The extremely well run Microsoft dominates the corporate landscape in Washington. It generated Pretax Income in 2011 of a massive $28.1 bil, up a very respectable 12% over 2010, and up a very robust 42% from 2009.
The remaining 21 Washington Corps, generated Total Pretax Earnings in 2011 of $14.3 bil, up very sharply by 24% over 2010, and up an off-the-charts 187% over 2009. Boeing led the strong earnings charge here, followed by One-of-a-kind Retailer Starbucks and by Paccar.
And this 187% total earnings growth of these 21 remaining Washington Corps is softened by investor favorite Amazon.com, whose 2011 reported earnings are burdened by huge charges from its major technological infrastructure investment initiatives.
When customer favorite Costco is 16th on this list of 22 Washington Corps for percentage earnings growth in the past two years, even though it has a very robust earnings growth of 38%, you know you have just an absolutely stellar group of Washington Corps.
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, and Gains and Losses on both Debt Retirements and Asset Dispositions.
Washington citizens should be extremely proud of the operating performance in the most recent two years of their superb Washington Corporations.
Clearly, the Obama Administration has created an economic environment that has permitted these Washington Corporations to flat-out flourish.
Washington is very fortunate to have as its US Senators, one of the most effective twosomes of any US State: Maria Cantwell and Patty Murray. These two have been very strong advocates and have done a great job in helping foster the operating success of these superb Washington companies. And the effectiveness of these two US Senators tell you why the country is shouting out for more women in the US Congress…..they work well across the aisle and are not ideologues.
And the following Washington members in the US House…..Jim McDermott, Jay Inslee, Norm Dicks, Rick Larsen, and Adam Smith…..have all been particularly strong advocates for these fine Washington companies, as well as for smaller Washington businesses.
The very effective Washington Governor Chris Gregoire also was a major contributor to the off-the-charts success of these fine Washington companies.
With this extremely high 187% Pretax Earnings growth of these 21 Washington State Corps in the most recent two years, which includes very solid Pretax Earnings growth of 24% in 2011 over 2010, there is no way that this robust 24% total earnings growth in 2011 will continue in 2012.
And this earnings growth has markedly decelerated in the 1Q of 2012.
- 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.
Below here is the Washington State headquarters location of each of these 22 Washington Corporations.
| Washington Corporation | Washington HQs |
| Microsoft | Redmond |
| Boeing | Seattle |
| Costco | Issaquah |
| Starbucks | Seattle |
| Paccar | Bellevue |
| Nordstrom | Seattle |
| Amazon.com | Seattle |
| Expeditors Intl | Seattle |
| Expedia | Bellevue |
| Alaska Air | Seattle |
| F5 Networks | Seattle |
| Symetra Financial | Bellevue |
| Plum Creek Timber | Seattle |
| Coinstar | Bellevue |
| Esterline Technologies | Bellevue |
| Weyerhaeuser | Federal Way |
| Itron | Liberty Lake |
| Clearwater Paper | Spokane |
| Sterling Financial | Spokane |
| Clearwire Corp | Kirkland |
| Late Additons | |
| Washington Federal | Seattle |
| HomeStreet | Seattle |
| 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 | |||
| Washington | |||||
| The Dominant One | |||||
| Microsoft | 28,071 | 25,013 | 19,821 | 12% | 42% |
| The Rest | |||||
| Boeing | 5,393 | 4,507 | 1,731 | 20% | 212% |
| Costco | 2,383 | 2,054 | 1,727 | 16% | 38% |
| Starbucks | 1,811 | 1,437 | 560 | 26% | 223% |
| Paccar | 1,507 | 660 | 109 | 128% | 1283% |
| Nordstrom | 1,119 | 991 | 696 | 13% | 61% |
| Amazon.com | 934 | 1,497 | 1,161 | -38% | -20% |
| Expeditors Intl | 638 | 564 | 403 | 13% | 58% |
| Expedia | 402 | 426 | 320 | -6% | 26% |
| Alaska Air | 394 | 406 | 203 | -3% | 94% |
| F5 Networks | 361 | 238 | 132 | 52% | 173% |
| Symetra Financial | 279 | 289 | 181 | -3% | 54% |
| Plum Creek Timber | 192 | 203 | 205 | -5% | -6% |
| Coinstar | 185 | 109 | 69 | 70% | 168% |
| Esterline Technologies | 158 | 155 | 118 | 2% | 34% |
| Weyerhaeuser | 144 | 87 | (855) | 66% | 117% |
| Itron | 104 | 121 | (33) | -14% | 415% |
| Clearwater Paper | 71 | 76 | 105 | -7% | -32% |
| Sterling Financial | 39 | (224) | (583) | 117% | 107% |
| Clearwire Corp | (2,049) | (2,070) | (1,208) | 1% | -70% |
| Total all 19 Rest | 14,065 | 11,526 | 5,041 | 22% | 179% |
| Late Additions | |||||
| Washington Federal | 174 | 37 | 76 | 370% | 129% |
| HomeStreet | 16 | (34) | (157) | 147% | 110% |
| Grand Total all 21 Rest | 14,255 | 11,529 | 4,960 | 24% | 187% |
