In performing a quick review of SEC filings of large corps with an SEC State Location Code in Arizona, I found 5 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 corporate income tax paid by the consolidated pretax income, both in total for the past twelve years for each of these 5 large Arizona Corps. These 5 large Arizona Corps below had a weighted average effective state corporate income tax rate paid of a modest 2.85%, which is a huge 59% discount from the current Arizona state corporate income tax rate of 6.968%.
….……………………....................Current………………...........State
….……………………......................State……Consolidated..Effective
….……………………................Income Tax…….Pretax…..Income Tax
….…………………….....................Paid……......Income……Rate Paid
….……………….…......................(Millions of Dollars)
..5. Apollo Group.....................518………....6,425…….....8.06%
..4. Pinnacle West Capital……...241....……...4,916……......4.90%
..3. Republic Services..............160………....4,595……......3.48%
..2. Phelps Dodge…..................108…….......7,900…….....1.37%
..1. Freeport McMoran..............93…........15,472*……...0.45%
Total all 5……….....................1,120…........39,308…….....2.85%
* Exlusive of $16.9 bil of Asset Impairment Charges. Also, Freeport McMoran’s numbers are only for the most recent three years from 2007-2009.
For the most recent 6 years, the weighted effective state corporate income tax rate paid by these 5 large Arizona Corps was a much lower 2.32%, and for the most recent year was an even lower 1.85%.
Apollo Group’s effective state corporate income tax rate paid of 8.06% is the highest one of all the large corps I have reviewed so far all throughout the country.
And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loopholes Taken by the two large Arizona Corps with total such tax loopholes of at least $300 mil each 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 Arizona Corporate Income Tax Rate of 6.968% by the total Consolidated Pretax Income of each of these two Arizona large Corps for the last twelve years. Then, I subtracted the actual total State Income Tax Paid by these two Corps for the same twelve years.
……………………….........................AZ…….....State……..Resultant
………………….........….............Corporate..Effective.......Higher
………………….........………….........Tax……..Tax Rate…...State Tax
………………..........…………...........Rate……....Paid…....Last 12 Years
…………………………………………………....................(Millions of dollars)
1.. Freeport McMoran…….......6.968%.......0.60%............985
2.. Phelps Dodge.....................6.968%.......1.37%.............442
Total of both…………………………………………1,427 (yeah, $1.4 bil)
I think it makes much 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 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.
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 tax expensing, or they could instead choose a tax equivalent amount of first-year refundable investment tax credit, with no tax depreciation deduction in subsequent years.
In a very positive development for states like Arizona, I do like it that the Obama Administration is now putting additional pressure on both Fannie Mae and Freddie Mac to write down the home mortgage loan principal balances of underwater home properties. When you think about it, Fannie Mae and Freddie Mac are now in essence the US government. The greedy large banks still are reluctant to write down their mortgage loan principal balances on underwater properties, particularly so on second mortgages. I think I would reluctantly consider giving these selfish banks a tax incentive to do so, such as a temporary acceleration of their federal income tax loan loss provision deduction. This can be easily structured at no CBO scored cost to the US Government over the ten-year CBO scoring period.
