I think it would be helpful to analyze the most recent key income tax footnote information related to the very largest US Corps, in order to get a better understanding of the extent of Corporate Tax Loopholes presently taken.
There were 24 US Corps which generated Consolidated Pretax Income (PTI) of more than $10 bil each in the most recent fiscal year through June 2011. The bulk of these had December 2010 year ends.
These 24 Biggest US Corps generated Total Worldwide Pretax Income of $449.3 bil in the most recent year, and a good estimate of their total US Federal Income Tax Paid was $32.3 bil, thus the estimated total effective US Federal Income Tax Paid was only 7.2%.
This US Federal Income Tax paid is the amount disclosed in their income tax footnotes as the Current Federal Income Tax Expense Paid or Payable related to the current year, and thus should be pretty close to the actual US Federal Income Tax paid in the most recent year.
Here is the detailed information for these 24 most profitable US Corps:
............................................................US........Effective
.........................................................Current........US
.........................................................Federal.... Federal
........................................................Income......Income
.........................................World.........Tax...........Tax
..........................................Wide.........Paid..........Rate
...........................................PTI........(Benefit)......Paid
........................................(mils of dollars)
Exxon Mobil...............52,959.......1,270.........2.4%
Chevron......................32,055........1,501.........4.7%
Microsoft.......................28,071........3,108........11.1%
JPMorganChase.............24,859........4,001........16.1%
Walmart.........................23,538........4,600........19.5%
ConocoPhillips..........19,750........1,312..........6.6%
IBM..............................19,723..........190..........1.0%
Berkshire Hathaway(1)...19,051........3,668........19.3%
Wells Fargo.................19,001........1,425.........7.5%
Apple............................18,540.........2,150........11.6%
ATT.............................18,238..........307..........1.7%
AIG...............................17,767.........(163).......(0.9)%
JNJ(2)...........................16,947........2,063........12.2%
Intel..............................16,045........4,059........25.3%
Procter&Gamble............15,189........1,809........11.9%
GE...............................14,208......(3,253)...(22.9)%
Citigroup....................13,184.........(249).......(1.9)%
Goldman Sachs.............12,892.........1,791.........13.9%
Verizon......................12,684........(705).......(5.6)%
Oracle............................11,411........1,817........15.9%
Bank of America(3)..11,077........(666)......(6.0)%
HP...............................10,974.........484..........4.4%
Google..........................10,796........1,657........15.3%
Phillip Morris............10,324..........157..........1.5%
Total all 24.................449,283......32,333..........7.2%
(1) Berkshire Hathaway above US Current Federal Income Tax Paid, and the related effective tax rate paid, are both overstated since they also include Foreign and State Income Tax Paid.
(2) JNJ above US Current Federal Income Tax Paid, and the related effective tax rate paid, are both overstated since they also include State Income Tax Paid.
(3) Bank of America above Worldwide Pretax Income excludes huge Goodwill Impairment Charge.
When you review the above 24 huge US Corps, there are several of them that have little in the way of foreign operations. Thus their Worldwide Income is generated substantially in the US. But yet, their US Federal Income Tax Paid is so meager.
The two of these mostly domestic large US Corps which really stick out are Verizon and ATT, and they had incredibly low effective US Federal Income tax rates paid.
I think there is something seriously wrong with US Tax Policy here. I would be interested in seeing how much tax benefit from 100% tax expensing they both received in 2010, along with the increased number of US full-time employees they had in 2010, while the 100% tax expensing was in effect.....after all, the whole idea behind 100% tax expensing is job creation, and these two giants are what Republicans continually say are the "Job Creators".
And then when I review Verizon's 10K SEC filing, I see that they had 222,900 employees at Dec 31, 2009. Thus if they are receiving all of these tax benefits from 100% tax expensing, then, in all fairness, they should have increased their number of employees dramatically in 2010.
So how many employees does their SEC filing say they have at Dec 31, 2010? Would you believe only 194,400, or a reduction of 28,500. Such is the recent employment hiring facts of our first "Job Creator".
Then, when I review ATT's 10K SEC filing, I see that they had 281,000 employees at Jan 31, 2010. So how many employees does their SEC filing say they have at Jan 31, 2011? Would you believe only 265,410, or a reduction of 15,590. So that's the employment hiring facts of our second "Job Creator".
I suggest we need a new head of the US House Ways and Means Committee, which is responsible for US tax legislation. US taxpayers are getting ripped off, and this has been happening since 2001.
Also, Wells Fargo is predominately a domestic company, but yet also has such a low effective US Federal Income Tax Rate Paid. When I review their Income Tax Rate Reconciliation, I do see so many large tax subsidies. I have to wonder just where are the benefits to the country of these large financial institutions receiving all of this tax largesse. So these large financial institutions cause the US financial meltdown, and the way the US Government penalizes them is by giving them all of these massive tax breaks? All of the Congressional Republicans, and frankly even some of the Congressional Democrats, are owned by US Big Corps.
Let me move to the US Multinational Corp giants included in the 23 largest US Corps.
Below here shows the Income Tax paid by the 20 giant US Corps, with a significant foreign presence, to the US Government and to Foreign Governments in the most recent year.
.............................US...........................Foreign
...........................Current......Foreign...Current
.............................Fed..........Current.......Inc
.............................Inc.............Inc...........Tax
.............................Tax............Tax.........Paid
............................Paid............Paid......(Benefit)
..........................(Benefit).....(Benefit).....Mix
...........................(mils of dollars)
GE.....................(3,253).........3,258....65,160%
Bank of America...(666)............815........547%
AIG......................(163)............807........125%
Citigroup..............(249).........3,239........108%
Exxon Mobil.......1,270........21,093.........94%
IBM.......................190..........3,127.........94%
Phillip Morris........157..........2,567.........94%
Chevron.............1,501.........10,483.........87%
ConocoPhillips....1,312..........7,469.........85%
HP.........................484..........1,345.........74%
JPMorganChase..4,001..........2,712.........40%
Procter&Gamble.1,809..........1,188.........40%
Goldman Sachs...1,791..........1,083.........38%
JNJ....................2,063..........1,194.........37%
Oracle................1,817..........1,037.........36%
Microsoft...........3,108..........1,602.........34%
Walmart............4,600..........1,466..........24%
Apple.................2,150............282..........12%
Google...............1,657............167............9%
Intel..................4,059............359............8%
Total all 20.......27,638.......65,293.........70%
When you look at the above list, yeah, Intel is clearly the patriotic US Big Multinational Corp "poster child". And Google and Apple aren't that bad at being patriotic either.
However, it just absolutely amazes me that these 20 largest US Multinational Corps are paying in total 70% of their total income taxes to Foreign Governments.....and yeah, that means that they are only paying 30% of their total income tax to the US Government.
And so many Americans call the US Multinational Corps patriotic? Give me a break. Most of them view themselves as Global Corps Period, not as American Corps Operating Globally. And they are doing much more to help balance the finances of Foreign Governments than they are of helping the severely depressed US Government finances, where their HQs are housed and where they are receiving so many benefits, including some very expensive ones like national security, infrastructure, and social security and medicare for their retirees.
And just think about some specific ones.
GE paid the same amount of money to Foreign Governments in total income taxes as they received from the US Government in income taxes. When I do the math, GE's numbers wash out, and effectively the US Government paid $3.3 bil in Foreign Aid in 2010 to these Foreign Governments related to GE.
And just look at the Big Oil Corps. Is this where we want to be as a country, where Exxon Mobil pays 94% of its Worldwide Income Taxes to Foreign Governments and only 6% of them to the US Government?
Why in the world are we giving Exxon Mobil all of these tax loopholes?
So the US Government pays twice and Foreign Governments are twice blessed as recipients. The US Government gives Exxon Mobil all of these massive tax loopholes and also pays for the national security of both Exxon Mobil employees and stockholders, as well as also paying for a good chunk of the national security of all of these foreign countries that are further blessed with the steep foreign income taxes that Exxon Mobil pays them.
And is this where we want to be as a country, where Chevron pays 87%, and ConocoPhillips 85%, of their Worldwide Income Taxes to Foreign Governments?
And IBM and Phillip Morris both paying 94%?
And both the US House Ways and Means Committee and the US Senate Finance Committee see nothing wrong with US Multinational Corps helping Foreign Government financial coffers substantially more than they are helping severely-stressed US Government financial coffers?.....and in fact, by their tax legislation, have consistently facilitated that result! And frankly, even the Joint Committee on Taxation Staff, and to a lesser extent, even the CBO, had to have played a role in leaving us in the horrible economic position we are faced with today, resulting from, in large part, off target, Big Corp-favored Tax Policy.
US Big Corps own all the Republicans members, and even some of the Democratic members, of the US House Ways and Means and US Senate Finance Committees. And the ones suffering from this Big Corp dominance are US small businesses and US citizens.
Focusing now on which of these large US Multinational Corps are taking the most advantage of tax loopholes, which permits them to pay so little in US Federal Income Taxes, below are the 8 of them, whose US Federal Income Tax Paid Mix (i.e. US as a % of Worldwide) is substantially lower than their US Pretax Income Mix:
...................................US..................................US
.................................Current............................Tax
...................................Fed...............................Paid
...................................Inc............US.................vs
...................................Tax............PTI............Income
...................................Mix...........Mix............Spread
GE........................(65,060)%........36%...........(65,096)%
AIG.............................(25)%........74%...............(99)%
IBM.................................6%........46%...............(41)%
ConocoPhillips...............15%........31%...............(17)%
HP.................................26%........37%...............(10)%
Exxon Mobil....................6%........15%................(9)%
Chevron.........................13%........20%................(8)%
JPMorganChase.............60%........67%................(7)%
Yeah, 3 of the above 8 are Big Oil Corps. And that horribly negative Percentage Spread has been like that for the entire past decade. If these 3 huge Big Oil Corps fairly paid US Federal Income Tax proportionate to the way they generated their US Income, the US Government's financial coffers would be substantially strengthened.
And there is something clearly wrong with US Tax Policy when a company like IBM can generate 46% of its Worldwide Income in the US, but yet only pay 6% of its Worldwide Federal Income Tax in the US.
And there is also something clearly wrong with US Tax Policy when a company like GE can generate 64% of its Worldwide Income overseas, and pay $3.3 bil in Foreign Income Taxes on this foreign income, and then generate 36% of its Worldwide Income in the US, and receive a US Federal Income Tax Refund of $3.3 bil on this US income. Just go figure!
And below here are the 18 large US Multinational Corps which disclosed financial information needed for me to compute both the US Pretax Income Mix as well as the US Revenue Mix.
............................................................US
.........................................................Income
..............................US...........US...........vs
.............................PTI...........Rev.........Rev
.............................Mix...........Mix......Spread
ConocoPhillips..31%..........66%........(34)%
Citigroup..............7%..........41%........(34)%
Microsoft...........32%..........54%........(23)%
Chevron.............20%.........42%........(22)%
Exxon Mobil......15%..........31%........(17)%
Apple....................30%..........44%........(14)%
JPMorganChase....67%..........78%........(12)%
GE.........................36%..........47%........(11)%
JNJ.......................38%..........48%........(10)%
Google..................46%..........48%.........(2)%
HP........................37%..........35%...........1%
Goldman Sachs.....57%..........55%...........2%
Walmart...............78%..........74%...........4%
IBM......................46%..........36%.........11%
Oracle...................56%..........43%.........13%
AIG......................74%..........53%.........21%
Procter&Gamble...59%..........37%.........22%
Intel.....................87%..........15%.........72%
And below here are the 16 large US Multinational Corps which disclosed financial information needed for me to compute both the US Pretax Income Mix as well as the US Asset Mix.
.............................................................US
...........................................................Income
................................US...........US...........vs
...............................PTI.........Asset.......Asset
...............................Mix..........Mix......Spread
Apple.....................30%..........86%........(56)%
Microsoft................32%..........86%........(55)%
Google....................46%..........86%........(40)%
Exxon Mobil...........15%..........43%.........(29)%
HP..........................37%..........55%........(18)%
ConocoPhillips........31%..........47%........(15)%
Chevron..................20%..........35%........(14)%
JNJ.........................38%..........51%........(13)%
Oracle.....................56%..........62%.........(6)%
JPMorganChase......67%..........71%.........(4)%
IBM........................46%..........49%.........(3)%
AIG........................74%..........67%...........7%
Procter&Gamble.....59%..........51%...........8%
GE...........................36%.........27%..........9%
Walmart..................78%.........68%.........10%
Intel........................87%.........71%.........16%
From a quick review of the above two charts, here are my observations:
***Intel making 15% of its sales to US customers, but yet having 71% of its Long-lived assets located in the US, a massive 87% of its Worldwide Income recognized in the US, and paying 92% of its Worldwide Federal Income Tax in the US is a flat-out fantastic result to all US constituencies.....US employees, US Government, all US citizens, and Intel.
***With Exxon Mobil having 43% of its Long-lived assets located in the US, and 31% of its Revenues in the US, but yet having only a paltry 15% of its Worldwide Profits in the US and also having only 6% of its Worldwide Federal Income Tax Paid in the US is patently unfair to the US Government, to US States, and to all US citizens, and thus US Tax Policy is clearly broken here and needs to be changed.
***With Chevron having 35% of its Long-lived assets located in the US, and 42% of its Revenues in the US, but yet having only a paltry 20% of its Worldwide Profits in the US and also having only 13% of its Worldwide Federal Income Tax Paid in the US is patently unfair to the US Government, to US States, and to all US citizens, and thus US Tax Policy is clearly broken here and needs to be changed.
***With ConocoPhillips having 47% of its Long-lived assets located in the US, and 66% of its Revenues in the US, but yet having a paltry 31% of its Worldwide Profits in the US and also having only 15% of its Worldwide Federal Income Tax Paid in the US is patently unfair to the US Government, to US States, and to all US citizens, and thus US Tax Policy is clearly broken here and needs to be changed.
***The Big Oil giant BP's amounts are not included in any of the above numbers, because BP is HQd in the UK, but I have to say that US Tax Policy is really off-target, and doesn't permit the US to collect its fair share of income taxes, when in 2009, BP's Non-Current Assets located in the US comprise a massive 41% of its Worldwide amounts, and BP's Total Revenues in 2009 in the US comprise 35% of its Worldwide Revenues, but yet BP's Total Replacement Cost Income Before Interest and Income Taxes in the US comprise a meager 12% of its Worldwide amount.
***The Big Oil giant Royal Dutch Shell's amounts are not included in any of the above numbers, because it is HQd in Europe, but there is something wrong with US Tax Policy, and it doesn't permit the US to collect its fair share of income taxes, when in 2010, Royal Dutch Shell Total Non-Current Assets located in the US comprise 22% of its Worldwide amounts, and its Total Revenues in 2010 in the US comprise 21% of its Worldwide Revenues, but yet its Pretax Earnings in the US from its massive Oil & Gas Exploration and Production Activities comprise a meager 7% of its Worldwide amount.
***It's just not fair for Microsoft to be able to recognize only 32% of its Worldwide Profits in the US, when 86% of its Worldwide long-lived assets are located in the US and 54% of its Revenues are made to US customers. US Tax Policy should be changed to fairly correct this.
***It's just not fair for JNJ to be able to recognize only 38% of its Worldwide Profits in the US, when 51% of its Worldwide long-lived assets are located in the US and 48% of its Revenues are made to US customers. US Tax Policy should be changed to fairly correct this.
***It's just not fair for Apple to be able to recognize only 30% of its gigantic Worldwide Profits in the US, when 86% of its Worldwide long-lived assets are located in the US and 44% of its Revenues are made to US customers. US Tax Policy should be changed to fairly correct this.
***It's just not fair for JPMorganChase to be able to recognize only 67% of its Gigantic Worldwide Profits in the US, and to pay only 60% of its Worldwide Federal Income Tax in the US, when 78% of its Revenues are in the US. US Tax Policy should be changed to fairly correct this.
***The Big Financial giant UBS's amounts are not included in any of the above numbers, because UBS is HQd in Switzerland, but I have to say that US Tax Policy is really off-target, and doesn't permit the US to collect its fair share of income taxes, when in 2010, UBS's Non-Current Assets located in the US comprise a massive 54% of its Worldwide amounts, but yet UBS's Operating Income in the US comprise a much lower 34% of its Worldwide amount.
I think the optimal way to deal with all of the above tax unfairness, and at the same time, to reduce US Federal Income Tax Rates for all business income, and to also reduce the US Deficit, is to institute a fair progressive minimum US Federal Income Tax on Worldwide Income.
When I get some time, I will research similar information related to Big US Corps with Worldwide Pretax Income ranging from $5 bil to $10 bil in the most recent year. It should be interesting.
Friday, September 23, 2011
Thursday, September 22, 2011
US Congress Headed for a Single Digit Approval Rating
You would think that an approval rating of 12% would make the US Congress take notice and at least attempt to improve it by making the country better.
But not these Congressional Leaders, particularly the Republican Leadership in both the US House and in the US Senate. They have shown their whole-scale single allegiance to US Big Corps and to the Well to do.
But on both sides of the aisle, there is this widespread interest in self aggrandizement. And they just don’t get it…..how this narcicissism is really turning off US citizens, who just want the country to function effectively on a bipartisan basis in these incredibly trying times.
These members of Congress hold all of these hearings, but instead of listening to these experts, it seems that these Congressmen are primarily interested in showing to the public how much they know on the issue by dominating the hearing. And frankly, these Congressmen seem to frequently be so off target, as compared with the experts invited to give testimony.
And here’s the thing…..after all of these hearings, just what happens? Actually, nothing, from what I can gather. It just totally frustrates US citizens.
The US economy keeps getting worse, and how does the Congress act? The Republicans attack the Obama Administration, which is the only part of the US Government which is acting responsibly, and at least attempting to create US jobs.
No doubt the American Jobs Act has flaws. It is a 50mg prescription for the US economy, when a dose of 500mg is needed to prevent a second recession.
So how do the Republicans act? Instead of attempting to improve it, and work with the Obama Administration, they instead totally reject it.
More than any other reason, this is why the approval rating of the US Congress is headed for a historic low of under 10%.
But it’s more than just that.
The US House Energy and Commerce Committee is now actually proposing for the US Government to give additional tax breaks and subsidies to Big Oil. I’m not kidding. They now want to give massive tax subsidies to Big Oil for Natural Gas. And they think that US citizens think this is perfectly OK.
And the US House Ways and Means Committee, which is responsible for US Federal Income Tax legislation, refuses to deal with the fact that so many very profitable US Big Corps continue to pay no US Federal Income Tax. And they think US citizens don’t care about this.
And the Republican Head of the US Senate’s Budget Committee strongly feels that the high US unemployment rate is primarily due to the Budget Deficit. Alabama should consider recalling him for holding such an unintelligent position on such a critical issue to the country.
And while the US economy burns, the US Senate spends nearly all of its time debating whether the funding for the country’s recent natural disasters should be offset. Kentucky should recall both of its Senators, who are severely harming the US economy and US job creation. They are both an embarrassment to their State.
And it seems that every Republican in the US Congress sees nothing wrong with a millionaire paying a lower effective income tax rate than what a middle class working stiff pays. And they ignore the polls on this key issue of fairness, and widely proclaim that the American people have it wrong here.
When the country is going down the tubes economically mainly because of a totally ineffective US Congress, something needs to be done.
As one thought, I think that any time the approval rating of the Congress drops below 10%, that should automatically trigger a requirement that all of the Congressional Leaders in any party in either the US House or in the US Senate, that has an under 10% approval rating, should resign their leadership positions and give other Congressional members a chance to lead…..after all, it can’t possibly be any worse.
The only part of the US Government that is functioning properly is the Executive Branch.
But there is still something wrong with even parts of the Executive Branch.
How in the world is it right for the FBI, IRS, and US Immigration to take full-blown Gestapo actions against an IHOP restaurant in Evansville, Indiana just because the restaurant manager is Muslim and several of the workers are Latino?
My wife and I think the two best things in Evansville area are the new Fresh Market and the local IHOP.
These Government Suits need to be investigated for their clearly inappropriate actions here. Just what kind of country have we become, when Gestapo actions like these on so many innocent non-Caucasians has become so common place?
There needs to be consequences for clearly inappropriate actions taken in menacing raids on innocent citizens by US Government Suits. It almost seems like it is now a throwback to the McCarthy Era.
But not these Congressional Leaders, particularly the Republican Leadership in both the US House and in the US Senate. They have shown their whole-scale single allegiance to US Big Corps and to the Well to do.
But on both sides of the aisle, there is this widespread interest in self aggrandizement. And they just don’t get it…..how this narcicissism is really turning off US citizens, who just want the country to function effectively on a bipartisan basis in these incredibly trying times.
These members of Congress hold all of these hearings, but instead of listening to these experts, it seems that these Congressmen are primarily interested in showing to the public how much they know on the issue by dominating the hearing. And frankly, these Congressmen seem to frequently be so off target, as compared with the experts invited to give testimony.
And here’s the thing…..after all of these hearings, just what happens? Actually, nothing, from what I can gather. It just totally frustrates US citizens.
The US economy keeps getting worse, and how does the Congress act? The Republicans attack the Obama Administration, which is the only part of the US Government which is acting responsibly, and at least attempting to create US jobs.
No doubt the American Jobs Act has flaws. It is a 50mg prescription for the US economy, when a dose of 500mg is needed to prevent a second recession.
So how do the Republicans act? Instead of attempting to improve it, and work with the Obama Administration, they instead totally reject it.
More than any other reason, this is why the approval rating of the US Congress is headed for a historic low of under 10%.
But it’s more than just that.
The US House Energy and Commerce Committee is now actually proposing for the US Government to give additional tax breaks and subsidies to Big Oil. I’m not kidding. They now want to give massive tax subsidies to Big Oil for Natural Gas. And they think that US citizens think this is perfectly OK.
And the US House Ways and Means Committee, which is responsible for US Federal Income Tax legislation, refuses to deal with the fact that so many very profitable US Big Corps continue to pay no US Federal Income Tax. And they think US citizens don’t care about this.
And the Republican Head of the US Senate’s Budget Committee strongly feels that the high US unemployment rate is primarily due to the Budget Deficit. Alabama should consider recalling him for holding such an unintelligent position on such a critical issue to the country.
And while the US economy burns, the US Senate spends nearly all of its time debating whether the funding for the country’s recent natural disasters should be offset. Kentucky should recall both of its Senators, who are severely harming the US economy and US job creation. They are both an embarrassment to their State.
And it seems that every Republican in the US Congress sees nothing wrong with a millionaire paying a lower effective income tax rate than what a middle class working stiff pays. And they ignore the polls on this key issue of fairness, and widely proclaim that the American people have it wrong here.
When the country is going down the tubes economically mainly because of a totally ineffective US Congress, something needs to be done.
As one thought, I think that any time the approval rating of the Congress drops below 10%, that should automatically trigger a requirement that all of the Congressional Leaders in any party in either the US House or in the US Senate, that has an under 10% approval rating, should resign their leadership positions and give other Congressional members a chance to lead…..after all, it can’t possibly be any worse.
The only part of the US Government that is functioning properly is the Executive Branch.
But there is still something wrong with even parts of the Executive Branch.
How in the world is it right for the FBI, IRS, and US Immigration to take full-blown Gestapo actions against an IHOP restaurant in Evansville, Indiana just because the restaurant manager is Muslim and several of the workers are Latino?
My wife and I think the two best things in Evansville area are the new Fresh Market and the local IHOP.
These Government Suits need to be investigated for their clearly inappropriate actions here. Just what kind of country have we become, when Gestapo actions like these on so many innocent non-Caucasians has become so common place?
There needs to be consequences for clearly inappropriate actions taken in menacing raids on innocent citizens by US Government Suits. It almost seems like it is now a throwback to the McCarthy Era.
Sunday, September 18, 2011
The Buffett Rule: Tax Policy Spot On.....Finally
The Obama Administration has just proposed that millionaires pay at least the same effective US federal income tax rate as middle income individuals pay.
Anybody in the US Congress who attempts to challenge that concept of tax fairness should be immediately removed from office as a US Senator or as a US House Member, due to clear incompetence.
But you know what, there is something even more unfair than what The Buffett Rule attempts to correct.
Let me focus on two key tax rate spreads.
The first one is the difference between what millionaire's pay in US federal income tax on their income and what middle income individuals pay. This is what The Buffett Rule focuses on.
The second one is the difference between what US Big Corporations pay in US federal income tax on their income and what Smaller and Medium-sized US Businesses pay on their income, both ones set up as corporations and in other forms, like sole proprietorships, partnerships, LLCs, etc.
The tax spread of the second one, which clearly both penalizes small and medium-sized US businesses, while at the same time, rewards large US Corps, especially Multinational Corps, is gargantuan as compared with the tax spread of the first one.
While closing both tax spreads is fair and noble, the key to also creating US jobs lies in not just closing, but also in reversing the direction of that huge very undesirable tax spread in the second one.
What is needed are true highly progressive US federal income tax rates on business income, that aren't just stair-step "sticker" increases, but reflect the economic reality of what effective tax rates are actually paid by businesses.
And what is also needed is a wisely designed and fair minimum tax on the worldwide income of large US Corps, which overdose on shifting income and US jobs overseas.
Anybody in the US Congress who attempts to challenge that concept of tax fairness should be immediately removed from office as a US Senator or as a US House Member, due to clear incompetence.
But you know what, there is something even more unfair than what The Buffett Rule attempts to correct.
Let me focus on two key tax rate spreads.
The first one is the difference between what millionaire's pay in US federal income tax on their income and what middle income individuals pay. This is what The Buffett Rule focuses on.
The second one is the difference between what US Big Corporations pay in US federal income tax on their income and what Smaller and Medium-sized US Businesses pay on their income, both ones set up as corporations and in other forms, like sole proprietorships, partnerships, LLCs, etc.
The tax spread of the second one, which clearly both penalizes small and medium-sized US businesses, while at the same time, rewards large US Corps, especially Multinational Corps, is gargantuan as compared with the tax spread of the first one.
While closing both tax spreads is fair and noble, the key to also creating US jobs lies in not just closing, but also in reversing the direction of that huge very undesirable tax spread in the second one.
What is needed are true highly progressive US federal income tax rates on business income, that aren't just stair-step "sticker" increases, but reflect the economic reality of what effective tax rates are actually paid by businesses.
And what is also needed is a wisely designed and fair minimum tax on the worldwide income of large US Corps, which overdose on shifting income and US jobs overseas.
Friday, September 9, 2011
Congress Must Make American Jobs Act Better
There are some really good things in the Obama Administration’s American Jobs Act (AJA) proposal. But certainly the country can do much better than what’s here.
Instead of Republicans taking their normal stand of stopping-on-arrival anything that the Obama Administration proposes, I have a better idea.
It’s pretty clear to me that the Obama Adminstration’s economic and housing advisers have again shown here that they don’t have the level of business acumen and financial creativity necessary to solve the country’s pressing economic problems.
Thus, the Congress should immediately take charge, in a bipartisan way, and continue to work around the clock until the job is done, keeping the good parts in AJA that make sense, but vastly improve it.
If they can do this, their ratings will go up dramatically, but more importantly they can make very substantial dents in solving this horrible, ongoing, challenging US economic problem, where only the Big Corps and the Well-to-Do's continue to thrive, and the rest of the country keeps getting worse.
I am certainly not an expert, but let me offer some thoughts on just four of the key issues in AJA…..employee payroll tax cut, housing, 100% tax expensing, and infrastructure.
I think you have to start with the $447 bil total cost amount of AJA, and the breakdown of it to see if the money is being properly and effectively invested in the real problem, which is Job Creation. After all, it is entitled American "Jobs" Act.
First off, 39% of the $447 bil, or $175 bil, is for one item…..Cutting employee payroll taxes in half in 2012. What was Obama’s economic team thinking here?
Liberals rightfully point out the absurdity of conservative attempts at fixing the US economy by reducing the top corporate federal income tax rate, or by keeping the historically very low Bush top individual tax rates.
Such an indirect approach does nothing to create US jobs, and costs the US Government tons of money.
But cutting employee payroll taxes does precisely the same thing. It is also clearly an indirect approach, and does nothing to directly create US jobs, and costs the US Government tons of money.
Cutting the top corporate income tax rate, or keeping the Bush low top individual tax rates, is trickle down. Cutting employee payroll taxes is trickle up. They both are intellectually flawed.
The problem with abstract-thinking IVY League economists who dominate the thinking of the Obama Administration is that they look at everything macro, and just assume that just because money is inserted into the US economy, that will automatically create US jobs. That’s crazy reasoning.
Instead, the Obama Administration needs people advising him that have “business acumen”, who know that to create US jobs, you have to instead target it directly.
Giving a business a jobs tax credit for hiring a worker creates a job, as long as there is a requirement that this job must be retained for a reasonable period of time, or else the jobs tax credit is recaptured.
Just throwing money into the US economy by any kind of an untargeted tax cut, either given to corporations or to individuals, does not create jobs. With so many cold, calculating, greedy, financially-astute CEOs and CFOs now effectively running US Big Corps, much of this money thrown into the US economy ends up as additional profits of Big Corps.
When you think about it, this massive employee payroll tax cut giveaway is consistent with several very popular, but failed, initiatives tried in the first Economic Stimulus. Back then there were mass individual tax cuts for mainly the middle and lower classes, as well as another massive tax cut for the wealthy related to the Alternative Minimum Tax.
These very popular, but extremely expensive indirect tax cuts did nothing for job creation, since untargeted money was just thrown into the US economy.
If instead, that massive amount of money would have been used for wise job-creating initiatives like well designed, directly targeted Jobs Tax Credits and Investment Tax Credits for all businesses, I think we would presently be looking at a US unemployment rate below 7.5%, rather than at one above 9%. It would have been much more effective having the entire country working simultaneously on solving its deep recession, rather than leaving out the business community.
Further, liberals also point out the unfairness of Big Corps taking advantage of all of these corporate tax loopholes. Clearly, these need to be closed.
But what the Obama Administration’s economic team is proposing here with this $175 bil employee payroll tax cut is creating a new tax loophole for employees…..who are able to avoid paying 50% of their payroll taxes.
How in the world can you argue for closing Corporate Tax Loopholes out of one side of your mouth, and then simultaneously backdoor the creation of a new Individual Employee Payroll Tax Loophole out of the other side of your mouth?
And this AJA is not just extending the 2011 employee payroll tax cut Individual Tax Loophole, but it is expanding it in 2012.
And once this Individual Tax Loophole is there, it is very difficult to ever remove it…..just look how hard it is to get rid of Big Oil Subsidies, even though more than 80% of the country agrees they should be eliminated.
Since once enacted, this $175 bil Employee Payroll Tax Cut Subsidy will likely remain and continue to grow, the cost to the US Government over the next 10 years will be much more than $2 trillion. That pretty much wipes out the entire Debt Ceiling Deficit reduction over the same 10 years, that the US Congress recently passed.
So anyway, I think spending $175 bil, or 39% of your economic stimulus, on the employee payroll tax cut is clearly crazy economic policy. It makes the recipients happy, but it doesn't address the problem.....Job Creation.
If it is necessary to have an employee payroll tax cut, I would target it at the forgotten Underemployed, thus give it on only say the first $30,000 of wages in 2012. That is fair economic policy. These Underemployed did nothing to create the 2000s Lost Decade, but are suffering severely from it, and have been clearly forgotten by everyone.
But why throw the country’s money away on people already making a decent wage. They already have a good-paying job. Why reward them more, when the US Government already has a US Debt level of about $15 trillion?
Enough on the employee payroll tax cut.
Let me focus on some of the other 61% of the cost of AJA.
So many in the country, as well as the US economy as a whole, have suffered severely from underwater mortgages, and the Obama Administration housing advisers continue to offer nothing in the way of true solutions here. And neither has anyone in Congress, on either side of the aisle. It’s pretty clear the country needs a new housing advising team, with fresh ideas, as well as new ideas on this critical issue in the US Congress.
Since the Obama Administration’s housing advisers are not proposing wise effective initiatives that would make significant strides in solving the housing crisis, including what’s included in AJA, it behooves Congress, in a bipartisan manner, to take the ball here and put real effective housing initiatives in the AJA.
Maybe I missed something, but when I look at the details of the $447 bil on the last two pages of the AJA, I see no dollar cost amounts in there for solving the housing crisis. You’ve got to be kidding. The housing crisis is one of the major reasons for US unemployment and US underemployment, and there’s no money there to even try to fix it?
I suggest that wisely targeting money at the solving the housing crisis is much better use of the US government’s finances than an employee payroll tax cut giveaway.
Let me now address the key 100% tax expensing in the AJA.
At first thought, a simple mind would conclude that extending 100% expensing of all investments in new plants and equipment is a great idea, since it only costs $5 bil, or only 1% of the total $447 bil cost of AJA.
But why in the world do something that instead of creating jobs, actually reduces jobs? And the US Government is actually paying money to reduce jobs with this initiative.
Big Corps are major beneficiaries of 100% tax expensing. Their profits have been substantially enhanced by the higher sales resulting from it. And they also get this massive tax benefit from it, and are pretty much hiring no one. And many of them get 100% tax expensing and the increased sales from it, and at the same time, continue to lay off many of their employees.
No doubt that US Big Corps are chuckling at the 100% tax expensing in the AJA, which has no strings attached, just like they chuckled at a US Government that would give them the same incredible 100% tax expensing largesse, with no strings attached, in 2011. And so many in the country still wonder why Big Corp Profits are at record levels in both 2010 and 2011, but yet the US Deficit is so high in both 2010 and 2011, and also there has been so little US job creation in both 2010 and 2011?
There's a reason the US Congress has an approval rating of only 13%.....it's been earned.
When I look at the individual resumes of members on both sides of the aisle of the US Congress, I am really impressed. So what's the problem?
I think it is clearly a situation where the whole of the US House and the US Senate is substantially less than the sum of its parts. The whole is substantially below the sum of its parts because of the Congressional Leadership of the parties, particularly the Republican Leadership in both the House and the Senate.....it is bringing down their parties to the demise of the entire country.
The individual Republican Senators and Republican House members, for the most part, aren't permitted to think independently, and do what they think is right for the country. Instead, they are looked down on if they aren't in complete lockstep with the Republican Leadership.
That is why there is so much Party Line Voting, and so much of it is how US Big Corps direct them to vote. But yet the Congressional Republican Leadership always publicly declares that they are voting in line with the interests of Small Businesses, but that is not the case at all. Their policies are clearly designed to benefit Big Corps, and it has really worked. Small Busineses are still suffering.
At some point in time, the entire country is going to realize that, no matter what they say publicly, US Big Corps are only out for themselves. Because of this whole-scale self interest of US Big Corps, it should be the US Government's role to continually be intimately aware of this fact, and design policies that take that into account. That's obviously not happening.
A significant problem with job creation here from 100% tax expensing is that the bulk of these tax incentives are for technological efficiencies, where investments are made in equipment, with the ultimate result being that employees are replaced by machines.
And this $5 bil cost is really misleading. For full financial transparency, the US Government should broadly and clearly display what the cost to the US Government was in 2011, and will be in 2012, due to 100% tax expensing by all Corps, big and small.
It wouldn’t surprise me if this cost number to the US Government in just 2012 alone is much closer to $500 bil than to $5 bil. And the cost disclosed here should also compare 100% tax expensing in 2012 to present continuing first-year tax depreciation, before the 50% first-year bonus tax depreciation for 2012, which was temporarily enacted at the end of last year.
Given the dismal current US Government Debt level, can the country really afford a $300 bil to $500 bil addition to US Debt in 2012 for a 100% first-year expensing program that instead of creating US jobs, does just the opposite?
On the other hand, it is really not that difficult to convert 100% first-year tax expensing into a very effective US job creator. The Congress should take the initiative here, in a bipartisan way, and do this.
I'll make a prediction. If there was both sufficient financial creativity and business acumen placed on the 100% tax expensing intiative, there would be many more jobs created by it than by all of the other parts of the AJA combined.
How could that be possible?
You need to focus on accelerated tax depreciation incentives for all building investments, particularly on building remodelings, and not just on manufacturing buildings, but on all commercial buildings.
True Job Creation from 100% tax expensing doesn't come from equipment purchases, but rather from a massive number and a massive dollar amount of building improvements.
With massive commercial building improvements, you get construction jobs on the front end. And with the much improved buildings, you also get many subsequent jobs created from the upgraded building environment.
So how do you get 100% tax expensing on a building? Well, you don't...exactly.
Instead, you give the first ten years of present building tax depreciation all in the first year....still an incredible stimulation for investing in building remodelings.....and at little or no CBO scored cost to the US Government, since you also reduce the building tax basis, for subsequent building tax depreciation, by the amount of the first-year highly accelerated tax depreciation taken. Thus, you don't allow any building tax depreciation in Years 2 through 10. And as an additional tax incentive, you allow much faster tax depreciation than before on the years subsequent to the first 10 years.
And the thing that really makes this an explosive stimulus is when you combine it with the upcoming corporate and individual federal income tax reform, where the corporate federal income tax rate, as well as the effective individual tax federal income rate on non-corporate entities, are substantially reduced, particularly for smaller and medium-sized businesses.
Thus, a business making a building remodeling, as well as making equipment and software investments in 2011 and 2012, will be getting first-year very highly accelerated tax depreciation deducted at a 35% front-end tax rate, but yet the future earnings stream from these investments will be getting federal income taxed at a much lower tax rate under any reasonable corporate federal income tax reform.....This is explosive stimulation.....businesses will get it, since they have "business acumen".....the US Government suits haven't yet, and probably won't, unless perceptive Congresswomen can explain it to them.
And companies making substantial PPE investments in 2011 and 2012 will also be getting a substantial subsequent year GAAP reported earnings increase from the related Deferred Income Tax Liability write-down when corporate federal income tax reform is enacted, with the resultant lower tax rate. Again, businesses have the financial acumen to understand this.....US Government Suits don't.....US Congresswomen need to explain this to the Suits.
And because of the massive tax benefit US Big Corps will be receiving from 100% tax expensing, it is absolutely essential that they get these massive tax benefits only if they also add a sufficient number of new full-time employees, and retain them, on a total payroll count basis, for a reasonable period of time, or else these massive tax benefits are recaptured, and recaptured back at the 35% tax rate, rather than at the lower tax rate that will prevail after wise corporate federal income tax reform is enacted.
And if you wanted to make building remodelings, and the job creation flowing from it, even more explosive, and I clearly would, you could add in a wise additional energy tax credit for the portion of the building remodeling that the US Dept of Energy defines as clearly green. This wise addition would also permit the business to reduce its future energy costs for many years after the investment is made. And the additional continuing pretax income from these annual energy cost savings are income taxed at the substantially lower post corporate income tax reform income tax rates. Further, the added benefit of these green investments, made on a whole-scale basis by businesses throughout the country, is that it will permit the US to be closer to its critical long-term goal of being energy independent.
Given what's in the current AJA, it’s pretty clear that the Obama Administration has again been deceptively hustled by the Big Corps in their clearly self-interest, company-over-country 100% tax expensing, with no strings attached, desire. Big Corps want no government regulation over 100% tax expensing, even though it is disastrous to the country’s economic interests, and clearly shows that these Big Corps value their patriotism to their company over their patriotism to their country, even in these dismal US economic times.
The Obama Administration keeps emphasizing Country-over-Party, and this is indeed an excellent thought. However, I think the thought should be expanded to include Country-over-Big Corp Special Interest and to also include Country-over-Well-to-Do Special Interest.
Moving to another issue, frankly, in looking at the overall $447 bil price tag cost of AJA, I think this cost is much too low, when a country, and the world for that matter, is going through such disastrous economic times…..i.e. except for the Big Corps and the Well to Do.
And even though I think the $175 bil cost of the employee payroll tax cut should be substantially reduced, the $447 bil cost is still much too low.
So clearly there should be more money invested in directly targeted jobs tax credits and other tax incentives for smaller businesses, and for business start ups. What’s in the AJA is something designed by and written by IVY League abstract-thinking economists, just discussing with each other.
And I didn't see a dime of direct tax incentives in AJA for stimulating desperately needed R&D investments, which are clearly people intensive.
Congress should take the ball here, in a bipartisan way, and instead focus on what incentives potential entrepreneurs need to start and grow new businesses. This is where much of the job creation will come from......and get away from the Republican off-target, myopic, very time-consuming, and continually whining focus on government over-regulation.
And then there should be more money invested in making true dents in solving the housing crisis, with particular focus on writing down principals on underwater mortgages.
So what else is short in AJA that is truly needed to stimulate the US economy and create US jobs?
Clearly, it’s infrastructure spending. Much more is needed here. And it can be done more wisely, where the true economic cost to the country is substantially reduced.
The Congress should take the ball here, in a bipartisan way, and make the proper expansions of the infrastructure proposals now in the AJA.
Just as one thought, I think more money needs to be invested in things like building many massive, very secure Pipelines. And if designed wisely, in addition to the many new jobs created from building these Pipelines, this initiative should also reduce future energy costs. Further, the country's security will be enhanced. The money related to these US Government incentives shouldn’t go to the Big Oil Corps, but rather to smaller companies investing in building Pipelines.
And let me add one more thought.
When the US economy is this bad for everyone but Big Corps and the Well-to-Dos, the US Government needs an infusion of talent into the economic area.
When you look at the effectiveness of the entire US Government, the person whose performance clearly sticks out above all others is Hillary Clinton. She has made a monumental enhancement to US Government relations around the globe.
I think it would be wise to move her into the Economic Area, just for the successful completion of this critical AJA. Agile, highly successful US businesses do this kind of stuff all the time. And frankly, US economic security is so integral to successful foreign relations. She is not just incredibly talented as a leader, but she also is viewed very favorably by both sides of the aisle, and this is really needed to turn the AJA into something really special.
And spending a lot of time recently watching the many Deficit and Tax Discussions on C-Span and on the Internet, I make the following brief observations.
The Obama Administration should permanently place Edward Kleinbard at its Economic Table. What a brilliant mind on effective tax policy. Marty Feldstein also had some really good insights, but Kleinbard towered over everyone else with his broad knowledge and perceptive insights on these matters. USC is very lucky to have him.
The initial presentation by the Congressional "Supercommittee" on Deficit Reduction really disappointed me. If these are the best financial minds that the US Government has, then our economy will continue to be very troubled for a very long time.
I am sure they are well meaning heads of the US House Ways and Means and of the US Senate Finance Committees, but in these just horrible economic times, can the country afford to have Dave Camp and Max Baucus as heads of these two absolutely critical Congressional Committees? It's easy to see how US Big Corps have just run herd over these key Congressional Tax Committees.
It's also easy to see why the approval rating of the Republicans in the US House is so low. All three of them on this Supercommittee.....Jeb Hensarling, Fred Upton, and Dave Camp.....have such mediocre financial minds.
The one Supercommittee member who pleasantly surprised me was Republican Pat Toomey. I thought he had some good insights.
And lastly, I think it would be wise for some of the key CBO members to get some real-world business experience. Just being brilliant, and endlessly examining the data, isn't enough. No matter how intelligent you are, the data gets interpreted much better if you also have real-world business insight.
Maybe the US Government should fund some Executive MBA programs, or some short-term business internships, for some of these key CBO members, whose entire background is government and education.
Given the horrible US unemployment, US underemployment, the low median pay of those employed full time, the full-time employed being scared to death of losing their jobs, and the awful housing crisis, it would be really sad if, due to lack of proper business insight, the CBO is unrealistically too conservative in its scoring of a clearly fine job-creating, business incentive proposal.
Instead of Republicans taking their normal stand of stopping-on-arrival anything that the Obama Administration proposes, I have a better idea.
It’s pretty clear to me that the Obama Adminstration’s economic and housing advisers have again shown here that they don’t have the level of business acumen and financial creativity necessary to solve the country’s pressing economic problems.
Thus, the Congress should immediately take charge, in a bipartisan way, and continue to work around the clock until the job is done, keeping the good parts in AJA that make sense, but vastly improve it.
If they can do this, their ratings will go up dramatically, but more importantly they can make very substantial dents in solving this horrible, ongoing, challenging US economic problem, where only the Big Corps and the Well-to-Do's continue to thrive, and the rest of the country keeps getting worse.
I am certainly not an expert, but let me offer some thoughts on just four of the key issues in AJA…..employee payroll tax cut, housing, 100% tax expensing, and infrastructure.
I think you have to start with the $447 bil total cost amount of AJA, and the breakdown of it to see if the money is being properly and effectively invested in the real problem, which is Job Creation. After all, it is entitled American "Jobs" Act.
First off, 39% of the $447 bil, or $175 bil, is for one item…..Cutting employee payroll taxes in half in 2012. What was Obama’s economic team thinking here?
Liberals rightfully point out the absurdity of conservative attempts at fixing the US economy by reducing the top corporate federal income tax rate, or by keeping the historically very low Bush top individual tax rates.
Such an indirect approach does nothing to create US jobs, and costs the US Government tons of money.
But cutting employee payroll taxes does precisely the same thing. It is also clearly an indirect approach, and does nothing to directly create US jobs, and costs the US Government tons of money.
Cutting the top corporate income tax rate, or keeping the Bush low top individual tax rates, is trickle down. Cutting employee payroll taxes is trickle up. They both are intellectually flawed.
The problem with abstract-thinking IVY League economists who dominate the thinking of the Obama Administration is that they look at everything macro, and just assume that just because money is inserted into the US economy, that will automatically create US jobs. That’s crazy reasoning.
Instead, the Obama Administration needs people advising him that have “business acumen”, who know that to create US jobs, you have to instead target it directly.
Giving a business a jobs tax credit for hiring a worker creates a job, as long as there is a requirement that this job must be retained for a reasonable period of time, or else the jobs tax credit is recaptured.
Just throwing money into the US economy by any kind of an untargeted tax cut, either given to corporations or to individuals, does not create jobs. With so many cold, calculating, greedy, financially-astute CEOs and CFOs now effectively running US Big Corps, much of this money thrown into the US economy ends up as additional profits of Big Corps.
When you think about it, this massive employee payroll tax cut giveaway is consistent with several very popular, but failed, initiatives tried in the first Economic Stimulus. Back then there were mass individual tax cuts for mainly the middle and lower classes, as well as another massive tax cut for the wealthy related to the Alternative Minimum Tax.
These very popular, but extremely expensive indirect tax cuts did nothing for job creation, since untargeted money was just thrown into the US economy.
If instead, that massive amount of money would have been used for wise job-creating initiatives like well designed, directly targeted Jobs Tax Credits and Investment Tax Credits for all businesses, I think we would presently be looking at a US unemployment rate below 7.5%, rather than at one above 9%. It would have been much more effective having the entire country working simultaneously on solving its deep recession, rather than leaving out the business community.
Further, liberals also point out the unfairness of Big Corps taking advantage of all of these corporate tax loopholes. Clearly, these need to be closed.
But what the Obama Administration’s economic team is proposing here with this $175 bil employee payroll tax cut is creating a new tax loophole for employees…..who are able to avoid paying 50% of their payroll taxes.
How in the world can you argue for closing Corporate Tax Loopholes out of one side of your mouth, and then simultaneously backdoor the creation of a new Individual Employee Payroll Tax Loophole out of the other side of your mouth?
And this AJA is not just extending the 2011 employee payroll tax cut Individual Tax Loophole, but it is expanding it in 2012.
And once this Individual Tax Loophole is there, it is very difficult to ever remove it…..just look how hard it is to get rid of Big Oil Subsidies, even though more than 80% of the country agrees they should be eliminated.
Since once enacted, this $175 bil Employee Payroll Tax Cut Subsidy will likely remain and continue to grow, the cost to the US Government over the next 10 years will be much more than $2 trillion. That pretty much wipes out the entire Debt Ceiling Deficit reduction over the same 10 years, that the US Congress recently passed.
So anyway, I think spending $175 bil, or 39% of your economic stimulus, on the employee payroll tax cut is clearly crazy economic policy. It makes the recipients happy, but it doesn't address the problem.....Job Creation.
If it is necessary to have an employee payroll tax cut, I would target it at the forgotten Underemployed, thus give it on only say the first $30,000 of wages in 2012. That is fair economic policy. These Underemployed did nothing to create the 2000s Lost Decade, but are suffering severely from it, and have been clearly forgotten by everyone.
But why throw the country’s money away on people already making a decent wage. They already have a good-paying job. Why reward them more, when the US Government already has a US Debt level of about $15 trillion?
Enough on the employee payroll tax cut.
Let me focus on some of the other 61% of the cost of AJA.
So many in the country, as well as the US economy as a whole, have suffered severely from underwater mortgages, and the Obama Administration housing advisers continue to offer nothing in the way of true solutions here. And neither has anyone in Congress, on either side of the aisle. It’s pretty clear the country needs a new housing advising team, with fresh ideas, as well as new ideas on this critical issue in the US Congress.
Since the Obama Administration’s housing advisers are not proposing wise effective initiatives that would make significant strides in solving the housing crisis, including what’s included in AJA, it behooves Congress, in a bipartisan manner, to take the ball here and put real effective housing initiatives in the AJA.
Maybe I missed something, but when I look at the details of the $447 bil on the last two pages of the AJA, I see no dollar cost amounts in there for solving the housing crisis. You’ve got to be kidding. The housing crisis is one of the major reasons for US unemployment and US underemployment, and there’s no money there to even try to fix it?
I suggest that wisely targeting money at the solving the housing crisis is much better use of the US government’s finances than an employee payroll tax cut giveaway.
Let me now address the key 100% tax expensing in the AJA.
At first thought, a simple mind would conclude that extending 100% expensing of all investments in new plants and equipment is a great idea, since it only costs $5 bil, or only 1% of the total $447 bil cost of AJA.
But why in the world do something that instead of creating jobs, actually reduces jobs? And the US Government is actually paying money to reduce jobs with this initiative.
Big Corps are major beneficiaries of 100% tax expensing. Their profits have been substantially enhanced by the higher sales resulting from it. And they also get this massive tax benefit from it, and are pretty much hiring no one. And many of them get 100% tax expensing and the increased sales from it, and at the same time, continue to lay off many of their employees.
No doubt that US Big Corps are chuckling at the 100% tax expensing in the AJA, which has no strings attached, just like they chuckled at a US Government that would give them the same incredible 100% tax expensing largesse, with no strings attached, in 2011. And so many in the country still wonder why Big Corp Profits are at record levels in both 2010 and 2011, but yet the US Deficit is so high in both 2010 and 2011, and also there has been so little US job creation in both 2010 and 2011?
There's a reason the US Congress has an approval rating of only 13%.....it's been earned.
When I look at the individual resumes of members on both sides of the aisle of the US Congress, I am really impressed. So what's the problem?
I think it is clearly a situation where the whole of the US House and the US Senate is substantially less than the sum of its parts. The whole is substantially below the sum of its parts because of the Congressional Leadership of the parties, particularly the Republican Leadership in both the House and the Senate.....it is bringing down their parties to the demise of the entire country.
The individual Republican Senators and Republican House members, for the most part, aren't permitted to think independently, and do what they think is right for the country. Instead, they are looked down on if they aren't in complete lockstep with the Republican Leadership.
That is why there is so much Party Line Voting, and so much of it is how US Big Corps direct them to vote. But yet the Congressional Republican Leadership always publicly declares that they are voting in line with the interests of Small Businesses, but that is not the case at all. Their policies are clearly designed to benefit Big Corps, and it has really worked. Small Busineses are still suffering.
At some point in time, the entire country is going to realize that, no matter what they say publicly, US Big Corps are only out for themselves. Because of this whole-scale self interest of US Big Corps, it should be the US Government's role to continually be intimately aware of this fact, and design policies that take that into account. That's obviously not happening.
A significant problem with job creation here from 100% tax expensing is that the bulk of these tax incentives are for technological efficiencies, where investments are made in equipment, with the ultimate result being that employees are replaced by machines.
And this $5 bil cost is really misleading. For full financial transparency, the US Government should broadly and clearly display what the cost to the US Government was in 2011, and will be in 2012, due to 100% tax expensing by all Corps, big and small.
It wouldn’t surprise me if this cost number to the US Government in just 2012 alone is much closer to $500 bil than to $5 bil. And the cost disclosed here should also compare 100% tax expensing in 2012 to present continuing first-year tax depreciation, before the 50% first-year bonus tax depreciation for 2012, which was temporarily enacted at the end of last year.
Given the dismal current US Government Debt level, can the country really afford a $300 bil to $500 bil addition to US Debt in 2012 for a 100% first-year expensing program that instead of creating US jobs, does just the opposite?
On the other hand, it is really not that difficult to convert 100% first-year tax expensing into a very effective US job creator. The Congress should take the initiative here, in a bipartisan way, and do this.
I'll make a prediction. If there was both sufficient financial creativity and business acumen placed on the 100% tax expensing intiative, there would be many more jobs created by it than by all of the other parts of the AJA combined.
How could that be possible?
You need to focus on accelerated tax depreciation incentives for all building investments, particularly on building remodelings, and not just on manufacturing buildings, but on all commercial buildings.
True Job Creation from 100% tax expensing doesn't come from equipment purchases, but rather from a massive number and a massive dollar amount of building improvements.
With massive commercial building improvements, you get construction jobs on the front end. And with the much improved buildings, you also get many subsequent jobs created from the upgraded building environment.
So how do you get 100% tax expensing on a building? Well, you don't...exactly.
Instead, you give the first ten years of present building tax depreciation all in the first year....still an incredible stimulation for investing in building remodelings.....and at little or no CBO scored cost to the US Government, since you also reduce the building tax basis, for subsequent building tax depreciation, by the amount of the first-year highly accelerated tax depreciation taken. Thus, you don't allow any building tax depreciation in Years 2 through 10. And as an additional tax incentive, you allow much faster tax depreciation than before on the years subsequent to the first 10 years.
And the thing that really makes this an explosive stimulus is when you combine it with the upcoming corporate and individual federal income tax reform, where the corporate federal income tax rate, as well as the effective individual tax federal income rate on non-corporate entities, are substantially reduced, particularly for smaller and medium-sized businesses.
Thus, a business making a building remodeling, as well as making equipment and software investments in 2011 and 2012, will be getting first-year very highly accelerated tax depreciation deducted at a 35% front-end tax rate, but yet the future earnings stream from these investments will be getting federal income taxed at a much lower tax rate under any reasonable corporate federal income tax reform.....This is explosive stimulation.....businesses will get it, since they have "business acumen".....the US Government suits haven't yet, and probably won't, unless perceptive Congresswomen can explain it to them.
And companies making substantial PPE investments in 2011 and 2012 will also be getting a substantial subsequent year GAAP reported earnings increase from the related Deferred Income Tax Liability write-down when corporate federal income tax reform is enacted, with the resultant lower tax rate. Again, businesses have the financial acumen to understand this.....US Government Suits don't.....US Congresswomen need to explain this to the Suits.
And because of the massive tax benefit US Big Corps will be receiving from 100% tax expensing, it is absolutely essential that they get these massive tax benefits only if they also add a sufficient number of new full-time employees, and retain them, on a total payroll count basis, for a reasonable period of time, or else these massive tax benefits are recaptured, and recaptured back at the 35% tax rate, rather than at the lower tax rate that will prevail after wise corporate federal income tax reform is enacted.
And if you wanted to make building remodelings, and the job creation flowing from it, even more explosive, and I clearly would, you could add in a wise additional energy tax credit for the portion of the building remodeling that the US Dept of Energy defines as clearly green. This wise addition would also permit the business to reduce its future energy costs for many years after the investment is made. And the additional continuing pretax income from these annual energy cost savings are income taxed at the substantially lower post corporate income tax reform income tax rates. Further, the added benefit of these green investments, made on a whole-scale basis by businesses throughout the country, is that it will permit the US to be closer to its critical long-term goal of being energy independent.
Given what's in the current AJA, it’s pretty clear that the Obama Administration has again been deceptively hustled by the Big Corps in their clearly self-interest, company-over-country 100% tax expensing, with no strings attached, desire. Big Corps want no government regulation over 100% tax expensing, even though it is disastrous to the country’s economic interests, and clearly shows that these Big Corps value their patriotism to their company over their patriotism to their country, even in these dismal US economic times.
The Obama Administration keeps emphasizing Country-over-Party, and this is indeed an excellent thought. However, I think the thought should be expanded to include Country-over-Big Corp Special Interest and to also include Country-over-Well-to-Do Special Interest.
Moving to another issue, frankly, in looking at the overall $447 bil price tag cost of AJA, I think this cost is much too low, when a country, and the world for that matter, is going through such disastrous economic times…..i.e. except for the Big Corps and the Well to Do.
And even though I think the $175 bil cost of the employee payroll tax cut should be substantially reduced, the $447 bil cost is still much too low.
So clearly there should be more money invested in directly targeted jobs tax credits and other tax incentives for smaller businesses, and for business start ups. What’s in the AJA is something designed by and written by IVY League abstract-thinking economists, just discussing with each other.
And I didn't see a dime of direct tax incentives in AJA for stimulating desperately needed R&D investments, which are clearly people intensive.
Congress should take the ball here, in a bipartisan way, and instead focus on what incentives potential entrepreneurs need to start and grow new businesses. This is where much of the job creation will come from......and get away from the Republican off-target, myopic, very time-consuming, and continually whining focus on government over-regulation.
And then there should be more money invested in making true dents in solving the housing crisis, with particular focus on writing down principals on underwater mortgages.
So what else is short in AJA that is truly needed to stimulate the US economy and create US jobs?
Clearly, it’s infrastructure spending. Much more is needed here. And it can be done more wisely, where the true economic cost to the country is substantially reduced.
The Congress should take the ball here, in a bipartisan way, and make the proper expansions of the infrastructure proposals now in the AJA.
Just as one thought, I think more money needs to be invested in things like building many massive, very secure Pipelines. And if designed wisely, in addition to the many new jobs created from building these Pipelines, this initiative should also reduce future energy costs. Further, the country's security will be enhanced. The money related to these US Government incentives shouldn’t go to the Big Oil Corps, but rather to smaller companies investing in building Pipelines.
And let me add one more thought.
When the US economy is this bad for everyone but Big Corps and the Well-to-Dos, the US Government needs an infusion of talent into the economic area.
When you look at the effectiveness of the entire US Government, the person whose performance clearly sticks out above all others is Hillary Clinton. She has made a monumental enhancement to US Government relations around the globe.
I think it would be wise to move her into the Economic Area, just for the successful completion of this critical AJA. Agile, highly successful US businesses do this kind of stuff all the time. And frankly, US economic security is so integral to successful foreign relations. She is not just incredibly talented as a leader, but she also is viewed very favorably by both sides of the aisle, and this is really needed to turn the AJA into something really special.
And spending a lot of time recently watching the many Deficit and Tax Discussions on C-Span and on the Internet, I make the following brief observations.
The Obama Administration should permanently place Edward Kleinbard at its Economic Table. What a brilliant mind on effective tax policy. Marty Feldstein also had some really good insights, but Kleinbard towered over everyone else with his broad knowledge and perceptive insights on these matters. USC is very lucky to have him.
The initial presentation by the Congressional "Supercommittee" on Deficit Reduction really disappointed me. If these are the best financial minds that the US Government has, then our economy will continue to be very troubled for a very long time.
I am sure they are well meaning heads of the US House Ways and Means and of the US Senate Finance Committees, but in these just horrible economic times, can the country afford to have Dave Camp and Max Baucus as heads of these two absolutely critical Congressional Committees? It's easy to see how US Big Corps have just run herd over these key Congressional Tax Committees.
It's also easy to see why the approval rating of the Republicans in the US House is so low. All three of them on this Supercommittee.....Jeb Hensarling, Fred Upton, and Dave Camp.....have such mediocre financial minds.
The one Supercommittee member who pleasantly surprised me was Republican Pat Toomey. I thought he had some good insights.
And lastly, I think it would be wise for some of the key CBO members to get some real-world business experience. Just being brilliant, and endlessly examining the data, isn't enough. No matter how intelligent you are, the data gets interpreted much better if you also have real-world business insight.
Maybe the US Government should fund some Executive MBA programs, or some short-term business internships, for some of these key CBO members, whose entire background is government and education.
Given the horrible US unemployment, US underemployment, the low median pay of those employed full time, the full-time employed being scared to death of losing their jobs, and the awful housing crisis, it would be really sad if, due to lack of proper business insight, the CBO is unrealistically too conservative in its scoring of a clearly fine job-creating, business incentive proposal.
Thursday, September 8, 2011
Big Corp Tax Loophole Closer #52: Minimum Tax on All US Big Corp Worldwide Profits
Since I have recently made posts on US Federal Income Taxes Paid, and Effective US Federal Income Tax Rate Paid (ETR), in 2010 by US Big Corps in each of the Sectors, in this post I will summarize the overall results.
The below summary shows US Big Corps with a 2010 ETR below 10% and also ones with a 2010 ETR below 15%. The summary also shows an estimate of positive ten-year CBO scoring to the US Government if a minimum tax of at least 10%, and also one of at least 15%, of worldwide pretax income on these Big US Corps were enacted.
................................US Big Corps with 2010 ETR Below........
......................................10%..............................15%...........
..............................................10 Year........................10 Year
............................................CBO Scoring..................CBO Scoring
..........................# of.....Total......10%.......# of....Total.....15%
...........................Big....2010..Minimum....Big....2010.Minimum
..........................Corps...ETR......Tax........Corps..ETR.......Tax
...............................................bils of $s.......................bils of $s
Big Oil...................35.....3.3%....273.5.......39.....3.6%.....480.5
Big Financial.........23...(6.2)%....259.4.......27....(2.0)%...345.0
Big Conglomerates..6..(11.1)%....131.3.........7....(7.0)%...163.0
Big Health Care.......5....(6.9)%.....95.2........10.....3.2%.....142.1
Big Utility.............30...(7.1)%.....82.6........32....(4.8)%....108.7
Big High Tech........14.....1.5%......73.0........21.....2.3%.....158.7
Big Telecom............6...(0.5)%.....72.9.........8.....0.7%.....110.2
Big Other Sectors..56.....2.4%....155.9........67.....5.2%.....282.7
Total all Sectors..175..(0.7)%..1,143.8.....211.....1.9%..1,790.9
Yeah, that's correct, the 175 most profitable US Big Corps, which paid effective US Federal Income Taxes of less than 10% in 2010, generated $565.7 bil of Consolidated Pretax Profits in 2010.....and how much Total US Federal Income Tax did these 175 US huge US Corps pay in 2010?
Well, in total not a dime, but rather they got Total Net US Federal Income Tax Refunds of $4.0 Bil.....thus a Total US Federal Income Tax Rate Refund of 0.7%.....I'm not kidding.
And how many times have you heard Republicans in the US Senate, and frankly even all of the Republican US Presidential candidates, talk about how US Corporations are paying way too much in US Corporate Federal Income Taxes, and that this is the main reason the US economy is so horrible and US unemployment is so high?
How can you possibly solve a problem when you have no clue what's going on? Instead of thinking independently and acting in the best interests of the country, these US Senate Republicans are just simply parroting what their Big Corp lobbyists are telling them to say.
The SEC is great in football, but the US Senate Republican Leadership from SEC States have little, if any, understanding on the US economy.
It's high time for the US Republicans in both the US Senate and in the US House to reverse course and step up, take the patriotic high road, and work with the Obama Administration in helping the country get out of its horrible economic mess. They have stopped nearly every good economic initiative that the Obama Administration has proposed.
Below here are the 175 US Big Corps with a 2010 Effective US Federal Income Tax Rate Paid below 10% each:
................................Current US..........................Effective
...............................Fed Inc Tax..Consolidated...Tax Rate
..............................Paid(Benefit).........PTI.......Paid(Refund)
...................................2010...............2010...........2010
.......................................(million of $s).....
Big Oil & Gas
Nabors Industries.......(138).................343..........(40.2)%
Weatherford Intl...........(34).................205..........(16.6)%
Halliburton.............(400)............2,655..........(15.1)%
Valero Energy...............(75)..............1,498...........(5.0)%
QEP Resources..............(17).................453...........(3.8)%
El Paso Corp....................(4)..............1,310...........(0.3)%
Newfield Exploration.......(1).................829...........(0.1)%
Chesapeake Energy...........0...............2,884.............0.0%
Pioneer Natural Res..........0.................788.............0.0%
EXCO Resources...............1..................674.............0.1%
Pride Intl..........................1..................252.............0.4%
Apache...........................25...............5,206.............0.5%
Southern Union................2..................350.............0.6%
Southwestern Energy......10..................995.............1.0%
Schlumberger.................76...............5,156.............1.5%
EOG Resources................17................1,151.............1.5%
Ensco Intl.......................10..................645.............1.6%
Exxon Mobil..........1,270............52,959.............2.4%
Noble Energy..................25...............1,031.............2.4%
Ultra Petroleum.............22..................723.............3.0%
Denbury Resources........16..................479.............3.3%
Marathon Oil................183................5,122.............3.6%
FMC Technologies..........21..................538.............3.9%
Hess.............................151................3,311.............4.6%
Chevron.................1,501............32,055.............4.7%
Cimarex Energy.............43..................914.............4.7%
Rowan Companies..........25..................379.............6.6%
ConocoPhillips......1,312............19,750.............6.6%
Devon Energy..............244...............3,568.............6.8%
Helmerich&Payne..........31..................438.............7.1%
Murphy Oil...................105...............1,414.............7.4%
OneOK...........................59..................755.............7.8%
Occidental Petroleum..614...............7,359.............8.3%
Noble Corp....................81..................917.............8.8%
Spectra Energy............105...............1,123.............9.3%
Total 35 Big Oil..........5,281..........158,229.............3.3%
Big Financial Corps
GE Capital Svcs...(3,991).............2,172........(183.7)%
State Street............(885).............2,086..........(42.4)%
Reinsurance Group....(218).................864...........(25.2)%
Lincoln National........(244)..............1,234...........(19.8)%
Bank NY Mellon....(670)............3,694...........(18.1)%
Prudential Fincl...(722).............4,422...........(16.3)%
Ameriprise Financial..(224).............1,594...........(14.1)%
Marsh&McLennan.......(90)................769...........(11.7)%
Bank of America...(666)...........11,077...........(6.0)%
PNC Financial...........(207)..............4,061............(5.1)%
Capital One Financial.(152)..............4,330............(3.5)%
Toyota Motor Credit...(26)..............3,003............(0.9)%
AON.............................16................1,059..............1.5%
NYSE Euronext............18...................686..............2.6%
Morgan Stanley..........213................6,202..............3.4%
MetLife.......................141................3,958..............3.6%
Invesco Ltd.................45...................834..............5.4%
Interactive Brokers......21...................341..............6.2%
Wells Fargo.........1,425..............19,001..............7.5%
Principal Financial......74...................841..............8.8%
American Express......532...............5,964..............8.9%
Western Union...........104................1,145..............9.1%
AFLAC.......................349................3,585..............9.7%
Total 23 Big Fincl...(5,157)............82,922............(6.2)%
Big Conglomerates
GE........................(3,253)...........14,208.........(22.9)%
Honeywell............(471)..............2,843..........(16.6)%
United Technolgy.122...............6,538...............1.9%
Tyco Intl....................45................1,270...............3.5%
Loews.......................154................2,902...............5.3%
Johnson Controls......112................1,763...............6.4%
Total 6 Big Cnglms.(3,291)............29,524............(11.1)%
Big Health Care
Pfizer..................(2,774)............9,422.........(29.4)%
Boston Scientific.......(83).................754...........(11.0)%
Merck....................399.............10,660............3.7%
Baxter.......................73................1,890..............3.9%
Eli Lilly....................376...............6,525..............5.8%
Total 5 BigHealth.(2,009)............29,251...........(6.9)%
Big Utilities
PacifiCorp..............(498)................777...........(64.1)%
MidAmerican Engy.(822).............1,465...........(56.1)%
Edison Intl.............(432)..............1,657...........(26.1)%
PinnacleWestCaptl.(109)................515...........(21.2)%
DTE Energy............(172)................950...........(18.1)%
NiSource.................(62)................436...........(14.2)%
Consolidated Ed.....(144)..............1,399...........(10.3)%
SCANA....................(47)................534............(8.8)%
AEP.......................(134)..............1,849............(7.2)%
EQT.........................(25)................355............(7.0)%
ConstellationEngy...(47)................702............(6.7)%
PublicSrvcEntrpr...(166).............2,616............(6.3)%
PPL.........................(51)..............1,239.............(4.1)%
CMS Energy.............(21)................590.............(3.6)%
Progress Energy......(46)..............1,406.............(3.3)%
FirstEnergy.............(23)..............1,242.............(1.9)%
PG&E.......................(12)..............1,660............(0.7)%
Duke Energy.............(5)..............2,210.............(0.2)%
Nextera Energy.........11..............2,489...............0.4%
Alliant Energy............3.................453...............0.7%
Allegheny Energy......7.................628...............1.1%
Southern Co.............42..............3,066...............1.4%
Xcel Energy.............17...............1,189...............1.4%
TECO Energy.............6.................410...............1.5%
Northeast Utilities....9.................605...............1.5%
Ameren...................13.................476...............2.7%
Sempra Energy........27................786...............3.4%
OGE Energy.............16.................461...............3.5%
CenterPoint Engy....40................705...............5.7%
Entergy.................145..............1,888...............7.7%
Total 30BigUtil.(2,480)...........34,758............(7.1)%
Big High Tech
Garmin Ltd............(46)................577............(8.0)%
Ebay....................(131).............2,098............(6.2)%
Seagate Technlgy....(6)................579............(1.0)%
Juniper Networks...(8)................778............(1.0)%
Corning....................0..............3,845..............0.0%
Priceline..................5.................746..............0.7%
IBM....................190............19,723.............1.0%
Computer Sci.........19.................968..............2.0%
Symantec..............17..................729..............2.3%
Yahoo...................26...............1,070..............2.4%
Western Digital......21..................780..............2.7%
Altera...................30..................868..............3.5%
HP......................484............10,974.............4.4%
CA Technologies..110...............1,209..............9.1%
Total 14BigTech.1,312............88,679..............1.5%
Big Telecom
Verizon..........(705)...........12,684...........(5.6)%
Qwest Comm........(14)................925.............(1.5)%
NII Holdings...........0.................598..............0.0%
AT&T...............307............18,238.............1.7%
TimeWarnerCbl..127...............2,196..............5.8%
CBS......................89...............1,222.............7.3%
Total6BigTelcom.(196).........35,863...........(0.5)%
Big Other Sectors
Intl Paper...........(249)..............822............(30.3)%
Nucor...................(66)..............267............(24.7)%
Dow Chemical.(576)........2,802............(20.6)%
Whirlpool........(101).............586............(17.2)%
Fortune Brands....(61)..............588............(10.4)%
DuPont...............(109)...........3,711.............(2.9)%
Avon Products.....(21)..............945.............(2.2)%
AES.......................(8)............2,265.............(0.4)%
Eaton....................(2)............1,036.............(0.2)%
Carnival.................0.............1,979..............0.0%
Royal Caribbean.....0...............548..............0.0%
Crown Holdings......0...............614..............0.0%
Boeing..................13............4,507..............0.3%
Supervalu..............2...............347..............0.6%
Cummins...............11............1,617..............0.7%
MolsonCoors Brw...8...............809..............1.0%
Coca Cola Enter......8...............746..............1.1%
Bunge, Ltd............33............3,050..............1.1%
PhillipMorris..157..........10,324..............1.5%
CHS.......................9................584..............1.5%
Southern Copper.40.............2,431..............1.6%
Mattel..................14...............847..............1.7%
Rockwell Autom..10...............544..............1.8%
FreeportMcMor.207...........8,512..............2.4%
Flowserve............13...............530..............2.5%
Kraft Foods..........91............3,642..............2.5%
Sara Lee...............13...............487..............2.7%
HJ Heinz..............39............1,374..............2.8%
Ingersoll-Rand.....29............1,007..............2.9%
FedEx..................79............2,265..............3.5%
Dover..................34...............925..............3.7%
Paccar.................25...............660..............3.8%
Fluor...................22...............560..............3.9%
Mosaic...............135............3,271..............4.1%
PPG Industries.....62............1,295..............4.8%
Coca Cola...........470...........9,709..............4.8%
Joy Global............33..............679..............4.9%
NewmontMining.214...........3,997..............5.4%
Cooper Industr....29...............530..............5.5%
Kellogg................97.............1,742..............5.6%
MeadJohnsnNutr.38...............634..............6.0%
Caterpillar.........247............3,750..............6.6%
Praxair..............133.............1,964..............6.8%
AirProd&Chem..101.............1,394..............7.2%
Avnet..................64...............871..............7.3%
Omnicom Grp....107............1,350..............7.9%
Ball Corp.............49...............606..............8.1%
CliffsNaturalRes.108............1,298..............8.3%
Goodrich.............67...............805..............8.3%
ArchDanMdlnd..251.............3,015..............8.3%
Raytheon...........205............2,432..............8.4%
Parker Hannifin..121.............1,414..............8.6%
KBR.....................56...............586..............9.6%
Lubrizol..............97............1,004..............9.7%
Yum Brands.......155............1,594..............9.7%
Wyndham WW.....55...............563..............9.8%
Total 56 Big Corps in
..Other22Sectors.2,558....106,434.............2.4%
Grand Total all Sectors
…175 Big Corps..(3,982)...565,660..........(0.7)%
The below summary shows US Big Corps with a 2010 ETR below 10% and also ones with a 2010 ETR below 15%. The summary also shows an estimate of positive ten-year CBO scoring to the US Government if a minimum tax of at least 10%, and also one of at least 15%, of worldwide pretax income on these Big US Corps were enacted.
................................US Big Corps with 2010 ETR Below........
......................................10%..............................15%...........
..............................................10 Year........................10 Year
............................................CBO Scoring..................CBO Scoring
..........................# of.....Total......10%.......# of....Total.....15%
...........................Big....2010..Minimum....Big....2010.Minimum
..........................Corps...ETR......Tax........Corps..ETR.......Tax
...............................................bils of $s.......................bils of $s
Big Oil...................35.....3.3%....273.5.......39.....3.6%.....480.5
Big Financial.........23...(6.2)%....259.4.......27....(2.0)%...345.0
Big Conglomerates..6..(11.1)%....131.3.........7....(7.0)%...163.0
Big Health Care.......5....(6.9)%.....95.2........10.....3.2%.....142.1
Big Utility.............30...(7.1)%.....82.6........32....(4.8)%....108.7
Big High Tech........14.....1.5%......73.0........21.....2.3%.....158.7
Big Telecom............6...(0.5)%.....72.9.........8.....0.7%.....110.2
Big Other Sectors..56.....2.4%....155.9........67.....5.2%.....282.7
Total all Sectors..175..(0.7)%..1,143.8.....211.....1.9%..1,790.9
Yeah, that's correct, the 175 most profitable US Big Corps, which paid effective US Federal Income Taxes of less than 10% in 2010, generated $565.7 bil of Consolidated Pretax Profits in 2010.....and how much Total US Federal Income Tax did these 175 US huge US Corps pay in 2010?
Well, in total not a dime, but rather they got Total Net US Federal Income Tax Refunds of $4.0 Bil.....thus a Total US Federal Income Tax Rate Refund of 0.7%.....I'm not kidding.
And how many times have you heard Republicans in the US Senate, and frankly even all of the Republican US Presidential candidates, talk about how US Corporations are paying way too much in US Corporate Federal Income Taxes, and that this is the main reason the US economy is so horrible and US unemployment is so high?
How can you possibly solve a problem when you have no clue what's going on? Instead of thinking independently and acting in the best interests of the country, these US Senate Republicans are just simply parroting what their Big Corp lobbyists are telling them to say.
The SEC is great in football, but the US Senate Republican Leadership from SEC States have little, if any, understanding on the US economy.
It's high time for the US Republicans in both the US Senate and in the US House to reverse course and step up, take the patriotic high road, and work with the Obama Administration in helping the country get out of its horrible economic mess. They have stopped nearly every good economic initiative that the Obama Administration has proposed.
Below here are the 175 US Big Corps with a 2010 Effective US Federal Income Tax Rate Paid below 10% each:
................................Current US..........................Effective
...............................Fed Inc Tax..Consolidated...Tax Rate
..............................Paid(Benefit).........PTI.......Paid(Refund)
...................................2010...............2010...........2010
.......................................(million of $s).....
Big Oil & Gas
Nabors Industries.......(138).................343..........(40.2)%
Weatherford Intl...........(34).................205..........(16.6)%
Halliburton.............(400)............2,655..........(15.1)%
Valero Energy...............(75)..............1,498...........(5.0)%
QEP Resources..............(17).................453...........(3.8)%
El Paso Corp....................(4)..............1,310...........(0.3)%
Newfield Exploration.......(1).................829...........(0.1)%
Chesapeake Energy...........0...............2,884.............0.0%
Pioneer Natural Res..........0.................788.............0.0%
EXCO Resources...............1..................674.............0.1%
Pride Intl..........................1..................252.............0.4%
Apache...........................25...............5,206.............0.5%
Southern Union................2..................350.............0.6%
Southwestern Energy......10..................995.............1.0%
Schlumberger.................76...............5,156.............1.5%
EOG Resources................17................1,151.............1.5%
Ensco Intl.......................10..................645.............1.6%
Exxon Mobil..........1,270............52,959.............2.4%
Noble Energy..................25...............1,031.............2.4%
Ultra Petroleum.............22..................723.............3.0%
Denbury Resources........16..................479.............3.3%
Marathon Oil................183................5,122.............3.6%
FMC Technologies..........21..................538.............3.9%
Hess.............................151................3,311.............4.6%
Chevron.................1,501............32,055.............4.7%
Cimarex Energy.............43..................914.............4.7%
Rowan Companies..........25..................379.............6.6%
ConocoPhillips......1,312............19,750.............6.6%
Devon Energy..............244...............3,568.............6.8%
Helmerich&Payne..........31..................438.............7.1%
Murphy Oil...................105...............1,414.............7.4%
OneOK...........................59..................755.............7.8%
Occidental Petroleum..614...............7,359.............8.3%
Noble Corp....................81..................917.............8.8%
Spectra Energy............105...............1,123.............9.3%
Total 35 Big Oil..........5,281..........158,229.............3.3%
Big Financial Corps
GE Capital Svcs...(3,991).............2,172........(183.7)%
State Street............(885).............2,086..........(42.4)%
Reinsurance Group....(218).................864...........(25.2)%
Lincoln National........(244)..............1,234...........(19.8)%
Bank NY Mellon....(670)............3,694...........(18.1)%
Prudential Fincl...(722).............4,422...........(16.3)%
Ameriprise Financial..(224).............1,594...........(14.1)%
Marsh&McLennan.......(90)................769...........(11.7)%
Bank of America...(666)...........11,077...........(6.0)%
PNC Financial...........(207)..............4,061............(5.1)%
Capital One Financial.(152)..............4,330............(3.5)%
Toyota Motor Credit...(26)..............3,003............(0.9)%
AON.............................16................1,059..............1.5%
NYSE Euronext............18...................686..............2.6%
Morgan Stanley..........213................6,202..............3.4%
MetLife.......................141................3,958..............3.6%
Invesco Ltd.................45...................834..............5.4%
Interactive Brokers......21...................341..............6.2%
Wells Fargo.........1,425..............19,001..............7.5%
Principal Financial......74...................841..............8.8%
American Express......532...............5,964..............8.9%
Western Union...........104................1,145..............9.1%
AFLAC.......................349................3,585..............9.7%
Total 23 Big Fincl...(5,157)............82,922............(6.2)%
Big Conglomerates
GE........................(3,253)...........14,208.........(22.9)%
Honeywell............(471)..............2,843..........(16.6)%
United Technolgy.122...............6,538...............1.9%
Tyco Intl....................45................1,270...............3.5%
Loews.......................154................2,902...............5.3%
Johnson Controls......112................1,763...............6.4%
Total 6 Big Cnglms.(3,291)............29,524............(11.1)%
Big Health Care
Pfizer..................(2,774)............9,422.........(29.4)%
Boston Scientific.......(83).................754...........(11.0)%
Merck....................399.............10,660............3.7%
Baxter.......................73................1,890..............3.9%
Eli Lilly....................376...............6,525..............5.8%
Total 5 BigHealth.(2,009)............29,251...........(6.9)%
Big Utilities
PacifiCorp..............(498)................777...........(64.1)%
MidAmerican Engy.(822).............1,465...........(56.1)%
Edison Intl.............(432)..............1,657...........(26.1)%
PinnacleWestCaptl.(109)................515...........(21.2)%
DTE Energy............(172)................950...........(18.1)%
NiSource.................(62)................436...........(14.2)%
Consolidated Ed.....(144)..............1,399...........(10.3)%
SCANA....................(47)................534............(8.8)%
AEP.......................(134)..............1,849............(7.2)%
EQT.........................(25)................355............(7.0)%
ConstellationEngy...(47)................702............(6.7)%
PublicSrvcEntrpr...(166).............2,616............(6.3)%
PPL.........................(51)..............1,239.............(4.1)%
CMS Energy.............(21)................590.............(3.6)%
Progress Energy......(46)..............1,406.............(3.3)%
FirstEnergy.............(23)..............1,242.............(1.9)%
PG&E.......................(12)..............1,660............(0.7)%
Duke Energy.............(5)..............2,210.............(0.2)%
Nextera Energy.........11..............2,489...............0.4%
Alliant Energy............3.................453...............0.7%
Allegheny Energy......7.................628...............1.1%
Southern Co.............42..............3,066...............1.4%
Xcel Energy.............17...............1,189...............1.4%
TECO Energy.............6.................410...............1.5%
Northeast Utilities....9.................605...............1.5%
Ameren...................13.................476...............2.7%
Sempra Energy........27................786...............3.4%
OGE Energy.............16.................461...............3.5%
CenterPoint Engy....40................705...............5.7%
Entergy.................145..............1,888...............7.7%
Total 30BigUtil.(2,480)...........34,758............(7.1)%
Big High Tech
Garmin Ltd............(46)................577............(8.0)%
Ebay....................(131).............2,098............(6.2)%
Seagate Technlgy....(6)................579............(1.0)%
Juniper Networks...(8)................778............(1.0)%
Corning....................0..............3,845..............0.0%
Priceline..................5.................746..............0.7%
IBM....................190............19,723.............1.0%
Computer Sci.........19.................968..............2.0%
Symantec..............17..................729..............2.3%
Yahoo...................26...............1,070..............2.4%
Western Digital......21..................780..............2.7%
Altera...................30..................868..............3.5%
HP......................484............10,974.............4.4%
CA Technologies..110...............1,209..............9.1%
Total 14BigTech.1,312............88,679..............1.5%
Big Telecom
Verizon..........(705)...........12,684...........(5.6)%
Qwest Comm........(14)................925.............(1.5)%
NII Holdings...........0.................598..............0.0%
AT&T...............307............18,238.............1.7%
TimeWarnerCbl..127...............2,196..............5.8%
CBS......................89...............1,222.............7.3%
Total6BigTelcom.(196).........35,863...........(0.5)%
Big Other Sectors
Intl Paper...........(249)..............822............(30.3)%
Nucor...................(66)..............267............(24.7)%
Dow Chemical.(576)........2,802............(20.6)%
Whirlpool........(101).............586............(17.2)%
Fortune Brands....(61)..............588............(10.4)%
DuPont...............(109)...........3,711.............(2.9)%
Avon Products.....(21)..............945.............(2.2)%
AES.......................(8)............2,265.............(0.4)%
Eaton....................(2)............1,036.............(0.2)%
Carnival.................0.............1,979..............0.0%
Royal Caribbean.....0...............548..............0.0%
Crown Holdings......0...............614..............0.0%
Boeing..................13............4,507..............0.3%
Supervalu..............2...............347..............0.6%
Cummins...............11............1,617..............0.7%
MolsonCoors Brw...8...............809..............1.0%
Coca Cola Enter......8...............746..............1.1%
Bunge, Ltd............33............3,050..............1.1%
PhillipMorris..157..........10,324..............1.5%
CHS.......................9................584..............1.5%
Southern Copper.40.............2,431..............1.6%
Mattel..................14...............847..............1.7%
Rockwell Autom..10...............544..............1.8%
FreeportMcMor.207...........8,512..............2.4%
Flowserve............13...............530..............2.5%
Kraft Foods..........91............3,642..............2.5%
Sara Lee...............13...............487..............2.7%
HJ Heinz..............39............1,374..............2.8%
Ingersoll-Rand.....29............1,007..............2.9%
FedEx..................79............2,265..............3.5%
Dover..................34...............925..............3.7%
Paccar.................25...............660..............3.8%
Fluor...................22...............560..............3.9%
Mosaic...............135............3,271..............4.1%
PPG Industries.....62............1,295..............4.8%
Coca Cola...........470...........9,709..............4.8%
Joy Global............33..............679..............4.9%
NewmontMining.214...........3,997..............5.4%
Cooper Industr....29...............530..............5.5%
Kellogg................97.............1,742..............5.6%
MeadJohnsnNutr.38...............634..............6.0%
Caterpillar.........247............3,750..............6.6%
Praxair..............133.............1,964..............6.8%
AirProd&Chem..101.............1,394..............7.2%
Avnet..................64...............871..............7.3%
Omnicom Grp....107............1,350..............7.9%
Ball Corp.............49...............606..............8.1%
CliffsNaturalRes.108............1,298..............8.3%
Goodrich.............67...............805..............8.3%
ArchDanMdlnd..251.............3,015..............8.3%
Raytheon...........205............2,432..............8.4%
Parker Hannifin..121.............1,414..............8.6%
KBR.....................56...............586..............9.6%
Lubrizol..............97............1,004..............9.7%
Yum Brands.......155............1,594..............9.7%
Wyndham WW.....55...............563..............9.8%
Total 56 Big Corps in
..Other22Sectors.2,558....106,434.............2.4%
Grand Total all Sectors
…175 Big Corps..(3,982)...565,660..........(0.7)%
Big Corp Tax Loophole Closer #51: Minimum Tax on Big Utility Profits
I found 36 Big US Utility Corps with Total Pretax Income above $1 bil each for the most recent three years. These 36 Big Utility Corps had a total effective US Federal Income Tax Rate Paid of a negative (1.2) % for 2010. And of these 36 Big Utility Corps, 18 of them, or 50%, had a negative US Federal Income Tax Rate Paid in 2010.
In comparison, the 2009 US Federal Income Tax Rate Paid of these 36 Big Utility Corps was a positive 3.4%, still very low.
Suffice it to say that if the US Government thinks that its Big US Utility Corps are helping reduce the US Deficit by paying a lot of US Federal Income Taxes, well…..good luck with that thought!
Here is the relevant 2010 financial information regarding these 36 US Big Utility Corps:
.................................Current US...........................Effective
.................................Fed Inc Tax..Consolidated...Tax Rate
................................Paid(Benefit).........PTI.......Paid(Benefit)
.....................................2010..............2010............2010
........................................(million of $s).....
PacifiCorp......................(498).............777...........(64.1)%
MidAmerican Energy.....(822)...........1,465...........(56.1)%
Edison International......(432)...........1,657...........(26.1)%
Pinnacle West Capital.....(109).............515...........(21.2)%
DTE Energy....................(172).............950...........(18.1)%
NiSource.........................(62)..............436...........(14.2)%
Consolidated Edison......(144)...........1,399...........(10.3)%
SCANA...........................(47)..............534.............(8.8)%
American Electric Pwr..(134)...........1,849.............(7.2)%
EQT................................(25)..............355.............(7.0)%
Constellation Energy(1)..(47)..............702.............(6.7)%
Public Service Enterpr..(166)............2,616.............(6.3)%
PPL................................(51)............1,239.............(4.1)%
CMS Energy....................(21)...............590.............(3.6)%
Progress Energy.............(46)............1,406.............(3.3)%
FirstEnergy....................(23)............1,242.............(1.9)%
PG&E..............................(12)............1,660.............(0.7)%
Duke Energy....................(5)............2,210.............(0.2)%
Nextera Energy................11............2,489...............0.4%
Alliant Energy...................3...............453...............0.7%
Allegheny Energy..............7...............628...............1.1%
Southern Co....................42............3,066...............1.4%
Xcel Energy.....................17............1,189...............1.4%
TECO Energy.....................6...............410...............1.5%
Northeast Utilities.............9...............605...............1.5%
Ameren...........................13...............476...............2.7%
Sempra Energy................27...............786...............3.4%
OGE Energy......................16...............461...............3.5%
CenterPoint Energy..........40..............705...............5.7%
Entergy..........................145............1,888...............7.7%
UGI Corp..........................61...............523.............11.7%
Exelon............................506............4,221.............12.0%
Dominion Resources.......891...........5,037..............17.7%
Wisconsin Energy...........145...............704.............20.6%
NRG Energy....................211...............753.............28.0%
NSTAR Electric...............122...............411.............29.7%
Total 36 Big Utilities......(544)........46,407.............(1.2)%
(1) Constellation Energy 2010 PTI excludes huge Asset Impairment Charge.
My proposal here is that all US Big Utility Corps should pay in US Federal Income Tax each year at least an amount equal to 10% of their Worldwide Pretax Income. That's not too much to ask, particularly in these horrible economic times, not just for US citizens and small businesses, but also for the US Debt Status.
When I run the detailed numbers on these Big Utility Corps, and use a conservative 5% average annual profit growth and 5% annual Federal Income Tax Paid growth from 2010 to 2021, I get additional US Federal Income Tax Receipts over the 10 years from 2012 to 2021 of $82.6 bil.
And if I use a 15% minimum Federal Income Tax Rate, rather than a 10% minimum tax rate, I get positive CBO scoring of $108.7 bil over the 10 years from 2012 to 2021 related to these 36 US Big Utility Corps.
Since such a high percentage of the income of US Big Utility Corps is received in the US, I think I would consider letting them have a portion of their income in each year not subject to a minimum tax, perhaps the first $100 mil.
In comparison, the 2009 US Federal Income Tax Rate Paid of these 36 Big Utility Corps was a positive 3.4%, still very low.
Suffice it to say that if the US Government thinks that its Big US Utility Corps are helping reduce the US Deficit by paying a lot of US Federal Income Taxes, well…..good luck with that thought!
Here is the relevant 2010 financial information regarding these 36 US Big Utility Corps:
.................................Current US...........................Effective
.................................Fed Inc Tax..Consolidated...Tax Rate
................................Paid(Benefit).........PTI.......Paid(Benefit)
.....................................2010..............2010............2010
........................................(million of $s).....
PacifiCorp......................(498).............777...........(64.1)%
MidAmerican Energy.....(822)...........1,465...........(56.1)%
Edison International......(432)...........1,657...........(26.1)%
Pinnacle West Capital.....(109).............515...........(21.2)%
DTE Energy....................(172).............950...........(18.1)%
NiSource.........................(62)..............436...........(14.2)%
Consolidated Edison......(144)...........1,399...........(10.3)%
SCANA...........................(47)..............534.............(8.8)%
American Electric Pwr..(134)...........1,849.............(7.2)%
EQT................................(25)..............355.............(7.0)%
Constellation Energy(1)..(47)..............702.............(6.7)%
Public Service Enterpr..(166)............2,616.............(6.3)%
PPL................................(51)............1,239.............(4.1)%
CMS Energy....................(21)...............590.............(3.6)%
Progress Energy.............(46)............1,406.............(3.3)%
FirstEnergy....................(23)............1,242.............(1.9)%
PG&E..............................(12)............1,660.............(0.7)%
Duke Energy....................(5)............2,210.............(0.2)%
Nextera Energy................11............2,489...............0.4%
Alliant Energy...................3...............453...............0.7%
Allegheny Energy..............7...............628...............1.1%
Southern Co....................42............3,066...............1.4%
Xcel Energy.....................17............1,189...............1.4%
TECO Energy.....................6...............410...............1.5%
Northeast Utilities.............9...............605...............1.5%
Ameren...........................13...............476...............2.7%
Sempra Energy................27...............786...............3.4%
OGE Energy......................16...............461...............3.5%
CenterPoint Energy..........40..............705...............5.7%
Entergy..........................145............1,888...............7.7%
UGI Corp..........................61...............523.............11.7%
Exelon............................506............4,221.............12.0%
Dominion Resources.......891...........5,037..............17.7%
Wisconsin Energy...........145...............704.............20.6%
NRG Energy....................211...............753.............28.0%
NSTAR Electric...............122...............411.............29.7%
Total 36 Big Utilities......(544)........46,407.............(1.2)%
(1) Constellation Energy 2010 PTI excludes huge Asset Impairment Charge.
My proposal here is that all US Big Utility Corps should pay in US Federal Income Tax each year at least an amount equal to 10% of their Worldwide Pretax Income. That's not too much to ask, particularly in these horrible economic times, not just for US citizens and small businesses, but also for the US Debt Status.
When I run the detailed numbers on these Big Utility Corps, and use a conservative 5% average annual profit growth and 5% annual Federal Income Tax Paid growth from 2010 to 2021, I get additional US Federal Income Tax Receipts over the 10 years from 2012 to 2021 of $82.6 bil.
And if I use a 15% minimum Federal Income Tax Rate, rather than a 10% minimum tax rate, I get positive CBO scoring of $108.7 bil over the 10 years from 2012 to 2021 related to these 36 US Big Utility Corps.
Since such a high percentage of the income of US Big Utility Corps is received in the US, I think I would consider letting them have a portion of their income in each year not subject to a minimum tax, perhaps the first $100 mil.
Tuesday, September 6, 2011
Whole-Scale US Infrastructure Investments with Optimal CBO Scoring
To maximize US job creation in the short term, there must be whole-scale US infrastructure investments made.
But also, it should be done in a way that optimizes upfront CBO scoring to the US Government, over the long run.
So, how do you do that? There are many smart ways to do this. Let me present four ideas.
First, on the front end, you lay out wise user fees that will apply to as many US infrastructure investments as you can. Thus, in upfront CBO scoring, an estimate must be made of the future user fees that the US Government will receive, which will reduce the overall long-term net cash outflow from the US infrastructure investment.
Second, if you make US infrastructure investments that are designed to reduce future energy costs, an estimate of these future energy cost savings should be factored into the upfront CBO scoring of the infrastructure project.
Third, I think for all US infrastructure investments, there should be upfront minimum percentage requirements of the total job cost that must be for labor costs. This minimum labor cost percentage should wisely vary by type of infrastructure project.
By having these upfront minimum labor cost percentage requirements, the upfront CBO scoring should include the additional US federal income taxes and US payroll taxes, both of which the US Government will be receiving, related to the minimum labor cost requirements of the US infrastructure projects.
And fourth, if the US Government, perhaps through the use of an Infrastructure Bank, provides wisely designed, highly incentivized financing for Infrastructure projects performed by outside entities, like State and Local Governments, and Non-Profit Hospitals and other Non-Profit Organizations, the interest to be collected by the US Government from the financing of the infrastructure project will result in upfront substantially positive CBO scoring to the US Government.
But also, it should be done in a way that optimizes upfront CBO scoring to the US Government, over the long run.
So, how do you do that? There are many smart ways to do this. Let me present four ideas.
First, on the front end, you lay out wise user fees that will apply to as many US infrastructure investments as you can. Thus, in upfront CBO scoring, an estimate must be made of the future user fees that the US Government will receive, which will reduce the overall long-term net cash outflow from the US infrastructure investment.
Second, if you make US infrastructure investments that are designed to reduce future energy costs, an estimate of these future energy cost savings should be factored into the upfront CBO scoring of the infrastructure project.
Third, I think for all US infrastructure investments, there should be upfront minimum percentage requirements of the total job cost that must be for labor costs. This minimum labor cost percentage should wisely vary by type of infrastructure project.
By having these upfront minimum labor cost percentage requirements, the upfront CBO scoring should include the additional US federal income taxes and US payroll taxes, both of which the US Government will be receiving, related to the minimum labor cost requirements of the US infrastructure projects.
And fourth, if the US Government, perhaps through the use of an Infrastructure Bank, provides wisely designed, highly incentivized financing for Infrastructure projects performed by outside entities, like State and Local Governments, and Non-Profit Hospitals and other Non-Profit Organizations, the interest to be collected by the US Government from the financing of the infrastructure project will result in upfront substantially positive CBO scoring to the US Government.
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