In performing a quick review of SEC filings of large corps with an SEC State Location Code in Kentucky, 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 and local corporate income tax paid by the consolidated pretax income, both in total for the past twelve years for each of these 5 large Kentucky Corps. These 5 large Kentucky Corps below had a weighted average state and local corporate effective income tax rate paid of a very modest 2.12%, which is a 65% discount to Kentucky’s current statutory corporate income tax rate of 6.00%.
….……………………..................Current…………………......State
….……………………....................State...Consolidated..Effective
….……………………....................Tax……….Pretax………Tax Rate
….……………………....................Paid……..Income……….Paid
….……………….…....................(Millions of Dollars)
..5. Humana...........................205*……..6,099……......3.36%
..4. Brown Forman.................185……....5,741…….......3.22%
..3. Lexmark............................88……....5,201…….......1.69%
..2. Ashland…..........................88……….5,528…….......1.59%
..1. Yum Brands.....................167….....11,993…….......1.39%
Total all 5………......................733….....34,562……......2.12%
* Includes Puerto Rico, as well as State and Local Income Tax Paid. Thus, Humana’s true effective US state corporate income tax rate paid should be markedly lower than the above 3.36%.
For the most recent six years, the weighted effective state and local corporate income tax rate paid by these large Kentucky Corps was a much lower 1.61%.
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 either drastically reducing critical state services like education and citizen protection, or by cutting off State unemployment compensation benefits. And particularly in Kentucky’s case, I think a wisely targeted, very healthy refundable investment tax credit would be very helpful to prop up the very troubled manufacturing sector.
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, with a bonus percentage for capital expenditures made by troubled small and medium-sized manufacturers, like many of those in Kentucky.
After watching the US House and US Senate in the past week on C-Span, some things are pretty clear to me.
First, almost the entire focus has been on how much tax breaks and other benefits are to go to the wealthy and to the not so wealthy. I think it is just as crazy for Democrats to assert that unemployment compensation benefits automatically percolate up, as it is for Republicans to assert that tax breaks for the very wealthy automatically trickle down. They are both acting so selfishly, irrationally, and most importantly, way off target, particularly so since the country has a US Debt level of close to $14 trillion.
Instead, I think the focus should be on how to substantially and quickly reduce the sky-high unemployment rate and the horribly high underemployment rate, and increase the pay of the many employed, but working for less than a livable wage. More than anything, this is what is causing the US deficit to continue to grow so substantially. And, in conjunction with this, the focus should be all about getting US real GDP growth up substantially and as quickly as possible, and also for as long a time as possible.
To best accomplish this, the focus should be on providing very healthy tax incentives to businesses, of all sizes, for them to make capital investments that result in maximum private sector job growth. Thus, the 100% expensing of capital expenditures for large corps is a good one. And for small and medium-sized businesses, the choice of either 100% expensing or a refundable investment tax credit is a good one. Making the research tax credit permanent is a good one. Giving businesses very healthy green energy tax credits is a good one. The US government making substantial infrastructure investments, particularly green ones, is a good one. Having the US government make prudent, direct loans to small and medium-sized businesses, which are unable to get financing from the private sector, is a good one. Perceptive US Government initiatives that result in the writing down of principal loan balances of underwater mortgages is a good one.
And just asking large businesses what specific initiatives are needed for them to move much of their $2 trillion of cash, now on the sidelines, into the US economy is a good one. And then the US government needs to assess which of these specific initiative suggestions by large businesses make the most sense. For businesses to just generally assert that they don't like the Government over-regulating their businesses is not helpful. On the other hand, something specific like eliminating the 1099 reporting requirements in the new Health Care legislation is a winner....it is a clear obstacle to economic growth and private sector job creation.
And none of these many annual tax extenders, which increase the US deficit, should be enacted, unless they are truly worth the cost and also create a substantial numbers of jobs. To argue that a tax extender should be enacted just because it is fair just isolates this one issue as to its fairness. There are thousands of items in the tax code that are unfair to many taxpayers. The US Congress is doing the country no good to single out specific tax extenders, because of Special Interest Intense Lobbying, when the US deficit is close to $14 trillion. From my analysis, there is only one tax extender that is worth the cost and truly creates a substantial number of jobs.....the research tax credit. The rest are all simply the result of selfish special interests.
Second, the country is going down the tubes financially, unless the US Congress and the Administration start acting responsibly and much more wisely.
Of all the people I have observed, the one who is clearly causing the most damage to the US economy presently is Kentucky’s Mitch McConnell, the US Senate Minority Leader. More than anyone, he is preventing the country from at least starting to work on improving its horrible economic status. He has personally stopped the US Senate in its tracks.
I think Kentucky citizens, especially those severely hurt by having their unemployment compensation benefits cut off right during the middle of the Holiday Season, through no fault of their own, should be demanding that their Senior Senator from Kentucky be removed from office. When conduct is this hurtful to the country, and to its citizens, the US office holder should be removed from office as expeditiously as possible.
