option.
But the real US GDP growth jolt comes from the smaller businesses and larger at least somewhat financially troubled businesses taking advantage of the refundable 35% investment tax credit option. These businesses will be able to get financing much easier because 35% of the purchase price of the Equipment is provided on the front end by the US government. And then these businesses are able to buy equipment from other smaller businesses and also from other financially troubled businesses. This whole thing really snowballs….it feeds on itself. Equipment will be flying in 2011 all over the country. Economists can’t seem to grasp this….smart business people do.
