Update on Nebraska Big Corps Have Paid Modest Amounts of State Income Taxes

This post updates my earlier post on Nebraska Big Corps and State Corporate Income Taxes Paid.

In performing a quick review of SEC filings of large corps with an SEC State Location Code in Nebraska, I found 4 large corps with Total Consolidated Core Pretax Income of more than $5 bil each, for the most recent 12 years. My definition of Core Pretax Income excludes large Asset Impairment Charges.

Below here is the effective state corporate income tax rates paid, which are computed by dividing the current state income tax paid by the consolidated core pretax income, both in total for the past twelve years for each of these 4 large Nebraska Corps. These 4 large Nebraska Corps below had a weighted average state corporate effective income tax rate paid of a very modest 1.45%, or a huge 81% discount to Nebraska’s current state corporate income tax rate of 7.81%.

….……………………...............Current………………................State
….…………………….................State………Consolidated…..Effective
….…………………….................Tax………........Pretax………Tax Rate
….…………………….................Paid…….........Income………..Paid
….……………….…...................(Millions of Dollars)

..4. TD Ameritrade................243……........6,163……......3.94%
..3. ConAgra Foods................286….........12,143……......2.36%
..2. Berkshire Hathaway……1,339*……...111,960……......1.20%*
..1. Union Pacific…...............341**..........21,893……......1.56%

Total all 4………..................2,209…........152,159……......1.45%

* Includes both Current State Income Tax Paid or Payable and Deferred State Income Taxes. Thus, Berkshire Hathaway’s Current State Income Tax Paid or Payable should be less than the above $1,339 mil, and its effective state corporate income tax rate paid should be lower than the above 1.20%.

** Union Pacific’s State Income Tax Payable for 2007 was estimated based on State vs. Federal Income Tax Payable mix trends in the two years just before and just after 2007.

For the most recent year, the effective state corporate income taxes paid rate by these 4 large Nebraska Corps was an even lower 1.20%.

And then, below here is a summary of what I call one reasonably fair way to measure the Total State Corporate Income Tax Loopholes Taken by the 4 large Nebraska Corps. In estimating what I think is a fair measurement of State Corporate Income Tax Loopholes Taken, for ease of computation, I started by multiplying the current Nebraska Corporate State Income Tax Rate of 7.81% by the total Consolidated Pretax Income of each large Nebraska Corps for the last twelve years. Then, I subtracted the actual total State Income Tax Paid by each of these Corps for the same twelve years.

……………………….........................NE………..State……......Resultant
………………….........….............Corporate..Effective..........Higher
………………….........………….........Tax……..Tax Rate…......State Tax
………………..........…………...........Rate……....Paid….....Last 12 Years
………………………………………………….......................(Mils of dollars)

1.. Berkshire Hathaway………....7.81%......1.20%*.........7,405*
2.. Union Pacific......................7.81%.......1.56%............1,369
3.. ConAgra Foods…................7.81%.......2.71%..............662
4.. TD Ameritrade…………………7.81%.......3.94%..............238

Total all 4………………………………………9,675 (yeah, $9.7 bil)

* Includes both Current State Income Tax Paid or Payable and Deferred State Income Taxes. Thus, Berkshire Hathaway’s effective state corporate income tax rate paid should be lower than the above 1.20%, and its estimated Total State Corporate Income Tax Loophole Taken should be higher than the above $7,405 mil.

For the most recent six years, the related estimated total State Corporate Income Tax Loopholes Taken, as I have defined them above, by these 4 large Nebraska Corps, was $6.7 bil, as compared to $9.7 bil for the past twelve years shown above.

So just how does Nebraska Big Corps’ low effective corporate state income tax rate paid stack up against other large States? Well, only Indiana clearly surpasses Nebraska in being a Corporate State Income Tax Haven for its Big Corps.

Here is a summary of the effective State Corporate Income Tax Rates Paid by Big Corps in all 18 US States where their Big Corps generated more than $100 bil of Total Core Pretax Income over the most recent 12 years:

.....................................Most Recent Twelve Years
.............................#....State&Local.......................Effective
............................of......Corporate........Core......State&Local
............................Big.......Income.........Pretax......Tax Rate
.......State............Corps....Tax Paid.......Income........Paid
..........................................(Millions of Dollars)

Indiana...................6..........1,280.........100,120......1.28%
Connecticut.............9.........4,958.........354,085......1.40%
Texas....................44........19,743......1,377,291......1.43%
Nebraska................4...........2,209.........152,159......1.45%
Michigan.................7..........1,752.........106,479......1.65%
Washington.............9..........6,168.........324,385......1.90%
Pennsylvania.........17..........4,159.........209,556......1.98%
Illinois..................24........10,960.........491,682......2.23%
Ohio......................17.........7,321..........321,950......2.27%
New Jersey...........18........12,217.........534,077......2.29%
Virginia..................9..........3,422.........132,009......2.59%
Georgia.................10..........8,543.........323,370......2.64%
New York..............45........42,291.......1,583,149......2.67%
California..............41.........31,961......1,175,517......2.72%
Minnesota.............14..........8,555.........309,056......2.77%
Arkansas.................4..........5,896.........208,554......2.83%
North Carolina.......13........12,355.........395,255......3.13%
Missouri..................8..........3,303........101,428.......3.26%

Of the above 18 States, three of them (Texas, Washington and Ohio) don’t have State Corporate Income Taxes. Thus, more to the point, here are the Percentage Discounts that the Effective State Corporate Income Tax Rates Paid are to the Statutory State Corporate Income Tax Rate at the beginning of 2011 of the Big Corps in the remaining 15 large States:

..............................Effective.......State........State
...........................State&Local..Corporate.....Tax
...............................Income.....Income....Loophole
..............................Tax Rate........Tax......Percentage
................................Paid...........Rate.......Discount

.1. Indiana................1.28%........8.50%........85%
.2. Nebraska.............1.45%........7.81%.........81%
.3. Connecticut.........1.40%........7.50%........81%
.4. Pennsylvania.......1.98%........9.99%........80%
.5. New Jersey..........2.29%........9.00%.......75%
.6. Michigan..............1.65%........6.04%.......73%
.7. Minnesota...........2.77%........9.80%.......72%
.8. Illinois................2.23%.........7.30%.......69%
.9. California............2.72%........8.84%........69%
10. New York...........2.67%........7.10%*......62%
11. Virginia..............2.59%........6.00%........57%
12. Arkansas............2.83%........6.50%........56%
13. Georgia..............2.64%........6.00%........56%
14. North Carolina....3.13%........6.90%........55%
15. Missouri.............3.26%........6.25%........48%

* It should be pointed out that City and County Statutory Income Tax Rates are not included above, even though these income taxes paid are included in the above Effective State and Local Income Tax Rates Paid. Thus the above Percentage Discounts should be much higher for States, like New York, that have a significant City or County Income Tax Rate.

The devastation of the US economy hasn’t hit Nebraska hard. Its State Unemployment Rate in Dec 2010 was only 4.4%. Businesses in Nebraska are also doing pretty well. This shows the high correlation between how businesses are doing in a State and the State’s unemployment rate. A very similar trend occurred in the State of Minnesota.

I still think that Nebraska would benefit from the Obama Administration’s Energy Tax Credit proposal on business investments in Green Energy Commercial Building Retrofit Upgrades.

Update on Virginia Big Corps Have Paid Mostly Modest Amounts of State Corporate Income Taxes

This post updates my earlier post on Virginia Big Corps and State Corporate Income Taxes they pay.

In performing a quick review of SEC filings of large corps with an SEC State Location Code in Virginia, I found 9 large corps with Total Consolidated Core Pretax Income of more than $5 bil each, for the most recent 12 years. My definition of Core Pretax Income here excludes large Asset Impairment Charges.

Below here is the effective state corporate income tax rates paid, which are computed by dividing the current state income tax paid by the consolidated core pretax income, both in total for the past twelve years for each of these 9 large Virginia Corps. These 9 large Virginia Corps below had a weighted average state corporate effective income tax rate paid of a 2.59%, or a 57% discount to Virginia’s current state corporate income tax rate of 6.00%.

….……………………......................Current……...Core……......State
….……………………........................State.....Consolidated..Effective
….……………………........................Tax………...Pretax………Tax Rate
….……………………........................Paid……....Income……….Paid
….……………….…..........................(Millions of Dollars)

..9. NVR……................................424…........6,173…….....6.87%
..8. Altria Group(2008-2009).....462………..9,666…….....4.78%
..7. Dominion Resources.............951……...24,825*.........3.83%
..6. Gannett……...........................628…......17,924*……....3.50%
..5. Norfolk Southern…................438…......15,116………...2.90%
..4. SLM.......................................231……...12,993……......1.78%
..3. Capital One Financial.............317……...21,532*….......1.47%
..2. AES..........................................11……...13,560*…......0.08%
..1. Genworth Financial(01-09)...(40)……...10,220………..(0.39)%

Total all 9.……….......................3,422…...132,009…….....2.59%

* Excludes large Asset Impairment Charges

For the most recent year, the effective state corporate income taxes paid by these 9 large Virgina Corps was an even lower 2.24%.

And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loopholes Taken by the 7 large Virginia Corps with total such tax loopholes of at least $300 mil each for the past twelve years. In estimating what I think is a fair measurement of State Corporate Income Tax Loopholes Taken, for ease of computation, I started by multiplying the current Virginia Corporate Income Tax Rate of 6.00% by the total Consolidated Pretax Income of each large Virginia Corp for the last twelve years. Then, I subtracted the actual total State Income Tax Paid by each of these Corps for the same twelve years.


……………………….........................VA…….....State……..Resultant
………………….........….............Corporate..Effective.......Higher
………………….........………….........Tax……..Tax Rate…...State Tax
………………..........…………...........Rate……....Paid…....Last 12 Years
…………………………………………………....................(Millions of dollars)

1.. Capital One Financial..........6.00%.......1.47%.............975
2.. AES……...............................6.00%.......0.08%............803
3.. Genworth Financial............6.00%......(0.39)%............653
4.. SLM………….........................6.00%.......1.78%.............549
5.. Dominion Resources……….6.00%.........3.83%.............539
6.. Norfolk Southern……….......6.00%........2.90%.............469
7.. Gannett…………………..........6.00%.........3.50%............447

Total all 7…………………………………………4,434 (yeah, $4.4 bil)

For the most recent six years, the related estimated total State Corporate Income Tax Loopholes Taken, as I have defined them above, by these 7 large Virginia Corps, was $2.6 bil, as compared to $4.4 bil for the past twelve years.

Excluded from the above lists is McLean, VA based Freddie Mac, even though it generated total pretax profits of $43.8 bil for the nine years from 1998 to 2006. More than offsetting these profits were its huge pretax losses totaling $72.9 bil for the most recent three years from 2007 to 2009.

Once the US Government gets Fannie, Freddie, and the horrible housing crisis back on track, I don’t see why Fannie shouldn’t then start paying income taxes to Washington DC, and why Freddie shouldn’t then start paying more state income taxes. Likewise, I think that Reston, VA based SLM (Sallie Mae), included in the above lists, should be paying much more state corporate income taxes to many US States. All three of these companies are getting the benefit of many city and state services, so why shouldn’t they have to pay for them, like other companies do?

Looking at the first above list, you’ll find NVR, a Reston, VA based home builder. I think it is really telling that this is the only home builder in the country I have seen which made over $5 bil in Total Pretax Income for the most recent twelve years. Also, unlike the other home builders, NVR has made a profit in each of the most recent twelve years.

I think the above NVR consistent success story is a salient insight into why there is such a huge economic difference to working people between those living outside the Beltway versus inside the Beltway. Things just aren’t that bad economically in the greater DC area.

Let me add to this thought. Falls Church, VA based US government contractor General Dynamics was also excluded from the above list, even though it generated Total Pretax Income of $24.2 bil in the past twelve years. It didn't disclose all of its Current State Corporate Income Tax amounts, which frankly I don’t understand. It is able to pass on its state corporate income tax costs to the US government in its US government contracts.

General Dynamics has rocked in the Great Recession, with Pretax Profits of $7,117 mil for the most recent two years of 2008 and 2009. In comparison, in the decade earlier two years (1998 and 1999), its Pretax Profits were only $2,030 mil. That’s a 251% profit increase in the very troubled past decade.

But it’s not just General Dynamics that has flourished during this Great Recession, but also the other huge US government contractors. The other three huge US government contractors with a substantial portion of their sales to the US government are Lockheed Martin, Northrop Grumman and Raytheon.

These four US government contractors generated Net Sales in just 2009 of $128.7 bil, an increase of 91% over a decade ago in 1999 of $67.5 bil. That’s bad enough, but much worse is that the Total Pretax Income of these four US government contractors totaled $13.0 bil in 2009, up a much more substantial 227% over the $4.0 bil earned a decade earlier in 1999. Given how horrible the US economy is, there is no way that the US government should be permitting its huge US government contractors to be generating obscene profits like this, on the backs of US citizens, and also on the back of the US Deficit.

The only industry I have seen that has topped the huge US defense contractors in obscene profit growth of the past decade is US Big Oil.

And below here are the 4 Medium-sized Virginia Corps, with Pretax Core Income for the most recent 6 years of more than $2 bil, but with Pretax Income for the past 12 years of less than $5 bil, and thus not included in the earlier shown 9 Big Virginia Corps.

........................................Most Recent Six Years
.......................................State&Local....(PTI).........Effective
.......................................Corporate........Core......State&Local
..........State.......................Income.........Pretax......Tax Rate
.......Corporations.............Tax Paid.......Income........Paid
...........................................(Millions of Dollars)

Computer Sciences(07-09)..(134)*….....2,927........(4.58)%
NII Holdings..............................2..........2,428..........0.08%
Advance Auto Parts.................87..........2,251..........3.86%
Dollar Tree..............................116..........2,053..........5.65%
VA Total for all 4......................71..........9,659..........0.74%

* Includes adjustments for uncertain tax positions

Anyway, 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, including computer software investments, they make.....they could either take 100% first year tax expensing, or they could instead choose a refundable investment tax credit.

The reason the refundable investment tax credit option is needed is that businesses that are in federal tax loss situations cannot get the economic benefit of the 100% first-year tax expensing.

Just like in so many states in the country, Virginia companies, as well as its residents, have been hurt severely by high energy costs. It think the Obama Administration’s Energy Tax Credit Proposal for all businesses that make Green Energy Commercial Building Upgrades is one that would really help Virginia.

And then to pay for this wise Energy Tax Credit, closing US Big Oil tax loopholes make all the sense in the world. US Big Oil and Gas companies, 35 in total, 25 of which are located in Texas, have seen their pretax core earnings increase by an incredible 712% in the past decade. And the US government rewards them for these windfall profits by granting them many lucrative tax incentives for doing just that….LIFO Inventory, Percentage Depletion, Domestic Production Tax Deduction, and many others. Incredible!

And US Big Oil companies are able to unreasonably shift income overseas, thereby reducing the US federal income taxes they pay. This needs to be fixed. The percentage of their worldwide profit that is included is their US income is substantially lower than the percentage of their worldwide sales that are made in the US. That makes no economic sense to me….there is no way such an enormous gap should be permitted.

And that past decade 712% earnings increase for US Big Oil, 35 companies in all, with 25 of them located in Texas, is for the two-year period 2008 and 2009 over the two-year period 1998 and 1999. So what's happened in 2010? It's gotten worse. Let me explain.

Of the 30 Dow Stocks, 23 have December year ends. Of those 23, only 3 (Coke, Merck and Kraft) haven't released their December 2010 earnings yet. Here's the annual Pretax Earnings of the 20 that did already release their December 2010 earnings.

.......................................Pretax Income
......................................2010.......2009....% Change
...................................(millions of dollars)
Big Oil
Exxon Mobil.................52,959.....34,777....+52%
Chevron........................32,055....18,528.....+73%
Total 2 Big Oil................85,014.....53,505.....+59%

Non-Big Oil
JPMorganChase...........24,859.....16,067......+55%
IBM..............................19,723.....18,138.........+9%
AT&T............................18,238.....18,518..........-2%
JNJ...............................16,947.....15,755........+8%
Intel.............................16,369......5,704......+187%
GE................................14,208......9,995........+42%
Verizon........................12,684.....13,520..........-6%
Bank of America...........11,077*.....4,360.....+154%
Pfizer.............................9,422.....10,827.........-13%
McDonalds....................7,000......6,487..........+8%
United Technologies......6,538......5,760........+14%
American Express..........5,964......2,841......+110%
3M.................................5,755......4,632.......+24%
Boeing...........................4,507......1,731......+160%
Travelers.......................4,306......4,711...........-9%
Caterpillar.....................3,750........569.......+559%
Dupont..........................3,711......2,184........+70%
Alcoa...............................548.....(1,498)......+137%
Total 18 Non-Big Oil..185,606...140,301.......+32%

* Excludes $12.4 bil Goodwill Impairment Charge

Well, when you look at the above numbers, you have to be impressed with the substantial overall earnings growth in 2010. And earnings drive stock prices, thus it's easy to see why the Dow Stock Index is up so steeply in the past two years, helped immensely by wise Obama Administration economic policies, very beneficial to Big Corps. And I think you are going to see the stock market move up even more dramatically through the end of the Obama Administration’s second term. By the end of President Obama’s second term, it wouldn’t surprise me if there will be some very successful business CEO’s pushing to change the law, and letting President Obama run for a third Presidential term. That’s how happy they will be, and also how smart they are.

But the economic problem confronting us now is that all boats haven't risen, only the Big Corp boats, and particularly the Big Oil Corp Yachts.

But more to the point, look how Big Oil dominates the Dow Industrial companies.....it was nothing like that a decade earlier. The average 2010 Pretax Earnings of the two Big Oil Dow companies (Exxon Mobil and Chevron) is $42.5 bil, which is 4.1 times the $10.3 bil average 2010 earnings of the above 18 Non-Big Oil Dow companies.

And then look at the earnings increase trend. The 18 Non-Big Oil Dow companies exerienced a very impressive 32% earnings growth in 2010. But that was nothing compared to the 59% earnings growth of the 2 Big Oil Dow companies.

OK, so Exxon Mobil and Chevron tower over the rest of the Dow here. Surely that's it for Big Oil? Well, it's not. ConocoPhillips, the next in the US Big Oil pecking order, generated Pretax Earnings in 2010 of $19,750 mil, which is higher than 17 of the 18 non-Big Oil companies shown here. And how did ConocoPhillips do with its earnings growth? Well, its earnings grew by 106% in 2010. And so many other Big Oil related companies also had incredibly stellar earnings amounts and increases in 2010.

Unless Big Oil’s devastation to the US economy gets fixed, it wouldn’t surprise me that you will start seeing financially desperate people massively picketing US Big Oil Corporate Offices, as well as the offices of the US Congress members, who are unabashed supporters of US Big Oil. And there are so many extremely bright, disillutioned college graduates of the past three years or so.....I think you'll see that they will eventually rise up against Big Oil, as will many college students, keenly aware that their friends graduating from college have not been able to get decent jobs.

Clearly, it would be wise for the US government to take action that would reverse this horrible income shift trend, which has severely damaged not just more than 95% of US businesses, but has also devastated US individuals, and all of federal, state and local governments. Not only has it resulted in much higher US unemployment, much higher US underemployment, and lower median US wages, but it also has resulted in a substantially higher portion of a family's take-home pay being used to pay for energy costs than that of a decade ago.

When energy costs are so high, and also increasing so much, as well as being so volatile, it is very difficult for someone to start a business. The risk/reward of taking a chance and starting a new business in this sky-high energy cost environment is dramatically tilted toward the risk side right now, whereas over a decade ago, it was clearly tilted toward the reward side. I think the US government should institute economic initiatives to make the risk/reward of starting a new business a lot more attractive…..that’s where the jobs will come from…..and the key are initiatives to reduce the after-tax energy cost of starting a new business, or of expanding an existing business.

As a first step, I think it only makes sense for the US government to eliminate the many massive tax loopholes that are granted to Big Oil and Gas Corps to reward them for generating these windfall profits. And the money raised here should be given as wise, lucrative tax incentives to all US businesses that effectively reduce their energy costs.

Such a tax plan, is a ten-fer:
.....higher US real GDP growth
.....lower US unemployment
.....lower US underemployment
.....higher US median wages
.....lower portion of take-home pay needed to fund energy costs
.....higher after-tax corporate profits for more than 95% of US businesses
.....significant reduction in the US deficit
.....better State government coffers
.....more competitive US firms
.....and a huge step toward US becoming energy independent

Update on Connecticut Big Corps Have Paid So Very Little in State Corporate Income Taxes

In performing a quick review of SEC filings of large corps with an SEC State Location Code in Connecticut, I found 9 corps with State Corporate Income Tax Loopholes Taken, at least the way I measure them, of at least $200 mil each, in the last dozen 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 each of these 9 Big Connecticut Corps. These 9 Big Connecticut Corps below had a weighted average state corporate effective income tax rate paid of an incredibly low 1.40%, or a massive 81% discount to Connecticut’s current state corporate income tax rate of 7.50%.

….……………………..................Current…………………......State
….……………………....................State...Consolidated..Effective
….……………………....................Tax……….Pretax………Tax Rate
….……………………....................Paid……..Income……….Paid
….……………….…....................(Millions of Dollars)
..9. Pitney Bowes....................411............8,793.........4.67%
..8. UST..................................214............6,367.........3.36%
..7. Aetna…………………….........462…….....16,827……..2.75%
..6. Xerox……………..................126……......7,590………1.66%
..5. GE..................................3,156........235,906.….....1.34%
..4. United Technologies.........487……....48,572……...1.00%
..3. Praxair...............................94…….....11,952…......0.79%
..2. Interactive Brokers Grp……..8….........5,550……...0.14%
..1. Hartford Financial Services…0….......12,528……...0.00%

Total all 9………....................4,958….....354,085……...1.40%

For the most recent six years, the weighted state corporate effective income tax rate paid by these 9 Big Connecticut Corps was an even lower 1.11%.

And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loopholes Taken by each of these 9 Big Connecticut Corps for the past twelve years. In estimating what I think is a fair measurement of State Corporate Income Tax Loopholes Taken, for ease of computation, I started by multiplying the current Connecticut Corporate Income Tax Rate of 7.50% by the total Consolidated Pretax Income of each Big Connecticut Corp for the last twelve years. Then, I subtracted the actual total State and Local Corporate Income Taxes Paid by each of these Corps for the same twelve years.

………………………........................CT…….....State……..Resultant
………………….........…............Corporate…Effective.......Higher
………………….........…………........Tax……..Tax Rate…...State Tax
………………..........…………..........Rate……....Paid…....Last 12 Years
…………………………………………………….................(Millions of dollars)

1.. GE………..............................7.50%.......1.34%.........14,537
2.. United Technologies ..........7.50%.......1.00%..........3,156
3.. Hartford Financial Services.7.50%......0.00%.............940
4.. Praxair….............................7.50%......0.79%.............802
5.. Aetna…...............................7.50%......2.75%..............800
6.. Xerox……………………............7.50%......1.66%..............443
7.. Interactive Brokers Group…7.50%......0.14%.............408
8.. UST.....................................7.50%.......3.36%.............264
9.. Pitney Bowes.......................7.50%.......4.67%.............248
Total all 9………………………………………….21,598 (yeah, $21.6 bil)

For the most recent six years, the estimated total State Corporate Income Tax Loopholes Taken by these 9 Connecticut Big Corps was $13.2 bil, as compared to $21.6 bil for the past twelve years.

So just how does Connecticut Big Corps’ low effective corporate state income tax rate paid stack up against other large States? Well, only Indiana clearly surpasses Connecticut in being a Corporate State Income Tax Haven for its Big Corps.

Here is a summary of the effective State Corporate Income Tax Rates Paid by Big Corps in all 18 US States where their Big Corps generated more than $100 bil of Total Core Pretax Income over the most recent 12 years:

.....................................Most Recent Twelve Years
.............................#....State&Local.......................Effective
............................of......Corporate........Core......State&Local
............................Big.......Income.........Pretax......Tax Rate
.......State............Corps....Tax Paid.......Income........Paid
..........................................(Millions of Dollars)

Indiana...................6..........1,280.........100,120......1.28%
Connecticut.............9.........4,958.........354,085......1.40%
Texas....................44........19,743......1,377,291......1.43%
Nebraska................4...........2,209.........152,159......1.45%
Michigan.................7..........1,752.........106,479......1.65%
Washington.............9..........6,168.........324,385......1.90%
Pennsylvania.........17..........4,159.........209,556......1.98%
Illinois..................24........10,960.........491,682......2.23%
Ohio......................17.........7,321..........321,950......2.27%
New Jersey...........18........12,217.........534,077......2.29%
Virginia..................9..........3,422.........132,009......2.59%
Georgia.................10..........8,543.........323,370......2.64%
New York..............45........42,291.......1,583,149......2.67%
California..............41.........31,961......1,175,517......2.72%
Minnesota.............14..........8,555.........309,056......2.77%
Arkansas.................4..........5,896.........208,554......2.83%
North Carolina.......13........12,355.........395,255......3.13%
Missouri..................8..........3,303........101,428.......3.26%

Of the above 18 States, three of them (Texas, Washington and Ohio) don’t have State Corporate Income Taxes. Thus, more to the point, here are the Percentage Discounts that the Effective State Corporate Income Tax Rates Paid are to the Statutory State Corporate Income Tax Rate at the beginning of 2011 of the Big Corps in the remaining 15 large States:

..............................Effective.......State........State
...........................State&Local..Corporate.....Tax
...............................Income.....Income....Loophole
..............................Tax Rate........Tax......Percentage
................................Paid...........Rate.......Discount

.1. Indiana................1.28%........8.50%........85%
.2. Nebraska.............1.45%........7.81%.........81%
.3. Connecticut.........1.40%........7.50%........81%
.4. Pennsylvania.......1.98%........9.99%........80%
.5. New Jersey..........2.29%........9.00%.......75%
.6. Michigan..............1.65%........6.04%.......73%
.7. Minnesota...........2.77%........9.80%.......72%
.8. Illinois................2.23%.........7.30%.......69%
.9. California............2.72%........8.84%........69%
10. New York...........2.67%........7.10%*......62%
11. Virginia..............2.59%........6.00%........57%
12. Arkansas............2.83%........6.50%........56%
13. Georgia..............2.64%........6.00%........56%
14. North Carolina....3.13%........6.90%........55%
15. Missouri.............3.26%........6.25%........48%

* It should be pointed out that City and County Statutory Income Tax Rates are not included above, even though these income taxes paid are included in the above Effective State and Local Income Tax Rates Paid. Thus the above Percentage Discounts should be much higher for States, like New York, that have a significant City or County Income Tax Rate.

And below here are the 5 Medium-sized Connecticut Corps, with Pretax Core Income for the most recent 6 years of more than $2 bil, but with Pretax Income for the past 12 years of less than $5 bil, and thus not included in the earlier shown 9 Big Connecticut Corps.

........................................Most Recent Six Years
.......................................State&Local....(PTI).........Effective
.......................................Corporate........Core......State&Local
..........State.......................Income.........Pretax......Tax Rate
.......Corporations.............Tax Paid.......Income........Paid
...........................................(Millions of Dollars)

WR Berkley...............................0.............4,199........0.00%
Odyssey Re Holdings................0.............3,099.........0.00%
Amphenol..............................44*............2,480.........1.77%
IMS Health.............................41*............2,334.........1.76%
Stanley Black & Decker............51.............2,054.........2.48%
CT Total for all 5.................136...........14,166.........0.96%

* Includes both State Current Income Taxes and State Deferred Income Tax Expense

Connecticut’s Big Corps, as well as its residents, have been hurt severely by high energy costs. It think the Obama Administration’s Energy Tax Credit Proposal for all businesses that make Green Energy Commercial Building Upgrades is one that would really help Connecticut.

It’s a ten-fer:
.....higher US real GDP growth
.....lower US unemployment
.....lower US underemployment
.....higher US median wages
.....lower portion of take-home pay needed to fund energy costs
.....higher after-tax corporate profits for more than 95% of US businesses
.....significant reduction in the US deficit
.....better State government coffers
.....more competitive US firms
.....and a huge step toward US becoming energy independent

Update on Indiana: a Clear State Income Tax Haven for its Big Corps

In performing a quick review of SEC filings of large corps with an SEC State Location Code in Indiana, I found 9 large corps with Total Consolidated Core Pretax Income of more than $3 bil each, for the most recent 12 years. My definition of Core Pretax Income excludes both large Asset Impairment Charges, as well as large Acquired In Process R&D Charges.

Below here is the effective state corporate income tax rates paid, which are computed by dividing the current state income tax paid by the consolidated core pretax income, both in total for the past twelve years for each of these 9 large Indiana Corps. These 9 large Indiana Corps below had a weighted average state corporate effective income tax rate paid of only 1.58%, or a huge 81% discount to Indiana’s current state corporate income tax rate of 8.50%.

….……………………..........................Current………Core…….......State
….……………………............................State.....Consolidated..Effective
….……………………............................Tax………...Pretax……..Tax Rate
….……………………............................Paid……....Income……….Paid
….……………….…..............................(Millions of Dollars)

..9. Steel Dynamics…........................190*….......3,221……....5.90%
..8. Duke Energy Indiana / PSI..........161………...3,229……....4.99%
..7. Guidant(1998-2005)..................187...........5,466..........3.42%
..6. NiSource…..................................190…........5,668……….3.35%
..5. Mead Johnson Nutrition(05-09).101……......3,155……....3.20%
..4. Zimmer Holdings........................201……......8,084……....2.49%
..3. WellPoint....................................649……....29,665……....2.19%
..2. Cummins……………………...............68*……......5,566……….1.22%
..1. Eli Lilly......................................(15)...........45,671…….(0.03)%

Total all 9………............................1,732…......109,725……....1.58%

* Includes both Current State Income Tax Paid or Payable and Deferred State Income Tax Expense. Thus, Current State Income Tax Paid, as well as the effective state corporate income tax paid rates, should both be lower than the above amounts for these two Corps.

For the most recent year, the effective state corporate income taxes paid by these 9 large Indiana Corps was an even lower 0.96%.

Eli Lilly is one of only several very profitable Big Corps in the country, that instead of paying state corporate income taxes, has received state corporate income tax refunds in total for the last 12 years.

It is difficult for me to understand how a State like Indiana could be so mean-spirited to lay off all of these State Educators and other State Employees, and also cut State Medicaid Benefits, while at the same time, permit a large Corporation like Eli Lilly, that generated a massive $45.7 bil of core pretax income in the past 12 years, to not pay a dime of State Income Tax in total for those 12 years.

And the same point can be made about Health Insurance giant WellPoint, which paid a total State effective state income tax rate of only 2.19% on a massive $29.7 bil of core pretax income in the last 12 years. And, WellPoint generated 100% of these earnings in the US....Go figure! Whatever happened to fairness?

Clearly, this shows that it’s a broken Indiana State Government on fiscal matters. It's all about the effectiveness of State lobbying, and the State government being much more concerned about its two Giant State Corporations that dominate the Indiana landscape (Eli Lilly and WellPoint) than they are of regular citizens of the State of Indiana.

And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loopholes Taken by the 6 large Indiana Corps with total such state tax loopholes of at least $250 mil each for the past twelve years. In estimating what I think is a fair measurement of State Corporate Income Tax Loopholes Taken, for ease of computation, I started by multiplying the current Indiana Corporate Income Tax Rate of 8.50% by the total Consolidated Core Pretax Income of each large Indiana Corp for the last twelve years. Then, I subtracted the actual total State Income Tax Paid by each of these Corps for the same twelve years.


……………………….........................IN…….....State……..Resultant
………………….........….............Corporate..Effective.......Higher
………………….........………….........Tax……..Tax Rate…...State Tax
………………..........…………...........Rate……....Paid…....Last 12 Years
…………………………………………………....................(Millions of dollars)

1.. Eli Lilly…………....................8.50%.......(0.03)%..........3,897
2.. WellPoint............................8.50%.........2.19%...........1,873
3.. Zimmer Holdings................8.50%.........2.49%..............486
4.. Cummins.............................8.50%.........1.22%..............405
5.. NiSource…..........................8.50%..........3.35%.............292
6.. Guidant...............................8.50%.........3.42%.............278

Total all 6…………………………………………7,230 (yeah, $7.2 bil)

For the most recent six years, the related estimated total State Corporate Income Tax Loopholes Taken, as I have defined them above, by these 6 large Indiana Corps, was $4.8 bil, as compared to $7.2 bil for the past twelve years.

And then here’s an updated list of the 6 Indiana Big Corps with Total Core Pretax Income of more than $5 bil for the most recent 12 years. This list is sorted by Pretax Income.

….…………………….....................Current……...Core…......State&Loc
….……………………...................State&Loc.Consolidated..Effective
….…………………….......................Tax………...Pretax……..Tax Rate
….…………………….......................Paid……....Income……….Paid
….……………….….........................(millions of dollars)

..1. Eli Lilly.................................(15)..........45,671……..(0.03)%
..2. WellPoint..............................649……....29,665……....2.19%
..3. Zimmer Holdings..................201……......8,084……....2.49%
..4. NiSource…............................190…........5,668………..3.35%
..5. Cummins……………………..........68..……....5,566………..1.22%
..6. Guidant(1998-2005)............187............5,466..........3.42%

Total all 6………........................1,280…......100,120……....1.28%

So just how does Indiana Big Corps’ low effective corporate income tax rate paid stack up against other large States? Well, Indiana is clearly the country’s State Corporate Income Tax Haven for Big Corps.

Here is a summary of the effective State Corporate Income Tax Rates Paid by Big Corps in all 18 US States where their Big Corps generated more than $100 bil of Total Core Pretax Income over the most recent 12 years:

.....................................Most Recent Twelve Years
.............................#....State&Local.......................Effective
............................of......Corporate........Core......State&Local
............................Big.......Income.........Pretax......Tax Rate
.......State............Corps....Tax Paid.......Income........Paid
..........................................(Millions of Dollars)

Indiana...................6..........1,280.........100,120......1.28%
Connecticut.............9.........4,958.........354,085......1.40%
Texas....................44........19,743......1,377,291......1.43%
Nebraska................4...........2,209.........152,159......1.45%
Michigan.................7..........1,752.........106,479......1.65%
Washington.............9..........6,168.........324,385......1.90%
Pennsylvania.........17..........4,159.........209,556......1.98%
Illinois..................24........10,960.........491,682......2.23%
Ohio......................17.........7,321..........321,950......2.27%
New Jersey...........18........12,217.........534,077......2.29%
Virginia..................9..........3,422.........132,009......2.59%
Georgia.................10..........8,543.........323,370......2.64%
New York..............45........42,291.......1,583,149......2.67%
California..............41.........31,961......1,175,517......2.72%
Minnesota.............14..........8,555.........309,056......2.77%
Arkansas.................4..........5,896.........208,554......2.83%
North Carolina.......13........12,355.........395,255......3.13%
Missouri..................8..........3,303........101,428.......3.26%

Of the above 18 States, three of them (Texas, Washington and Ohio) don’t have State Corporate Income Taxes. Thus, more to the point, here are the Percentage Discounts that the Effective State Corporate Income Tax Rates Paid are to the Statutory State Corporate Income Tax Rate at the beginning of 2011 of the Big Corps in the remaining 15 large States:

..............................Effective.......State........State
...........................State&Local..Corporate.....Tax
...............................Income.....Income....Loophole
..............................Tax Rate........Tax......Percentage
................................Paid...........Rate.......Discount

.1. Indiana................1.28%........8.50%........85%
.2. Nebraska.............1.45%........7.81%.........81%
.3. Connecticut.........1.40%........7.50%........81%
.4. Pennsylvania.......1.98%........9.99%........80%
.5. New Jersey..........2.29%........9.00%.......75%
.6. Michigan..............1.65%........6.04%.......73%
.7. Minnesota...........2.77%........9.80%.......72%
.8. Illinois................2.23%.........7.30%.......69%
.9. California............2.72%........8.84%........69%
10. New York...........2.67%........7.10%*......62%
11. Virginia..............2.59%........6.00%........57%
12. Arkansas............2.83%........6.50%........56%
13. Georgia..............2.64%........6.00%........56%
14. North Carolina....3.13%........6.90%........55%
15. Missouri.............3.26%........6.25%........48%

* It should be pointed out that City and County Statutory Income Tax Rates are not included above, even though these income taxes paid are included in the above Effective State and Local Income Tax Rates Paid. Thus the above Percentage Discounts should be much higher than that shown above for States, like New York, that have a significant City or County Income Tax Rate.

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, drastically cutting Medicaid and Unemployment Benefits, or by substantially increasing college tuition at state universities. And particularly in Indiana’s case, I think a wisely targeted, very healthy refundable investment tax credit would be very helpful to prop up the 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, and computer software investments, they make.....they could either take 100% first year expensing, or they could instead choose a refundable investment tax credit.

The reason a refundable investment tax credit works much better than 100% expensing for many small and medium-sized manufacturing companies is that in this very troubled economy, many of these manufacturers can't realize the tax benefit of 100% expensing, since they have tax losses. A 35% first-year refundable tax credit option, gives these manufacturers an equivalent first-year tax benefit. And then to yield no CBO-scored cost to the US government over the next ten years, no tax depreciation should be allowed related to this equipment purchase.

US Big Oil has really hurt Indiana businesses and Indiana residents. And at the same time, US Big Oil’s pretax core earnings increased by 712% in the past decade. Whew!

And these US Big Oil Corps got all of these massive tax incentives to generate these windfall profits, including a huge annual Domestic Production Tax Deduction, when at the same time, they were applying all of this Energy Cost pressure on US Manufacturers, which ended up reducing these Manufacturing Companies Domestic Production Tax Deduction….that’s just crazy.

And then US Big Oil got Percentage Depletion Deductions, which means they are able to tax deduct in total more than the actual costs they incurred….Again, that’s just crazy.

And then there’s LIFO Inventory on their Oil Inventory, which let’s them cost out their Inventory at the very low oil prices of decades ago, with the resultant huge tax sheltering of their income….again, this is just crazy.

And there are other tax loopholes that US Big Oil enjoys….it’s all about the incredible power they have over many in the US Congress, scared to death of the power of US Big Oil.

Thus, as a first step, I think the Obama Administration’s proposal for a very healthy energy tax credit incentive to all businesses that do Commercial Building Green Energy Retrofit Upgrades is a very prescient one. I think the whole country could get behind this wise initiative. And it is fairly paid for, on a very conservative CBO-scored basis, by closing some of the US Big Oil tax loopholes. I think it’s a great strategy….. Clean Energy Tax Incentives paid for by closing Dirty Energy Tax Loopholes.

It’s a ten-fer:
.....higher US real GDP growth
.....lower US unemployment
.....lower US underemployment
.....higher US median wages
.....lower portion of take-home pay needed to fund energy costs
.....higher after-tax corporate profits for more than 95% of US businesses
.....significant reduction in the US deficit
.....better State government coffers
.....more competitive US firms
.....and a huge step toward US becoming energy independent

Update on Florida Big Corps and State Corporate Income Tax Rates Paid

This post updates my earlier post on Florida Big Corps and state corporate income taxes paid.

In performing a quick review of SEC filings of large corps with an SEC State Location Code in Florida, I found 7 Florida Corps with Total Consolidated Pretax Income of more than $5 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 and local corporate income tax paid by the consolidated pretax income, both in total for the past twelve years for each of these 7 large Florida Corps. These 7 Florida Corps below had a weighted average state corporate effective income tax rate paid of a modest 2.06%, or a hefty 63% discount to Florida’s low current state corporate income tax rate of 5.50%.

….……………………...........................Current………………….......State
….…………………….............................State....Consolidated..Effective
….…………………….............................Tax………..Pretax…….Tax Rate
….…………………….............................Paid……...Income……….Paid
….……………….….............................(Millions of Dollars)

..7. Publix Super Markets…………......647.…….14,783…….....4.38%
..6. AutoNation……………………..........219.……...5,382*……....4.07%
..5. Fidelity National Financial.........268**…...7,268……......3.69%
..4. CSX….........................................255……...12,133……......2.10%
..3. FPL Group..................................281***...16,103…….....1.75%
..1. Royal Caribbean****……….............0………..5,157………..0.00%
..1. Carnival*****……………..................0………20,192………..0.00%

Total all 7………............................1,670…......81,018…….....2.06%

* Exclusive of Asset Impairment Charges of $2.1 bil
** Both current state income tax and deferred state tax expense combined
*** Also includes provision for unrecognized state income tax benefits
**** Royal Caribbean is a Liberia Corp, with an SEC location code in Florida, and with both an SEC business and mailing address in Miami, FL
***** Carnival is a Panama Corp, with an SEC location code in Florida, and with both an SEC business and mailing address in Miami, FL

And below here are the 10 Medium-sized Florida Corps, with Pretax Core Income for the most recent 6 years of more than $1.7 bil, but with Pretax Income for the past 12 years of less than $5 bil, and thus not included in the above 7 Big Florida Corps.

........................................Most Recent Six Years
.......................................State&Local....(PTI).........Effective
.......................................Corporate........Core......State&Local
..........State.......................Income.........Pretax......Tax Rate
.......Corporations.............Tax Paid.......Income........Paid
...........................................(Millions of Dollars)

Harris Corp................................91..........3,333..........2.73%
Darden Restaurants..................144.........3,053..........4.72%
Health Management Associates..77.........2,155..........3.57%
Ryder System.............................40.........2,036..........1.96%
Raymond James Financial..........91..........1,978..........4.60%
Lender Processing Services........91..........1,880..........4.84%
Fidelity National Info Services...91..........1,856..........4.90%
TECO Energy..............................38..........1,835..........2.07%
Roper Industries........................37..........1,794..........2.06%
Office Depot................................50..........1,742..........2.87%
FL Total for all 10.....................750........21,662..........3.46%

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.

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.

I think I would target wise energy tax credits for businesses. Florida businesses have been crushed by sky-high energy costs. Florida businesses and residents get a double whammy from Big Oil. First, they get whacked by monstrous energy costs, that pad the bottom-line profits of US Big Oil, whose core pretax earnings are up 712% in the past decade. And second, they get piled on, due to the devastating aftershocks of the Gulf Oil spill.

There is one thing I am really befuddled by. The Florida State Governor wants to reduce Florida’s State Corporate Income Tax Rate from 5.5% to 3.0%. The 5.5% is one of the very lowest in the country. But as you can see from the above, the 7 largest Florida Corps are paying only a 2.06% effective state corporate income tax rate. So the idea to balance Florida’s State Budget is to reduce this already low 2.06% effective state corporate income tax rate paid even more? The math just doesn’t work out. I think Florida’s Governor is understating the financial wisdom of Florida residents.

Looking at how the US government could help out the State of Florida, I think 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 refundable investment tax credit. The reason it is better for companies to have this choice is that 100% tax expensing of equipment doesn’t economically benefit companies that are in a tax loss situation.

In the Florida Gulf Region directly impacted by the Gulf Oil spill, I think I would give bonus investment tax credit percentages for capital expenditures made, and I would also give bonus tax depreciation for real property additions made in the rental property, retail, lodging and leisure industries.

In a very positive development for States like Florida, I do like it that the Obama Administration seems to be now putting additional pressure on both Fannie Mae and Freddie Mac to write down the home mortgage loan principal balances of underwater home properties. When you think about it, Fannie Mae and Freddie Mac are now in essence the US government.

The greedy large banks, like Wells Fargo, Bank of America and JPMorgan Chase, still are reluctant to write down their mortgage loan principal balances on underwater properties, particularly so on second mortgages. I think I would reluctantly consider giving these selfish banks a federal tax incentive to do so, such as a temporary acceleration of their federal income tax loan loss provision deduction. This can be easily structured at no CBO scored cost to the US Government over the ten-year CBO scoring period.

In another very positive development for States like Florida, the FASB has changed its position on how financial institutions are to carry some of their loans on their balance sheets, switching from a fair market value approach to an amortized cost approach. I think the FASB’s previous accounting position contributed significantly to both the severity of the original US financial crisis, as well as to the extremely prolonged nature of this horrible financial crisis.

Update on Ohio Big Corps Have Paid Modest Amounts of State and Local Corporate Income Taxes

This post updates my previous post on Ohio Big Corps.

In performing a quick review of SEC filings of large corps with an SEC State Location Code in Ohio, I found 21 large corps with Total Consolidated Core Pretax Income of more than $4 bil, for the most recent 12 years. My definition of Pretax Core Income excludes large Asset Impairment Charges, particularly those related to Goodwill Impairments.

Below here is the effective state corporate income tax rates paid, which are computed by dividing the current state and local corporate income tax paid by the consolidated core pretax income, both in total for the past twelve years for each of these 21 large Ohio Corps. These 21 large Ohio Corps below had a weighted average state and local corporate effective income tax rate paid of a modest 2.27%.

….……………………..................Current…………………......State
….……………………....................State...Consolidated..Effective
….……………………....................Tax……….Pretax………Tax Rate
….……………………....................Paid……..Income……….Paid
….……………….…....................(Millions of Dollars)

21. First Energy………………....1,047……...16,613………..6.30%
20. Macy’s…………………….........730……....12,318*………5.93%
19. Abercrombie & Fitch...........238….......4,610………..5.16%
18. Limited Brands….................564……...12,203………..4.62%
17. Sherwin Williams.................275….......6,837………..4.02%
16. Cintas…………………..............172…........4,850………...3.55%
15. Kroger…………......................641…......18,518*...…….3.46%
14. Cardinal Health...................488……...17,663……......2.76%
13. Keycorp…….........................335….....12,650*….......2.65%
12. Duke Energy Ohio/Cinergy..147..........5,997*..........2.45%
11. National City Corp…............497……..24,178……......2.06%
10. Parker Hannifin……………......161….......8,143……......1.98%
..9. American Electric Power.....276……..17,237…….....1.60%
..8. Fifth Third Bancorp……….....244……..16,432*..……...1.48%
..7. Procter&Gamble...............1,765…..120,702……......1.46%
..6. Owens Illinois Group..............69.........5,002*..........1.38%
..5. Eaton.....................................82……….8,539……......0.96%
..4. American Financial Group.....19……….4,635……......0.41%
..1. Nationwide Financial Svcs…....0……….4,805……......0.00%
..1. Cincinnati Financial................0**......6,984............0.00%
..1. The Progressive Corp..............0……...11,934……......0.00%

Total all 21………....................7,750…....340,850…….....2.27%

* Exclusive of large Asset Impairment Charges
** No mention of State Income Taxes, therefore assumed none were paid.

For the most recent year, the weighted state corporate effective income tax rate paid by these 21 large Ohio Corps was an even lower 1.45%.

There is a massive divergence between the state and local corporate income tax rates paid by Ohio’s retailers and that paid by its financial companies. Ohio retailers have paid much higher state and local corporate income tax rates, as you can see by three Ohio retailers being in the top four in the above list. On the other hand, four financial companies are at the very bottom of the above list.

And there are so few manufacturers on the above list. The severe recession has really devastated Ohio’s manufacturing sector, just like it has hurt manufacturers all throughout the country’s Rust Belt….particularly in Pennsylvania, Michigan, Wisconsin, Illinois amd Indiana.

Only six of the 50 US States now don't have state corporate income taxes. Ohio is one of the six, since it switched from a Franchise Tax to now some version of a Gross Receipts Tax, which it phased-in starting in 2005. However, many Ohio Big Corps still pay Corporate State Income Taxes to other states. These 44 US States plus Washington DC, which have state corporate income taxes, have an average Corporate State Income Tax Rate of 7.44%, which is close to the related median tax rate of 7.30%.

It seems to me that Ohio’s switch from an income-based Franchise Tax to a Gross Receipts Tax has substantially benefited the giant, powerful Procter & Gamble, at the expense of nearly all other Ohio’s manufacturers. Procter & Gamble’s net margin percentage (i.e. Pretax Income divided by Net Sales) just towers over all other Ohio manufacturers, as you can see from the following table.

……………………………………………..........Most Recent Two Years…...
……………………………………………………...Pretax……....................Net
......Ohio Corp………………...HQs……....Income….Net Sales….Margin
…………………………………………..............(millions of dollars)

Procter&Gamble.....Cincinnati...29,460...155,632...18.9%

Ohio's Next 14 Largest Traditional Manufacturers
Owens Illinois…………....Perrysburg……1,313…….14,952……8.8%
Parker Hannifin…………..Cleveland……..1,437……20,302…...7.1%
Eaton……………………......Cleveland……..1,443…….27,249……5.3%
Timken…………………......Canton…………...346……....8,183……4.2%
Owens Corning…………...Toledo…………...199……...10,650…..1.9%
Goodyear Tire…………....Akron…………..(171)….....35,789….(0.5)%
AK Steel……………….......West Chester….(104)……..11.721….(0.9)%
Worthington Industries.Columbus……...(63)……....4,574…..(1.4)%
Polyone………………….....Avon Lake…….(116)……....4,800….(2.4)%
Cooper Tire…………….....Findlay………...(142)……....5,815….(2.4)%
Ferro……………………......Cleveland……...(100)……...3,903….(2.6)%
Nacco Industries………..Cleveland……...(392)……...5,976….(6.6)%
NewPage Holding……….Miamisburg…...(512)……....7,462….(6.9)%
Dana Holding………….....Maumee……..(1,098)….....13,323…(8.2)%

Total 14 Other Than P&G..............2,040.....174,699.....1.2%

Whereas, for the two most recent years, these above 14 largest Ohio traditional manufacturers other than Procter & Gamble had total net sales of $174,699 mil, 12% above that of Procter & Gamble, these 14 companies only had total Pretax Income of $2,040 mil, a miniscule 7% of Procter & Gamble’s Pretax Income of $29,460 mil. Thus, the huge, very powerful Procter & Gamble cleans up with the new Ohio Gross Receipts Tax vs. the previous Franchise Tax, which was based on income. And these other manufacturers get nailed with substantial Ohio Gross Receipts Tax, even though their profit is very modest. And 9 of these 14 manufacturers even had Pretax Losses for the most recent two years.

Particularly in these very troubled, jobless recovery economic times, especially for manufacturers, it seems to me that another really good argument for Ohio to have a State Corporate Income Tax, rather than a Gross Receipts Tax, is that when the giant Procter & Gamble repatriates any of its massive amounts of presently Unremitted Foreign Earnings, the State of Ohio’s financial coffers should be significantly enhanced, if the Ohio State legislature were to enact it wisely.

Here’s Procter & Gamble’s Unremitted Foreign Earnings amount at the end of its four most recent fiscal years:

June 30, 2010…..$30 bil
June 30, 2009…..$25 bil
June 30, 2008…..$21 bil
June 30, 2007…..$17 bil

Now that is what I call a huge amount of Unremitted Foreign Earnings. It’s also what I call substantial annual growth in the build up of this key Unremitted Foreign Earnings number. Just think what Procter & Gamble’s Unremitted Foreign Earnings will be down the road.

In its fiscal year ended June 30, 2006, Procter & Gamble repatriated $7.2 bil of its foreign earnings. In its annual report footnotes, there is no mention of any state income tax paid connected with this foreign earnings repatriation. My hunch is that is so because Ohio switched to a Gross Receipts Tax from its previous Income-based Franchise Tax.

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 significantly increasing state university tuition.

And particularly in Ohio’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 the very troubled Rust Belt manufacturers, like those in Ohio.

I think many people have missed the key point that 100% first-year tax expensing of equipment gives no economic benefit to the many manufacturers in a US federal tax loss situation.

I wouldn't give the bonus investment tax credit percentage to huge companies like Procter & Gamble. I think something has seriously gone wrong when one company like Procter & Gamble is able to generate pretax profits which are more than 14 times the total profits of the 14 next largest manufacturers in Ohio.

Here’s an updated list of the 17 Ohio Big Corps with Total Core Pretax Income of more than $5 bil for the most recent 12 years. This list is sorted by Pretax Income.

….…………………….....................Current……...Core…......State&Loc
….……………………...................State&Loc.Consolidated..Effective
….…………………….......................Tax………...Pretax……..Tax Rate
….…………………….......................Paid……....Income……….Paid
….……………….….........................(millions of dollars)

Procter & Gamble.........................1,765......120,702.......1.46%
National City Corp...........................497........24,178.......2.06%
Kroger.............................................641........18,518.......3.46%
Cardinal Health...............................488........17,663.......2.76%
American Electric Power................276........17,237.......1.60%
FirstEnergy..................................1,047........16,613.......6.30%
Fifth Third Bancorp.........................244........16,432.......1.48%
Keycorp.........................................335........12,650.......2.65%
Macy's............................................730........12,318........5.93%
Limited Brands................................564.......12,203.......4.62%
Progressive Corp................................0........11,934.......0.00%
Eaton...............................................82..........8,539.......0.96%
Parker Hannifin...............................161.........8,143........1.98%
Cincinnati Financial............................0.........6,984.......0.00%
Sherwin Williams............................275.........6,837.......4.02%
Duke Energy Ohio/Cinergy..............147.........5,997.......2.45%
Owens Illinois Group.........................69.........5,002.......1.38%
OH Total for all 17 Corps............7,321......321,950......2.27%

And below here is a listing of the 8 Ohio Mid-sized Corps with Total Core Pretax Income for the most recent 6 years of at least $2 bil each, but which had Total Core Pretax Income for the most recent 12 years of less than $5 bil, and thus weren’t included in the above list of the 17 Very Big Ohio Corps.

........................................Most Recent Six Years
.......................................State&Local.....................Effective
.......................................Corporate........Core......State&Local
..........State.......................Income.........Pretax......Tax Rate
.......Corporations.............Tax Paid.......Income........Paid
...........................................(Millions of Dollars)

American Financial Group.....15............3,386..........0.44%
Abercrombie & Fitch...........138............3,002..........4.60%
Cintas....................................98............2,758..........3.55%
Cliffs Natural Resources.........17............2,429..........0.70%
Scripps Ntwks Interactive......83............2,361..........3.52%
Lubrizol.................................16............2,156**.......0.74%
J M Smucker..........................38............2,044..........1.86%
E W Scripps............................99............1,999**.......4.95%
OH Total for all 8...............504..........20,135..........2.50%

** Excludes large Asset Impairment Charges

When you review the above two lists of the 25 Big and Mid-sized Ohio Corps, you have to be impressed with the quality and excellent financial performance.

But this strong financial performance is but a drop in the bucket in comparison to what has been going on with US Big Oil and Gas Corps. There has been a massive income shift in the past decade from non-Big Oil and Gas Corps to Big Oil and Gas Corps, which has been devastating to all non-Big Oil and Gas businesses.

To illustrate how this massive income shift in the past decade has applied to Ohio, there were 16 Very Profitable Ohio Non-Big Oil and Gas Big Corps, from the above list of 17, which were in existence for the entire past 12 years. The Total Core Pretax Income for these 16 Ohio Non-Big Oil and Gas Big Corps of $49.5 bil for the most recent two years was up 31% from the $37.6 bil earned a decade earlier.

On the other hand, the 35 US Oil and Gas Big Corps, 25 of which are based in Texas, generated Core Pretax Earnings of $373.7 bil for the most recent two years, which was an incredible 712% increase from the $46.0 bil earned a decade earlier. I'm not kidding!

US Big Oil has just economically devastated all of US Manufacturing in the past decade. And probably more than anything, the reason the US has such a devastating, never-ending jobless recovery, is due to the massive transfer of wealth in the past decade from all non-Oil and Gas businesses, from all US individuals, and from federal, state and local governments to the financial coffers of US Big Oil Corps, whose earnings in the past decade have increased by a monstrous 712%. This is wrong and people should be outraged.

And that past decade 712% earnings increase for US Big Oil, 35 companies in all, with 25 of them located in Texas, is for the two-year period 2008 and 2009 over the two-year period 1998 and 1999. So what's happened in 2010? It's gotten worse. Let me explain.

Of the 30 Dow Stocks, 23 have December year ends. Of those 23, only 3 (Coke, Merck and Kraft) haven't released their December 2010 earnings yet. Here's the annual Pretax Earnings of the 20 that did already release their December 2010 earnings.

.......................................Pretax Income
......................................2010.......2009....% Change
...................................(millions of dollars)
Big Oil
Exxon Mobil.................52,959.....34,777....+52%
Chevron........................32,055....18,528.....+73%
Total 2 Big Oil................85,014.....53,505.....+59%

Non-Big Oil
JPMorganChase...........24,859.....16,067......+55%
IBM..............................19,723.....18,138.........+9%
AT&T............................18,238.....18,518..........-2%
JNJ...............................16,947.....15,755........+8%
Intel.............................16,369......5,704......+187%
GE................................14,208......9,995........+42%
Verizon........................12,684.....13,520..........-6%
Bank of America...........11,077*.....4,360.....+154%
Pfizer.............................9,422.....10,827.........-13%
McDonalds....................7,000......6,487..........+8%
United Technologies......6,538......5,760........+14%
American Express..........5,964......2,841......+110%
3M.................................5,755......4,632.......+24%
Boeing...........................4,507......1,731......+160%
Travelers.......................4,306......4,711...........-9%
Caterpillar.....................3,750........569.......+559%
Dupont..........................3,711......2,184........+70%
Alcoa...............................548.....(1,498)......+137%
Total 18 Non-Big Oil..185,606...140,301.......+32%

* Excludes $12.4 bil Goodwill Impairment Charge

Well, when you look at the above numbers, you have to be impressed with the substantial overall earnings growth in 2010. And earnings drive stock prices, thus it's easy to see why the Dow Stock Index is up so steeply in the past two years, helped immensely by wise Obama Administration economic policies, very beneficial to Big Corps. And I think you are going to see the stock market move up even more dramatically through the end of the Obama Administration’s second term. By the end of President Obama’s second term, it wouldn’t surprise me if there will be some very successful business CEO’s pushing to change the law, and letting President Obama run for a third Presidential term. That’s how happy they will be, and also how smart they are.

But the economic problem confronting us now is that all boats haven't risen, only the Big Corp boats, and particularly the Big Oil Corp Yachts.

But more to the point, look how Big Oil dominates the Dow Industrial companies.....it was nothing like that a decade earlier. The average 2010 Pretax Earnings of the two Big Oil Dow companies (Exxon Mobil and Chevron) is $42.5 bil, which is 4.1 times the $10.3 bil average 2010 earnings of the above 18 Non-Big Oil Dow companies.

And then look at the earnings increase trend. The 18 Non-Big Oil Dow companies experienced a very impressive 32% earnings growth in 2010. But that was nothing compared to the 59% earnings growth of the 2 Big Oil Dow companies.

OK, so Exxon Mobil and Chevron tower over the rest of the Dow here. Surely that's it for Big Oil? Well, it's not. ConocoPhillips, the next in the US Big Oil pecking order, generated Pretax Earnings in 2010 of $19,750 mil, which is higher than 17 of the 18 non-Big Oil companies shown here. And how did ConocoPhillips do with its earnings growth? Well, its earnings grew by 106% in 2010. And so many other Big Oil related companies also had incredibly stellar earnings amounts and increases in 2010.

Unless Big Oil’s devastation to the US economy gets fixed, it wouldn’t surprise me that you will start seeing financially desperate people massively picketing US Big Oil Corporate Offices, as well as the offices of the US Congress members, who are unabashed supporters of US Big Oil. And there are so many extremely bright, disillusioned college graduates of the past three years or so.....I think you'll see that they will eventually rise up against Big Oil, as will many college students, keenly aware that their friends graduating from college have not been able to get decent jobs.

Clearly, it would be wise for the US government to take action that would reverse this horrible income shift trend, which has severely damaged not just more than 95% of US businesses, but has also devastated US individuals, and all of federal, state and local governments. Not only has it resulted in much higher US unemployment, much higher US underemployment, and lower median US wages, but it also has resulted in a substantially higher portion of a family's take-home pay being used to pay for energy costs than that of a decade ago.

When energy costs are so high, and also increasing so much, as well as being so volatile, it is very difficult for someone to start a business. The risk/reward of taking a chance and starting a new business in this sky-high energy cost environment is dramatically tilted toward the risk side right now, whereas over a decade ago, it was clearly tilted toward the reward side. I think the US government should institute economic initiatives to make the risk/reward of starting a new business a lot more attractive…..that’s where the jobs will come from…..and the key are initiatives to reduce the after-tax energy cost of starting a new business, or of expanding an existing business.

As a first step, I think it only makes sense for the US government to eliminate the many massive tax loopholes that are granted to Big Oil and Gas Corps to reward them for generating these windfall profits. And the money raised here should be given as wise, lucrative tax incentives to all US businesses that effectively reduce their energy costs.

Such a tax plan, is a ten-fer:
.....higher US real GDP growth
.....lower US unemployment
.....lower US underemployment
.....higher US median wages
.....lower portion of take-home pay needed to fund energy costs
.....higher after-tax corporate profits for more than 95% of US businesses
.....significant reduction in the US deficit
.....better State government coffers
.....more competitive US firms
.....and a huge step toward US becoming energy independent

Now on to updating some other States.

Update on Michigan Big Corps Have Paid Very Modest Amounts of State Corporate Income Taxes

This post updates my previous post on Michigan Big Corps. It changes the Pretax Income numbers to Core Pretax Income numbers, which exclude large Asset Impairments.

In performing a quick review of SEC filings of large corps with an SEC State Location Code in Michigan, I found 7 corps with healthy State Corporate Income Tax Loopholes Taken, at least the way I measure them, in the last dozen years.

General Motors was excluded from this below list because of its huge pretax losses, which totaled $58.5 bil for the four years from 2005 to 2008. GMAC was also excluded, even though it registered total pretax profits of $24.8 bil in the years from 1998 to 2005, when it was 100% owned by GM. However, all of these GMAC profits were already included in GM’s total earnings. Since GM sold 51% of GMAC in November 2006, GMAC has generated pretty hefty aggregate losses.

Ford was included in the below list, even though it generated $33.4 bil of pretax losses in the three years from 2006 to 2008. Ford more than made up for those losses, when in the three years from 1998 to 2000 (ahh, those Clinton Economic years), Ford registered pretax profits totaling $42.4 bil. In those same three Clinton years, even General Motors generated pretax profits, which totaled $21.1 bil.

The many publicly-held auto suppliers in Michigan were also excluded from the list. Nearly all of them generated substantial losses. More on that later.

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 core pretax income, both in total for the past twelve years for each of these Big Michigan Corps. These 7 Big Michigan Corps below had a weighted average state corporate effective income tax rate paid of a very modest 1.65%. This is substantially below Michigan’s current state corporate income tax rate that starts at 4.95% of income, but then added to this 4.95% tax rate is the lesser of $6 mil or of another 22% of 4.95% of income, or an additional 1.09%.

….……………………...............Current……Core……..........State
….…………………….................State.....Consolidated....Effective
….…………………….................Tax………...Pretax………..Tax Rate
….…………………….................Paid……....Income………...Paid
….……………….…...................(Millions of Dollars)

..7. Masco...........................366…….....11,125*….......3.29%
..6. Stryker….......................265............9,333.…........2.84%
..5. Kellogg……………….........338…….....14,419…….......2.34%
..4. Whirlpool……................116.............6,071….........1.91%
..3. Dow Chemical...............422…….....28,200…….......1.50%
..2. Ford…...........................210……....30,242*..........0.69%
..1. DTE Energy.....................35**........7,089…….......0.49%

Total all 7………...............1,752….......106,479…….......1.65%

* Excludes large Asset Impairments
** Current State Income Tax for the most recent three years; there was no State Income Tax disclosure in the earlier years, therefore I assumed none were paid.

I think it makes much more sense to balance a State’s budget by closing some of the Big Corp State Corporate Income Tax Loopholes, rather than by either significantly reducing critical state services like education and citizen protection, or by cutting unemployment benefits or Medicaid benefits.

But also, I think it makes sense to use some of the funds from the closing of these Michigan Big Corp State Income Tax Loopholes to provide some wise, highly stimulative, job-creating tax incentives to small and medium-sized businesses, and particularly ones targeted at the severely depressed auto supplier industry.

After reviewing tons of the SEC filings of Michigan auto suppliers, with substantial losses after losses, years on end, it is pretty clear to me why there was such widespread dissatisfaction with both the Federal and State Governments, as shown in the recent November 2010 election.

What the Obama Administration did to prop up General Motors was absolutely necessary, or else the country’s unemployment rates would have increased substantially, and particularly so in states with a heavy automobile and automobile supplier industry like Michigan. And for many US citizens to now be so visibly upset that the recent General Motors IPO was successful is frankly unpatriotic. The country ended up making money on the General Motors bailout and there are many citizens who are intensely mad about that. Incredible!

But the problem in the US auto industry is much too severe to be solved by a somewhat rejuvenated General Motors, which was revived from the ashes. What I think is needed are substantial smartly-designed business tax incentives to help rescue all of these auto suppliers, who are now on life support. Their losses have just been so substantial, and for so many years, while the Government just ignored this massive problem.

I would prefer seeing something like the investment tax credit, but with a bonus percentage in very hard hit areas of the country like Detroit, and some other parts of Michigan. And other places hit hard by offshoring of manufacturing jobs should also get the benefit of a bonus investment tax credit.

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 the very troubled Rust Belt manufacturers, like those in Michigan. I wouldn't give the bonus investment tax credit percentage to huge companies. Something totally missed by many people is that 100% expensing of equipment doesn’t help the many companies that are in huge tax loss positions. These companies can’t get the tax benefit from 100% expensing.

A healthy business research tax credit program is also needed for Michigan. There are all of these very bright, innovative people connected with the second best public research university in the world, the University of Michigan….second only to Cal-Berkeley…..and somehow this Wolverine think tank should be better utilized to foster Michigan’s economic recovery. There should be some strong government incentives to make this happen.

And until this happens, I can’t understand why elected members of the US House and the US Senate are being so mean-spirited with some of these many unemployed by wanting to cut off their unemployment compensation benefits. It’s not the fault of the Michigan unemployed that the US auto industry went down the tubes. It’s really the fault of many in the laissez-faire US government who ignored this problem for so many years. And at the same time, these same US politicians were fostering the offshoring of Michigan manufacturing jobs, which added substantial amounts of kindling to this ravishing fire.

And the hypocrisy of voting down unemployment benefits under the pretense of Deficit Reduction! Just looking at a couple of the Dow Industrials, these same US politicians strongly support measures that permitted:

…..Exxon Mobil to pay no federal income taxes in 2009, instead letting them get a federal income tax refund of more than $800 mil, when in the same year, Exxon Mobil earned consolidated pretax income of more than $35 bil.

….. Verizon Communications to pay no federal income taxes in 2009, instead letting them get a federal income tax refund of more than $600 mil, when in the same year, Verizon earned pretax income of more than $11 bil.

….. Merck to pay no federal income taxes in 2009, when in the same year, it earned consolidated pretax income of more than $15 bil.

…..GE to pay no federal income taxes in 2009, instead letting them get a federal income tax refund of more than $800 mil, when in the same year, GE earned consolidated pretax income of more than $10 bil.

…..GE to pay no federal income taxes in 2008, instead letting them get a federal income tax refund of more than $700 mil, when in the same year, GE earned consolidated pretax income of more than $19 bil.

…..GE to pay no federal income taxes in total for the four years 2006 through 2009, instead letting them get a federal income tax refund of more than $1.5 bil, when in those same four years, GE earned consolidated pretax income of more than $82 bil.

And further, these same US politicians protect the so many, huge Big Corp federal and state corporate income tax loopholes. By closing many of these tax loopholes, both the US and State Budgets would be substantially strengthened.

Also, these same US politicians, and even including some Democrats, passed all of these annual Tax Extenders, clearly being lobbied by special interest groups to do so. And what is their proposal to pay for this massive cost? Well, it is not paid for, instead it increases the US Deficit.

US Big Oil has devastated the Auto Industry. Probably more than anything, the reason the US has such a devastating, never-ending jobless recovery, is due to the massive transfer of wealth in the past decade from all non-Oil and Gas businesses, from all US individuals, and from federal, state and local governments to the financial coffers of US Big Oil Corps, whose core pretax earnings in the past decade have increased by a monstrous 712%. This is wrong and people should be outraged.

And that 712% earnings increase for US Big Oil, 35 companies in all, with 25 of them located in Texas, is for the two-year period 2008 and 2009 over the two-year period 1998 and 1999. So what's happened in 2010? It's gotten worse. Let me explain.

Of the 30 Dow Stocks, 23 have December year ends. Of those 23, only 3 (Coke, Merck and Kraft) haven't released their December 2010 earnings yet. Here's the annual Pretax Earnings of the 20 that did already release their December 2010 earnings.

.......................................Pretax Income
......................................2010.......2009....% Change
...................................(millions of dollars)
Big Oil
Exxon Mobil.................52,959.....34,777....+52%
Chevron........................32,055....18,528.....+73%
Total 2 Big Oil................85,014.....53,505.....+59%

Non-Big Oil
JPMorganChase...........24,859.....16,067......+55%
IBM..............................19,723.....18,138.........+9%
AT&T............................18,238.....18,518..........-2%
JNJ...............................16,947.....15,755........+8%
Intel.............................16,369......5,704......+187%
GE................................14,208......9,995........+42%
Verizon........................12,684.....13,520..........-6%
Bank of America...........11,077*.....4,360.....+154%
Pfizer.............................9,422.....10,827.........-13%
McDonalds....................7,000......6,487..........+8%
United Technologies......6,538......5,760........+14%
American Express..........5,964......2,841......+110%
3M.................................5,755......4,632.......+24%
Boeing...........................4,507......1,731......+160%
Travelers.......................4,306......4,711...........-9%
Caterpillar.....................3,750........569.......+559%
Dupont..........................3,711......2,184........+70%
Alcoa...............................548.....(1,498)......+137%
Total 18 Non-Big Oil..185,606...140,301.......+32%

* Excludes $12.4 bil Goodwill Impairment Charge

Well, when you look at the above numbers, you have to be impressed with the substantial overall earnings growth in 2010. And earnings drive stock prices, thus it's easy to see why the Dow Stock Index is up so much, helped immensely by wise Obama Administration economic policies, very beneficial to Big Corps. But the problem is that all boats haven't risen, only the Big Corp boats.

But more to the point, look how Big Oil dominates the Dow Industrial companies.....it was nothing like that a decade earlier. The average 2010 Pretax Earnings of the two Big Oil Dow companies (Exxon Mobil and Chevron) is $42.5 bil, which is 4.1 times the $10.3 bil average 2010 earnings of the above 18 Non-Big Oil Dow companies.

And then look at the earnings increase trend. The 18 Non-Big Oil Dow companies exerienced a very impressive 32% earnings growth in 2010. But that was nothing compared to the 59% earnings growth of the 2 Big Oil Dow companies.

OK, so Exxon Mobil and Chevron tower over the rest of the Dow here. Surely that's it for Big Oil? Well, it's not. ConocoPhillips, the next in the US Big Oil pecking order, generated Pretax Earnings in 2010 of $19,750 mil, which is higher than 17 of the 18 non-Big Oil companies shown here. And how did ConocoPhillips do with its earnings growth? Well, its earnings grew by 106% in 2010. And so many other Big Oil related companies also had incredibly stellar earnings amounts and increases in 2010.

Unless Big Oil’s devastation to the US economy gets fixed, it wouldn’t surprise me that you will start seeing financially desperate people massively picketing US Big Oil Corporate Offices, as well as the offices of the US Congress members, who are unabashed supporters of US Big Oil. And there are so many extremely bright, disillusioned college graduates of the past three years or so.....I think you'll see that they will eventually rise up against Big Oil, as will many college students, keenly aware that their friends graduating from college have not been able to get decent jobs.