In performing a quick review of SEC filings of large corps with an SEC State Location Code in the State of Kansas, I found two 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 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 these two large Kansas Corps. These two large Kansas Corps below had a weighted average effective state corporate income tax rate paid of 3.01%, which is a 57% discount from the current Kansas state corporate income tax rate of 7.05%.
….……………………....................Current………………...........State
….……………………......................State……Consolidated..Effective
….……………………................Income Tax……Pretax…..Income Tax
….…………………….....................Paid……......Income……Rate Paid
….……………….…......................(Millions of Dollars)
..Embarq*…............................352…….......7,968…….....4.41%
..Garmin**................................32…..........4,758……....0.67%
Total of both………....................384….......12,746…….....3.01%
* Embarq Corp was embedded in, and later spun off by, the huge Sprint Nextel. And then later, Embarq was acquired. Thus, the numbers shown above for Embarq are only for the six years from 2003 to 2008.
** Garmin, Ltd. has a mailing address in Olathe, KS, and has as its external auditor a CPA firm in Kansas City. However, it legally is headquartered in the tax haven of the Cayman Islands.
Big Corp Sprint Nextel, headquartered in Overland Park, KS, dominates the Big Corp scene in the State of Kansas. It generated Total Revenues of $339 bil in the past 12 years. However, its earnings haven’t been very robust. In the three years from 1998 to 2000, it earned Total Pretax Income of $7.6 bil. But in the most recent three years from 2007 to 2009, it suffered Total Pretax Losses of $37.3 bil, $30.6 bil of which related to Goodwill Impairment Charges. Therefore, Sprint Nextel was excluded from the above list of highly profitable Kansas Corps.
Koch Industries, based in Wichita, KS, is the second largest private corporation in the US. It was excluded from the above list because its profits have not been disclosed to the public.
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 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. The latter is necessary to permit both smaller and at least somewhat troubled companies to be treated fairly in comparison with large very profitable Corps. Many of these smaller and somewhat troubled companies are in tax loss positions, thus they cannot take immediate benefit of 100% expensing of equipment purchases.
