President Obama’s Framework for Business Tax Reform has as one of its main elements a reduction in the top Corporate Income Tax Rate from 35% to 28%, a huge chunk of which is paid for by a dramatic reduction in tax benefits from Accelerated Tax Depreciation.
To be fair to all businesses, it only makes sense that this huge tax rate reduction would also apply at the individual tax level for any business income of Sub S corps, partnerships, and Schedule C income passed through to any business owner.
I think this key aspect of the Framework for Business Tax Reform is what makes it so massively powerful for US job creation and US economic growth.
It is pretty clear that 50% and 100% first-year bonus tax depreciation have been great for US Big Corporation earnings, but have not in the aggregate added a dime of US job creation by these same US Big Corporations.
On the other hand, a substantial permanent business tax rate reduction, especially one targeted predominantly at the lower levels of business income, is a very powerful US job creator.
Also, I think that once bright people figure out the impact of this trade off of income tax rate reduction for accelerated tax depreciation, the stock market will move up dramatically, assuming the stock market makes the determination that this aspect of the Framework will pass in a reasonably short period of time.
Common stock prices are driven by earnings.
This Framework will result in a massive increase in earnings for companies with their operations predominantly in the US.
Whereas a permanent tax rate reduction directly increases corporate earnings, a killing of accelerated tax depreciation deductions does not reduce corporate earnings.
Also, companies with massive investments in property and equipment will obtain an additional upfront first-year huge pickup in earnings from bringing down the US Federal Income Tax Rate on the Cumulative Accelerated Tax Depreciation Deductions it has already taken the benefit of.
This additional earnings benefit results from the reduction of the US Deferred Income Tax Liability related to the difference in the Book and Tax Basis of Property and Equipment from one where the US Federal Rate is now set up at 35% to the new reduced rate of 28%.
Let me explain the impact of this trade off more specifically by taking you around the country to its effect on many businesses in many different industries.
The basic concept is that everything else being equal, the market price of the common stock of the company operating only in the US should increase by the continuing annual percentage increase in earnings, caused by this switch from Accelerated Tax Depreciation Benefits to a 7% income tax rate reduction.
For pure domestic companies, and just looking at this trade off, the continuing annual earnings increase should be mostly about 11%.
I started out in my earlier Part One post with large companies in the US Southeast.
Let me now move up North in this Part Two post to large companies with the majority of their US Profits in the US Midwest States, where college basketball is "on fire", and where State Governors and State Legislatures have put many of these States "aflame" with their seemingly very far right-wing extremist initiatives.
As an introduction here, let me first show the Corps in Midwest US States with Worldwide Pretax Income above $1 bil in the most recent year 2011, and which also have a majority of their worldwide income earned overseas, along with what percentage of this income was earned in Foreign Countries.
……………..…….................Worldwide
……………….……..................Pretax……….Foreign
………………….….................Income………Income
……..…………................(mils of dollars)…..Mix
McDonald's.............IL.......8,012.............60%
Caterpillar..............IL.......6,725.............67%
3M.........................MN.....6,031..............58%
General Motors......MI......5,985..............52%
Eli Lilly..................IN.......5,350.............76%*
Abbott Labs...........IL.......5,199..............93%
Kraft Foods............IL.......4,772.............76%
Medtronic.............MN......3,723.............61%
Dow Chemical........MI.......3,601.............89%
Accenture..............IL.......3,512..............80%
Mosaic..................MN.......3,271.............55%
Baxter....................IL.......2,809.............86%
Cummins...............IN.......2,671.............67%
Johnson Controls..WI.......2,111..............63%
Stryker..................MI.......1,686.............64%
Eaton....................OH.......1,553.............76%
Parker Hannifin.....OH.......1,414.............52%
Aon Corp...............IL........1,384.............78%
TRW Automotive...MI.......1,148.............69%
St Jude Medical.....MN......1,019.............51%
* Eli Lilly combines its huge operations in tax-haven Puerto Rico with its US Pretax Income.
Wow, when you review the above numbers of these 20 Global US Midwest Giants, you have to be very impressed and feel very good for the country.
However, that's only the Pretax Income perspective, which indeed is quite good.
It would be helpful to also focus on the global tax aspect of several of these companies.
Abbott Labs
Abbott Labs' 2011 US Pretax Income in 2011 comprised only 7% of its Worldwide Pretax Income. On the other hand, its US Revenues in 2011 comprised a much larger 41% of its Worldwide Revenues. And its US Total Long-term Assets also comprised a much larger 43% of its Worldwide Total Long-term Assets.
So why would a Big Pharma Corp like Abbott Labs focus so intently on shifting income from the US to Foreign?
Well, let me quantify the benefit.
Abbott Labs received foreign tax breaks from having it foreign earnings taxed at lower rates than that in the US which totaled $1,191 mil in 2011, another $1,108 mil in 2010, and another $1,180 mil in 2009.
As a result of this massive income shift, Abbott Labs has unremitted foreign earnings of a massive $31.9 bil at the end of 2011.
Clearly, the US Congress has no business giving companies which overdose on shifting US income to lower foreign tax havens, like Abbott Labs does, a tax free holiday to repatriate these foreign earnings.
But every Republican in the US Congress want companies like Abbott Labs to get this tax holiday. And so do some Democrats. And the US Congress doesn't understand why the 99% is so disappointed in them? And they also don't understand why their favorable approval ratings are so incredibly low, and headed much lower?
And then to pile on the 99%, the IRS shows its clear support for the 1% Big Corps over the 99%, including small businesses. In Abbott Labs case, in 2011, Abbott reflected a massive $582 mil tax benefit, which increased its after-tax earnings, from favorable resolution of its tax positions.
Eli Lilly
For some strange reason, instead of being financially transparent, Indiana headquartered Eli Lilly combines its huge operations in its Puerto Rico tax haven with its US Pretax Income.
Eli Lilly's 2011 Pretax Income of its US and Puerto Rico operations combined in 2011 comprised only 24% of its Worldwide Pretax Income. I have a hunch that the US only portion of Eli Lilly's Pretax Income is markedly less than 24%. After all, Puerto Rico is clearly a tax haven.
On the other hand, Eli Lilly's Revenues to US customers in 2011 comprised a much larger 53% of its Worldwide Revenues. And its US Total Long-term Assets also comprised a much larger 59% of its Worldwide Total Long-term Assets.
So why would a Big Pharma Corp like Eli Lilly focus so intently on shifting income from the US to Foreign?
Well, let me quantify the benefit.
Eli Lilly received foreign tax breaks from having it foreign earnings, including that in Puerto Rico, taxed at lower rates than that in the US which totaled $797 mil in 2011, another $823 mil in 2010, and another $741 mil in 2009.
As a result of this massive income shift, Eli Lilly has unremitted foreign earnings of a massive $20.6 bil at the end of 2011.
Clearly, the US Congress has no business giving companies which overdose on shifting US income to lower foreign tax havens, like Eli Lilly does, a tax free holiday to repatriate these foreign earnings.
But every Republican in the US Congress want companies like Eli Lilly to get this tax holiday. And so do some Democrats. And the US Congress doesn't understand why the 99% is so disappointed in them? And they also don't understand why their favorable approval ratings are so incredibly low, and headed much lower?
And then to pile on the 99%, the IRS shows its clear support for the 1% Big Corps over the 99%, including small businesses. In Eli Lilly's case, it reflected a tax benefit, which increased its after tax earnings by $85 mil in 2011 and by another $54 mil in 2009 from favorable tax audit settlements with the IRS.
Dow Chemical
For the most recent five years (2007 through 2011) combined, Midland, MI-headquartered Dow Chemical generated not a total US Pretax Income, but rather a total US Pretax Loss of $1,823 mil.
But in those same five years combined, Dow Chemical generated total Foreign Pretax Income of a gigantic $14,164 mil.
Yeah, the US Pretax Income mix for those five years was a negative 15%.
As a result of this massive global income shift, how much did Dow Chemical end up paying in US Federal Income Tax?
Well, with the US loss, actually nothing. Instead, for the five years combined, Dow Chemical received total US Federal Income Tax Refunds of $395 mil.
Just how reasonable was this US Pretax Income mix of a negative 15%?
Well, Dow Chemical's Revenues to US customers in 2011 comprised 32% of its Worldwide Revenues. And its US Total Long-lived Assets comprised an even larger 50% of its Worldwide Total Long-term Assets.
And as a result of all of this income shifting, Dow Chemical has accumulated unremitted foreign earnings of $10.1 bil at the end of 2011.
How could this have happened where the 99% are getting ripped off by Dow Chemical's tax engineering?
Well, I have a hunch.
Who's the US House of Representative Republican, whose district includes Midland, MI, where Dow Chemical is headquartered?
Well, it's Dave Camp, the Chairman of the US House Ways and Means Committee, which writes US tax law.
And the US Congress doesn't understand why the 99% is so disappointed in them? And they also don't understand why their favorable approval ratings are so incredibly low, and headed much lower?
These highly unusual situations above tell you why the President’s Framework for Business Tax Reform is so important to prevent these clearly unfair situations to the 99% of the country from continuing to happen.
President Obama’s Framework for Business Tax Reform has some incredibly powerful incentives to entice the above companies and many others to insource back to the US a huge chunk of these massive foreign earnings as well as the related jobs.
First, these foreign earnings shifted back to the US will be granted a 7% US federal income tax rate deduction.
Second, these foreign earnings shifted back to the US will be able to avoid a US federal minimum income tax on their foreign earnings. This provision is particularly focused in a fair manner at companies which overdose in shifting US income and the related US jobs overseas.
And third, there’s a special tax break for the costs of companies moving their operations back to the US.
My focus below is on specific large companies with US Pretax Income in the most recent year above $500 mil, and which also have the majority of their consolidated earnings generated in the US. I am also including some companies not making the US Pretax Earnings threshold but with a very large net Deferred Income Tax Liability position at the end of the most recent year.
ILLINOIS
Walgreens
The Deerfield, IL-based Drug Retailer Walgreens generated Pretax income for fiscal year ended (FYE) Aug 2011 of $4,294 mil, all in the US. Its Income Tax Expense in FYE 2011 was $1,580 mil, for an effective income tax rate of 36.8%. And thus its After-tax Net Income in FYE 2011 was $2,714 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of FYE 2011, Walgreens would have reduced its income tax expense in FYE 2011 by $301 mil, or by 7% X $4,294. And thus, its FYE 2011 After-tax Net Income would have increased by 11%, or by $301 mil divided by $2,714 mil. And its Equivalent Pretax Income in FYE 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Walgreens, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to reduce the exorbitantly high drug prices that Walgreens charges. By such fair, patriotic action, the long-term US health care cost curve will be bent down, which is so critical to substantially reducing the US deficit and making US businesses much more competitive. Also in all fairness, some of these additional earnings should be used by Walgreens to both move more of its part-time workers to full-time status, and to increase the pay of its employees.
Deere
Exceptionally well run, Moline, IL-based Farm Equipment Manufacturer Deere & Co generated US Pretax Income of $2,618 mil in FYE Oct 2011, 62% of its Worldwide Pretax Income of $4,223 mil.
Its Total Income Tax Expense in FYE 2011 was $1,424 mil, for an effective income tax rate of 33.7%. This lower effective tax rate was helped both by lower foreign income tax rates and by R&D tax credits, which will be made permanent under President Obama’s Framework For Business Tax Reform.
Deere’s After-tax Net Income in FYE 2011 was $2,799 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of FYE 2011, Deere would have reduced its income tax expense in FYE 2011 by roughly $183 mil, or by 7% X $2,618 mil. And thus, its FYE 2011 After-tax Net Income would have increased by 7%, or by $183 mil divided by $2,799 mil. And its Equivalent Pretax Income in FYE 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Deere, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used by Deere to move more of its foreign manufacturing, and the related jobs, back to the US.
Archer Daniels Midland
Decatur, IL-based Farm Products Manufacturer Archer Daniels Midland (ADM) generated US Pretax Income of $2,035 mil in FYE June 2011, 67% of its Worldwide Pretax Income of $3,015 mil. Its Total Income Tax Expense in FYE 2011 was $997 mil, for an effective income tax rate of 33.1%. This lower effective tax rate was helped by lower foreign income tax rates. ADM’s After-tax Net Income in FYE 2011 was $2,018 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of FYE 2011, ADM would have reduced its income tax expense in FYE 2011 by roughly $142 mil, or by 7% X $2,035 mil. And thus, its FYE 2011 After-tax Net Income would have increased by 7%, or by $142 mil divided by $2,018 mil. And its Equivalent Pretax Income in FYE 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of ADM, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used by ADM to move more of its foreign manufacturing, and the related jobs, back to the US.
CF Industries
Deerfield, IL-based Ag Chemical Manufacturer CF Industries generated Pretax Income of $2,646 mil in 2011, nearly all in the US. Its Total Income Tax Expense in 2011 was $927 mil, for an effective income tax rate of 35%. Its income tax rate benefited from the domestic production tax deduction, which gets increased under the President's Framework for Business Tax Reform. CF Industries’ After-tax Net Income in 2011 was $1,719 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of FYE 2011, CF Industries would have reduced its income tax expense in 2011 by roughly $185 mil, or by 7% X $2,646 mil. And thus, its 2011 After-tax Net Income would have increased by 11%, or by $185 mil divided by $1,719 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of CF Industries, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used by CF Industries to hire more full-time employees, and to fairly increase the pay and/or employee benefits of their employees.
Illinois Tool Works
Glenview, IL-based Machinery Manufacturer Illinois Tool Works generated US Pretax Income of $1,452 mil in 2011, 56% of its Worldwide Pretax Income of $2,593 mil.
Its Total Income Tax Expense in 2011 was only $576 mil, for an effective income tax rate of a very low 22.2%. This lower effective tax rate was helped by an Australian Court Decision, by non-taxable foreign interest income, by lower foreign tax rates, and by tax relief for US manufacturers, which will be increased under the President’s Framework for Business Tax Reform.
Illinois Tool Work’s After-tax Net Income in 2011 was $2,017 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, Illinois Tool Works would have reduced its income tax expense in 2011 by roughly $102 mil, or by 7% X $1,452 mil. And thus, its 2011 After-tax Net Income would have increased by 5%, or by $102 mil divided by $2,017 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Illinois Tool Works, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used by Illinois Tool Works to move more of its foreign manufacturing, and the related jobs, back to the US.
WW Grainger
Lake Forest, IL-based Wholesaler WW Grainger generated US Pretax Income of $918 mil in 2011, 87% of its Worldwide Pretax Income of $1,052 mil. Its Total Income Tax Expense in 2011 was $385 mil, for an effective income tax rate of 36.6%. WW Grainger’s After-tax Net Income in 2011 was $667 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of FYE 2011, WW Grainger would have reduced its income tax expense in 2011 by roughly $64 mil, or by 7% X $918 mil. And thus, its 2011 After-tax Net Income would have increased by 10%, or by $64 mil divided by $667 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of WW Grainger, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used by WW Grainger to hire more full-time employees, and to fairly increase the pay and/or employee benefits of their employees.
Discover Financial Services
Riverwoods, IL-based Credit Card Corp Discover Financial Services, which operates predominantly in the US, generated Pretax Income of $3,511 mil in FYE Nov 2011. Discover Financial Services Total Income Tax Expense in FYE 2011 was $1,284 mil, for an effective income tax rate of 36.6%. And thus, its After-tax Net Income for FYE 2011 was $2,227 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, Discover Financial Services would have reduced its income tax expense in FYE 2011 by roughly $246 mil, or by 7% X $3,511 mil. And thus, its FYE 2011 After-tax Net Income would have increased by 11%, or by $246 mil divided by $2,227 mil. And its Equivalent Pretax Income in FYE 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Discover Financial Services, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to cut interest rates and late fees charged to its credit card customers.
CME Group
Chicago IL-based CME Group, which operates predominantly in the US, generated Pretax Income of $1,937 mil in 2011.
CME Group’s Total Income Tax Expense in 2011 was a meager $122 mil, for an effective income tax rate of an incredibly low 6%. I'm not kidding.
When you review CME Group’s income tax footnote, it becomes clear why its effective income tax rate in 2011 is so incredibly low.
To quote this income tax footnote…..“In 2011, the effective tax rate was lower than the statutory tax rate because of a change in state tax apportionment which resulted in a reduction in the company's income tax provision of $646.0 million.”
I find it very hard to believe that the majority of Illinois citizens would buy into the State of Illinois granting CME Group a state income tax benefit totaling a massive $646 million through just the end of 2011. And no doubt, this state tax relief continues from here on out.
Something just doesn't smell right here.
With this huge State Income Tax Benefit, CME Group’s After-tax Net Income for 2011 was $1,814 mil.
If you assume that CME Group's US federal income tax rate would have dropped from 35% to 28% for all of 2011, CME Group would have reduced its income tax expense in 2011 by roughly $136 mil, or by 7% X $1,937 mil. And thus, its 2011 After-tax Net Income would have increased by 7%, or by $136 mil divided by $1,814 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
Allstate
Northbrook, IL-based Allstate Insurance Corp generated Pretax Income of $960 mil in 2011.
Its Total Income Tax Expense in 2011 was a modest $172 mil, for an effective income tax rate of only 17.9%.
When you review AllState Corp's income tax footnote, it becomes clear why its effective income tax rate in 2011 is so low.
In 2011, Allstate received a tax benefit of $131 mil due to its investment in tax exempt income. It also received tax credits in 2011 of $20 mil. And it also received a tax benefit from dividends received tax deductions in 2011 of another $17 mil.
Allstate also received tax benefits due to its investment in tax exempt income of $176 mil n 2010 and $252 mil in 2009.
I think these huge annual tax subsidies Allstate and other large financial institutions now receive should be eliminated.
And in addition, Allstate would be receiving another income tax benefit if the US federal income tax rate is reduced from 35% to 28%.
In all fairness, Allstate should be sharing some of its tax largesse with its customers in lower insurance premiums.
CNA Financial
Chicago,IL-based CNA Financial Insurance Corp generated $877 mil of Pretax Income in 2011.
Just like Allstate, CNA Financial also received huge tax benefits from tax exempt income which totaled $74 mil in 2011, $84 mil in 2010, and $119 in 2009.
And in addition, CNA Financial would be receiving another income tax benefit if the US federal income tax rate is reduced from 35% to 28%.
In all fairness, CNA Financial should be sharing some of its tax largesse with its customers in lower insurance premiums.
Exelon Corp
Chicago, IL-based Utility Giant Exelon generated Pretax Income of $3,952 mil in 2011. Its Total Income Tax Expense in 2011 was $1,457 mil, for an effective income tax rate of 36.9%. And thus its After-tax Net Income in 2011 was $2,495 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, Exelon Corp Energy would have reduced its income tax expense in 2011 by roughly 7% X $3,952 mil, or by $277 mil. And thus, its 2011 After-tax Net Income would have increased by 11%, or by $277 mil divided by $2,495 mil.
In addition, Exelon had a net Deferred Income Tax Liability of a gigantic $8,254 mil at the end of 2011, caused by its heavy investment in Property, Plant and Equipment, as do all utility corps. Thus, ignoring state income taxes, its US federal Deferred Income Tax Liability would have to be reduced by $1,651 mil, and thus additional After-tax Net Income, of $1,651 mil in 2011, due to this trade off in President's Framework For Business Tax Reform.
Therefore in total, the After-tax Net Income of Exelon would have increased by $1,928 mil in 2011, yeah that’s $1.9 bil, by this key trade off included in the Obama Administration's wise Framework For Business Tax Reform. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Exelon, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to substantially reduce the utility costs of Exelon's many customers.
Northern Trust
Dover Corp
United Continental
Integrys Energy Group
INDIANA
WellPoint
Indianapolis, IN-based Health Insurance Giant WellPoint generated Pretax income for 2011 of $3,958 mil.
Its Income Tax Expense in 2011 was $1,311 mil, for an effective income tax rate of 33.1%.
Tax Exempt Income and Dividends Received Tax Deductions resulted in WellPoint receiving tax benefits of $59 mil in 2011, of $53 mil in 2010, and of $52 mil in 2009.
Its effective income tax rate also benefited from favorable IRS Tax Audit Settlements of $50 mil in 2011, of $18 mil in 2010, and of $13 mil in 2009.
Its After-tax Net Income in 2011 was $2,647 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, WellPoint would have reduced its income tax expense in 2011 by a huge $277 mil, or by 7% X $3,958. And thus, its 2011 After-tax Net Income would have increased by 10%, or by $277 mil divided by $2,647 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of WellPoint, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to reduce the exorbitantly high insurance premiums that WellPoint charges. By such fair, patriotic actions, US Big Health Insurance Corps will bend down the long-term US health care cost curve, which is so critical to substantially reducing the US deficit and making US businesses, especially smaller ones, much more competitive.
Steel Dynamics
NiSource
ITT Educational Services
Vectren
Republic Airways
IOWA
Principal Financial Group
Des Moines, IA-based Principal Financial Group Insurance Corp generated Pretax Income of $988 mil in 2011.
Its Total Income Tax Expense in 2011 was a modest $236 mil, for an effective income tax rate of only 23.9%.
When you review Principal Financial Group’s income tax footnote, it becomes clear why its effective income tax rate in 2011 is so low.
In 2011, it received a tax benefit of $79 mil due to Dividend Received Tax Deductions. It also received in 2011 a tax benefit of $30 mil from its tax exempt investment income.
Principal Financial Group also received similar tax benefits in both 2010 and 2009.
I think these huge annual tax subsidies Principal Financial Group and other large financial institutions now receive should be eliminated.
And in addition, Principal Financial Group would be receiving another income tax benefit if the US federal income tax rate is reduced from 35% to 28%.
In all fairness, Principal Financial Group should be sharing some of its tax largesse with its customers in lower insurance premiums.
Rockwell Collins
MidAmerican Energy
MICHIGAN
Kellogg
Exceptionally well run, Battle Creek, MI-based Food Company generated US Pretax Income of $1,267 mil in 2011, 73% of its Worldwide Pretax Income of $1,732 mil.
Its Total Income Tax Expense in 2011 was $503 mil, for an effective income tax rate of 29%. This lower effective tax rate was helped by lower foreign tax rates and by the US tax deduction for Domestic Qualified Production Activities, which will be increased under the President’s Framework for Business Tax Reform.
Kellogg’s After-tax Net Income in 2011 was $1,229 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, Kellogg would have reduced its income tax expense in 2011 by roughly $89 mil, or by 7% X $1,267 mil. And thus, its 2011 After-tax Net Income would have increased by 7%, or by $89 mil divided by $1,229 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Kellogg, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used by Kellogg to move some of its foreign manufacturing, and the related jobs, back to the US.
DTE Energy
Detroit, MI-based Utility Corp DTE Energy generated Pretax Income of $987 mil in 2011. Its Total Income Tax Expense in 2011 was $267 mil, for an effective income tax rate of 27%. And thus its After-tax Net Income in 2011 was $720 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, DTE Energy would have reduced its income tax expense in 2011 by roughly 7% X $987 mil, or by $69 mil. And thus, its 2011 After-tax Net Income would have increased by 10%, or by $69 mil divided by $720 mil.
In addition, DTE Energy had a net Deferred Income Tax Liability of a huge $3,065 mil at the end of 2011, caused by its heavy investment in Property, Plant and Equipment, as do all utility corps. Thus, ignoring state income taxes, its US federal Deferred Income Tax Liability would have to be reduced by $613 mil, and thus additional After-tax Net Income, of $613 mil in 2011, due to this trade off in President's Framework For Business Tax Reform.
Therefore in total, the After-tax Net Income of DTE Energy would have increased by $682 mil in 2011 by this key trade off included in the Obama Administration's wise Framework For Business Tax Reform. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of DTE Energy, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to substantially reduce the utility costs of DTE Energy’s many financially struggling customers.
Ford Motor
Chrysler
CMS Energy
MINNESOTA
UnitedHealth Group
Minneapolis, MN-based Health Insurance Giant UnitedHealth Group generated Pretax income for 2011 of a monstrous $7,959 mil.
Its Income Tax Expense in 2011 was $2,817 mil, for an effective income tax rate of 35.4%.
Its effective income tax rate was lowered somewhat by tax benefits of $63 mil in 2011, $65 mil in 2010, and $70 mil in 2009 related to UnitedHealth Group’s Tax Exempt Income.
Its After-tax Net Income in 2011 was $5,142 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, UnitedHealth Group would have reduced its income tax expense in 2011 by a gigantic $557 mil, or by 7% X $7,959. And thus, its 2011 After-tax Net Income would have increased by 11%, or by $557 mil divided by $5,142 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of UnitedHealth Group, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to reduce the exorbitantly high insurance premiums that UnitedHealth Group charges. By such fair, patriotic actions, US Big Health Insurance Corps will bend down the long-term US health care cost curve, which is so critical to substantially reducing the US deficit and making US businesses, especially smaller ones, much more competitive.
Target
Minneapolis, MN-based Retailer Target, which just operates in the US, generated Pretax Income of $4,456 mil in FYE Jan 2012. Its Total Income Tax Expense was $1,527 mil, for an effective income tax rate of 34.3%. And thus its After-tax Net Income in FYE 2012 was $2,929 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, Target would have reduced its income tax expense in FYE 2012 by roughly 7% X $4,456 mil, or by $312 mil. And thus, its 2011 After-tax Net Income would have increased by 11%, or by $312 mil divided by $2,929 mil, as a result of this wise trade off. And its Equivalent Pretax Income in FYE 2012 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Target, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to move more of Target’s many part-time workers to full-time status, to elevate the wages of its workers to a much more livable status, to hire additional full-time workers, and to also reduce the prices it charges its customers.
US Bancorp
Minneapolis,MN-based Bank Giant US Bancorp, which operates just in the US, generated Pretax Income of a huge $6,629 mil in 2011.
US Bancorp’s Total Income Tax Expense in 2011 was only $721 mil, for an effective income tax rate of a modest 29.7%.
So what’s going on with US Bancorp’s modest effective income tax rate?
It’s all about tax subsidies that it, and many other large financial institutions, are blessed with.
The tax benefit US Bancorp received from Tax Credits totaled $458 mil in 2011, $462 mil in 2010, and $421 mil in 2009.
And the tax benefit US Bancorp received for Tax Exempt Income totaled another $226 mil in 2011, $214 mil in 2010, and $202 mil in 2009.
Anyway, US Bancorp’s After-tax Net Income for 2011 was $4,788 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, US Bancorp would have reduced its income tax expense in 2011 by roughly a huge $464 mil, or by 7% X $6,629 mil. And thus, its 2011 After-tax Net Income would have increased by 10%, or by $464 mil divided by $4,788 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In addition, US Bancorp has a Deferred Income Tax Liability related to its tax advantaged Leasing Activities of a monstrous $3,048 mil at 2011 year end. With the trade off in the President’s Framework for Business Tax Reform, this Deferred Income Tax Liability, which is set up using a 35% US federal income tax rate, will now be reduced to 28%, resulting in a one-time reduction in income tax expense, and a related increase in After-tax Net Income of roughly $610 mil, ignoring all state income tax effects.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of US Bancorp, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to write down the principal balances of underwater home mortgages, to permit underwater homeowners to refinance their mortgages at the existing lower interest rates, to make more loans to small businesses, and to also charge a more reasonable interest rate on small business loans.
Further, these huge annual tax subsidies US Bancorp and other large financial institutions now receive should be eliminated.
General Mills
Minneapolis, MN-based Food Company General Mills generated US Pretax Income of $2,145 mil in FYE May 2011, 88% of its Worldwide Pretax Income of $2,428 mil.
Its Total Income Tax Expense in FYE 2011 was $721 mil, for an effective income tax rate of 29.7%. This lower effective tax rate was helped by lower foreign tax rates and by the US tax deduction for Domestic Qualified Production Activities, which will be increased under the President’s Framework for Business Tax Reform.
General Mills' After-tax Net Income in FYE 2011 was $1,707 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of FYE 2011, General Mills would have reduced its income tax expense in FYE 2011 by roughly $150 mil, or by 7% X $2,145 mil. And thus, its FYE 2011 After-tax Net Income would have increased by 9%, or by $150 mil divided by $1,707 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
Best Buy
Travelers
Ameriprise Financial
Xcel Energy
OHIO
Procter & Gamble
Cincinnati, OH-based Consumer Product Manufacturing Giant Procter & Gamble (P&G) generated US Pretax Income of $8,983 mil in FYE June 2011, 59% of its Worldwide Pretax Income of $15,189 mil.
Its Total Income Tax Expense in FYE 2011 was $3,392 mil, for an effective income tax rate of a very low 22%. The brunt of this lower effective tax rate in FYE 2011was caused by the 8.0% effective tax rate reduction from the effect of having its foreign income taxed at much lower foreign income tax rates. This 8.0% foreign tax break equates to a massive $1,215 mil in foreign tax breaks for P&G in just the FYE ended 2011.
With this incredibly lucrative use of much lower foreign income tax rates, P&G’s cumulative unremitted foreign earnings totaled $35 bil at the end of June 2011.
In addition, P&G came out extremely well with the IRS and other taxing authorities. Its settlements with taxing authorities totaled $168 mil in 2011, $216 mil in 2010, and another $172 mil in 2009. P&G also received the tax benefit of another $207 mil for the most three recent years combined due to the positive effect of the lapsing of the statute of limitations. It's pretty clear to me that the IRS is working very well for the awesomely powerful 1% Corps like P&G.....not so well for the 99% small businesses and individuals.
Anyway, P&G’s After-tax Net Income in FYE 2011 was $11,797 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of FYE 2011, P&G would have reduced its income tax expense in FYE 2011 by roughly a gigantic $629 mil, or by 7% X $8,983 mil. And thus, its FYE 2011 After-tax Net Income would have increased by 5%, or by $629 mil divided by $11,797 mil. And its Equivalent Pretax Income in FYE 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of P&G, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used by P&G to move some of its foreign manufacturing, and the related jobs, back to the US.
And clearly the last two things the US needs now, which US House Leader Cincinnati-based John Boehner is intensely pushing for, is to either permit companies like P&G to repatriate, in a substantial tax holiday, its $35 bil of extremely low taxed foreign earnings sitting overseas, or to adopt a global territorial tax system, where companies like P&G are motivated even more lucratively to shift even more US income and the related US jobs overseas to foreign tax havens.
It's US Republican House and Senate self-interest positions like this, which is so economically detrimental to the 99%, that make it absolutely essential to have a substantial reconfiguration of both the US House and the US Senate in the November 2012 election. This is the only way the US is going to be great again economically. The Obama Administration needs to have a US Congress that it can work with to solve the country's pressing economic problems, not one that continually works against it.
Marathon Petroleum
Findlay, OH-based Marathon Petroleum Corp is a Refining, Marketing, and Transportation Business, which was spun off from Marathon Oil in 2011.
Marathon Petroleum generated Pretax Income of $3,719 mil in 2011. Its Total Income Tax Expense in 2011 was $1,330 mil, for an effective income tax rate of 35.8%. And thus its After-tax Net Income in 2011 was $2,389 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, Marathon Petroleum would have reduced its income tax expense in 2011 by roughly 7% X $3,719 mil, or by a huge $260 mil. And thus, its 2011 After-tax Net Income would have increased by 11%, or by $260 mil divided by $2,389 mil.
In addition, Marathon Petroleum had a net Deferred Income Tax Liability of $1,757 mil at the end of 2011, caused mostly by its heavy investment in Property, Plant and Equipment. Thus, ignoring state income taxes, its US federal Deferred Income Tax Liability would have to be reduced by $351 mil, and thus additional After-tax Net Income, of $351 mil in 2011, due to this trade off in President's Framework For Business Tax Reform.
Therefore in total, the After-tax Net Income of Marathon Petroleum would have increased by $611 mil in 2011 by this key trade off included in the Obama Administration's wise Framework For Business Tax Reform. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Marathon Petroleum, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to substantially reduce gas prices at the pump.
I do think a closer look at Marathon Petroleum’s net Deferred Income Tax Liability is warranted. The two huge pieces to it are the amount related to its Property, Plant and Equipment of $1,936 mil and to its Inventory of $610 mil. I think that both of these tax breaks result from flat out tax loopholes that need to be closed.
Cliff's Natural Resources
Cleveland, OH-based Metal Mining Corp Cliff’s Natural Resources generated US Pretax Income of $1,507 mil in 2011, 67% of its Worldwide Pretax Income of $2,242 mil.
Its Total Income Tax Expense in 2011 was $420 mil, for an effective income tax rate of a very low 18.7%. This lower effective tax rate was helped primarily by huge amounts of tax benefits from the Excess of Percentage Depletion over Cost Depletion, which totaled $153 mil in 2011, $103 mil in 2010, and $66 mil in 2009.
Thus, Cliff’s Natural Resources’ After-tax Net Income in 2011 was $1,822 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, Cliff’s Natural Resources would have reduced its income tax expense in 2011 by roughly $105 mil, or by 7% X $1,507 mil. And thus, its 2011 After-tax Net Income would have increased by 6%, or by $105 mil divided by $1,822 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In addition, Cliff’s Natural Resources had a net Deferred Income Tax Liability of $831 mil at the end of 2011, caused mostly by its heavy investment in Properties. Thus, ignoring state income taxes, its US federal Deferred Income Tax Liability would have to be reduced by $166 mil, and thus additional After-tax Net Income, of $166 mil in 2011, due to this trade off in President's Framework For Business Tax Reform.
Therefore in total, the After-tax Net Income of Cliff’s Natural Resources would have increased by $271 mil in 2011 by this key trade off included in the Obama Administration's wise Framework For Business Tax Reform. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
American Electric Power
Utility Corp Giant American Electric Power (AEP), is headquartered in Columbus, OH, but has utility customers in parts of 11 US States.
AEP generated Pretax Income of $2,367 mil in 2011. Its Total Income Tax Expense in 2011 was $818 mil, for an effective income tax rate of 34.6%. And thus its After-tax Net Income in 2011 was $1,549 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of 2011, AEP would have reduced its income tax expense in 2011 by roughly 7% X $2,367 mil, or by $166 mil. And thus, its 2011 After-tax Net Income would have increased by 11%, or by $166 mil divided by $1,549 mil.
In addition, AEP had a net Deferred Income Tax Liability of an absolutely gigantic $8,330 mil at the end of 2011, caused by its heavy investment in Property, Plant and Equipment, as do all utility corps. Thus, ignoring state income taxes, its US federal Deferred Income Tax Liability would have to be reduced by $1,666 mil, and thus additional After-tax Net Income, of $1,666 mil in 2011, due to this trade off in President's Framework For Business Tax Reform.
Therefore in total, the After-tax Net Income of AEP would have increased by $1,832 mil, yeah that’s $1.8 bil, in 2011 by this key trade off included in the Obama Administration's wise Framework For Business Tax Reform. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of AEP, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to substantially reduce the utility costs of AEP’s many financially struggling customers……and these utility customers span parts of an incredible 11 US States: Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia…..Whew!
Fifth Third Bancorp
Cardinal Health
KeyCorp
Huntington Bancshares
Macy's
Limited Brands
Kroger
Sherwin Williams
Progressive Corp
American Financial Group
Scripps Networks Interactive
JM Smucker
Timken
FirstEnergy
WISCONSIN
Kohl's Corp
Very well run, Menomonee Falls, WI-based Retailer Kohl’s, which just operates in the US, generated Pretax Income of $1,859 mil in FYE Jan 2012. Its Total Income Tax Expense was $692 mil, for an effective income tax rate of 37.2%. And thus its After-tax Net Income in FYE Jan 2012 was $1,167 mil.
If you assume the US federal income tax rate would have dropped from 35% to 28% for all of FYE Jan 2012, Kohl’s would have reduced its income tax expense in FYE Jan 2012 by roughly 7% X $1,859 mil, or by $130 mil. And thus, its FYE Jan 2012 After-tax Net Income would have increased by 11%, or by $130 mil divided by $1,167 mil. And its Equivalent Pretax Income in 2011 would have increased by substantially more.
In fairness to all of US society, some of these substantial additional continuing annual Equivalent Pretax Earnings increases of Kohl’s, resulting from this wise trade off included in the President's Framework For Business Tax Reform, should be used to move more of Kohl’s many part-time workers to full-time status, to elevate the wages of its workers to a much more livable status, to hire additional full-time workers, and to also reduce the prices it charges its customers.
Harley Davidson
Fiserv
Joy Global
Wisconsin Energy
Alliant Energy
Much more to come!
