Johnson and Johnson dominates the corporate landscape in New Jersey. It generated Pretax Income in 2011 of $16.7 bil, down 1% from 2010, but up 9% from 2009.
The remaining 51 New Jersey Corps generated Total Pretax Earnings in 2011 of $44.8 bil, up a very robust 19% over 2010, and up and even more robust 72% over 2009.
In deriving Pretax Income, I start with Pretax Income under Generally Accepted Accounting Principles (GAAP), and then exclude several clearly unusual very large items relative to Pretax Income, such as Asset Impairments, Gains and Losses on both Debt Retirements and Asset Dispositions, Acquired In Process Research and Development Charges, and Special Litigation Charges and Gains.
I use Pretax Income rather than After-tax Net Income, since so much of the change in effective income tax rates just happens due to financial engineering.
I excluded Corps in the Development Stage, and ones generating losses for many years.
New Jersey citizens should be extremely proud of the operating performance in the most recent two years of their fine New Jersey Corporations.
Clearly, the Obama Administration has created an economic environment that has permitted these New Jersey Corporations to flat-out flourish.
I think the only way to ensure that these fine New Jersey 51 Remaining Corps will be able to generate Total Pretax Earnings growth for the remainder of 2012 of at least 15%, and at the same time, also result in very robust US job creation, is for the US Congress to immediately pass the following economic initiatives:
- Extend the 100% first-year tax expensing of equipment and computer software investments made in the remainder of 2012. The CBO-scored cost should not be very significant.
- Substantially accelerate first-year tax depreciation on all new building and building remodeling investments made in the remainder of 2012, and rein in its CBO-scored cost, by lowering tax depreciation in years 2 through 10.
- Pass the Research and Experimentation Tax Credit for businesses for all 2012 expenditures, but substantially enhance it, especially for smaller businesses, and simplify it.
- Give small businesses, creating US jobs in 2012, a 10% tax credit.
- Give businesses a 20% income tax credit for the expenses of moving operations from overseas back to the US. And pay for this by removing income tax deductions businesses now get for moving their production from the US to overseas. This one's pretty cool, where the pay-for is also positive to the US job count.
- Permit US taxpayers, who have their mortgage loans financed by either Fannie Mae or Freddie Mac, to have their mortgages refinanced at the current lower prevailing market interest rates.
- Pass the substantial amount of school construction infrastructure fix ups for K-12 Schools and for Community Colleges, which is in the American Jobs Act (AJA). And all of these school investments should occur in 2012, and mostly from now through the end of the summer of 2012.
The above first two will result in explosive US economic stimulation, particularly when viewed in light of future business income tax reform, which should result in a much lower business income tax rate in 2013 and going forward.
Thus, businesses will get both the 100% first-year tax depreciation on equipment purchases and the substantially accelerated first-year tax deprecation on building investments in 2012 at a business income tax rate reduction which is much higher in 2012, and then the future earnings from these equipment and building investments will generate post 2012 earnings streams from these investments which are taxed at a much lower post tax reform business income tax rate. Wow, now that is bold economic stimulation.
This above bold economic stimulation effectively works like a back-door, stealth investment tax credit in 2012, due to the expected future reduction in business income tax rates starting in 2013 under any reasonable business tax reform.
The investment tax credit was used first by President Jack Kennedy in the early 1960s to get the US out of a deep recession. And President Lyndon Johnson also used it after he took over. The end result was US real GDP growth which averaged 4.85% from 1960 to 1968. And the US unemployment rate dropped substantially while this investment tax credit was in effect during the 1960s.
This kind of very robust US real GDP growth, markedly north of 4%, and for an extended period of time, is precisely what the US economy now needs. And this very strong GDP growth is by far the best way to substantially reduce the massive US Deficit.
But these explosive economic benefits to US businesses from this accelerated first-year tax depreciation does not necessarily mean that there will be resultant substantial US job creation from it.
Thus, I would make sure that the largest of the US Corps…..say the top 50 or so…..would get these first-year accelerated tax depreciation benefits in 2012 only if they add a sufficient number of US full-time workers in 2012.
And similar economic benefits will result from the Research and Experimentation Expenditures. Not only will businesses get higher Research Tax Credits in 2012 for making investments in 2012, but they will also get 2012 tax deductions from these Research investments made in 2012 at the higher business income tax rate in 2012, and then subsequently get the future earnings stream from these Research investments taxed at the lower post tax reform business income tax rate that will be applicable starting in 2013 and going forward.
| Obama | |||||
| Bump | |||||
| PTI(L) | PTI(L) | ||||
| 1 Year | 2 Year | ||||
| PTI(L) | PTI(L) | PTI(L) | % | % | |
| 2011 | 2010 | 2009 | Change | Change | |
| mils $s | mils $s | mils $s | |||
| New Jersey | |||||
| The Dominant One | |||||
| Johnson and Johnson | 16,683 | 16,830 | 15,369 | -1% | 9% |
| The Rest | |||||
| Merck | 8,276 | 4,601 | 4,598 | 80% | 80% |
| Prudential Financial | 5,117 | 4,392 | 1,524 | 17% | 236% |
| Honeywell | 4,084 | 3,193 | 2,705 | 28% | 51% |
| Medco Health Solutions | 2,376 | 2,334 | 2,103 | 2% | 13% |
| Chubb | 2,199 | 2,988 | 2,962 | -26% | -26% |
| Automat Data Processing | 1,933 | 1,863 | 1,900 | 4% | 2% |
| Tyco Intl | 1,893 | 1,270 | 935 | 49% | 102% |
| Becton Dickinson | 1,716 | 1,661 | 1,579 | 3% | 9% |
| Bed Bath & Beyond | 1,569 | 1,293 | 985 | 21% | 59% |
| Celgene | 1,524 | 1,134 | 976 | 34% | 56% |
| Ingersoll-Rand | 1,260 | 1,011 | 594 | 25% | 112% |
| Cognizant Technology Solutions | 1,169 | 879 | 637 | 33% | 84% |
| Campbell Soup | 1,168 | 1,242 | 1,079 | -6% | 8% |
| Quest Diagnostics | 1,092 | 1,184 | 1,228 | -8% | -11% |
| CR Bard | 758 | 718 | 672 | 6% | 13% |
| Wyndham WW | 650 | 563 | 493 | 15% | 32% |
| Hudson City Bancorp | 646 | 892 | 874 | -28% | -26% |
| Vornado Realty LP | 604 | 562 | 119 | 7% | 408% |
| Watson Pharmaceuticals | 535 | 282 | 363 | 90% | 47% |
| PHH | 534 | 542 | 560 | -1% | -5% |
| Church & Dwight | 495 | 418 | 392 | 18% | 26% |
| Verisk Analytics | 460 | 407 | 265 | 13% | 74% |
| Rockwood Holdings | 456 | 205 | 37 | 122% | 1132% |
| WABCO Holdings | 405 | 223 | (28) | 82% | 1546% |
| Dun & Bradstreet | 368 | 388 | 433 | -5% | -15% |
| CIT Group | 325 | 779 | (3,411) | -58% | 110% |
| Hertz | 324 | (15) | (177) | 2260% | 283% |
| Warner Chilcott | 300 | 307 | 166 | -2% | 81% |
| Avis Budget | 291 | 104 | (77) | 180% | 478% |
| Sealed Air | 281 | 382 | 330 | -26% | -15% |
| PBF Energy | 243 | (44) | (6) | 652% | 4150% |
| Foster Wheeler | 235 | 263 | 455 | -11% | -48% |
| Cytec | 233 | 195 | (11) | 19% | 2218% |
| John Wiley & Sons | 231 | 200 | 164 | 16% | 41% |
| Valley National Bank | 197 | 187 | 168 | 5% | 17% |
| Knight Capital | 187 | 150 | 233 | 25% | -20% |
| Curtiss Wright | 185 | 158 | 145 | 17% | 28% |
| Covance | 177 | 163 | 228 | 9% | -22% |
| Toys R Us | 150 | 132 | 344 | 14% | -56% |
| Par Pharmaceuticals | 139 | 135 | 126 | 3% | 10% |
| Innophos Holdings | 130 | 66 | 104 | 97% | 25% |
| Investors Bancorp | 125 | 99 | 59 | 26% | 112% |
| Pinnacle Foods Finance | 124 | 75 | 25 | 65% | 396% |
| Childrens Place | 109 | 135 | 124 | -19% | -12% |
| Covanta | 107 | 106 | 104 | 1% | 3% |
| Lincoln Educational Services | 41 | 124 | 84 | -67% | -51% |
| Franklin Credit Holding | 22 | (56) | (361) | 139% | 106% |
| Asta Funding | 18 | 5 | (148) | 260% | 112% |
| Trump Entertainment Resorts | (19) | (59) | (125) | 68% | 85% |
| Hovnanian Enterprises | (292) | (295) | (1,082) | 1% | 73% |
| Everest Reinsurance | (373) | 229 | 525 | -263% | 171% |
| Total all 51 Rest | 44,777 | 37,770 | 25,971 | 19% | 72% |
| Grand Total all 52 | 61,460 | 54,600 | 41,340 | 13% | 49% |
