In many of his TV ads, US House Republican candidate Dr. Larry Bucshon wears blue jeans, is spending time with his family in a run-of-the-mill Indiana back yard, in a clear attempt to show that he is just a regular Southwest Indiana 8th District guy.
But let’s test that to see if this is a real middle income, blue collar kind of Indiana Bloody 8th District guy. Let me cite just for now a couple of items I discovered about candidate Dr. Bucshon.
…..He is a very gifted heart surgeon, and has been Physician President and Medical Director of Cardiovascular Surgery of Ohio Valley Heartcare (OVHC) since 2003. OVHC has eight locations in three states. OVHC has eleven Cardiovascular Physicians, five Clinical Directors, and six Nurse Practitioners. When I extensively study heart surgeons on the web, my hunch is that a heart surgeon, who is President of this very prosperous, prestigious cardiovascular health care company with such a broad reach, must be averaging probably at least a million dollars a year in his personal total income plus benefits for at least each of the past eight years. In all fairness and in a sense of financial transparency, I think he should disclose to voters the precise amount of his total annual income plus benefits.
.…..He lives in what I would call a just beautiful mansion on Outer Lincoln Drive in Newburgh, a very nice suburb of Evansville. In all fairness, I think he should disclose the fair market value of his home.
…..He lives in the Castle High School District of Newburgh. From very favorable personal experience with two daughters who attended school there, Castle High School is probably one of the best ten public high schools in the State of Indiana, with many exceptional teachers, and with an exceptionally strong and very extensive Advanced Placement program. Castle’s Junior Highs are also very educationally strong schools, with many gifted teachers. I can understand why someone living in Newburgh would have their kids go to the public charter school, Evansville Signature School, one of the best charter schools not just in the State, but also in the country. I also can clearly understand why someone living in Newburgh would have their kids go to Evansville Memorial, a very high quality Catholic high school on Evansville's East Side and not really that far from Newburgh, and with very reasonable tuition. So what school does the Bucshon family decide to attend? Neither of the public schools, Castle or Sig School, but instead the elitist, very expensive Evansville Day School, located way on the other side of town. This is Dr. Bucshon’s idea of public education reform....abandon public schools?
…..He is a strong US Big Multinational Corp supporter, so much so that he wants to reduce the corporate US federal income tax rate on them, along with on all other corps, from 35% to 20% immediately, which is an amazingly high 43% tax reduction. The stated US federal income tax rate on these large US Multinational Corps of 35% is meaningless, since from exhaustive study of SEC annual report filings, the most recent average US federal income tax rate actually paid presently by the roughly 100 largest US Multinational Corps is just under 10%, already a 71% discount to the 35% artificially high stated corporate federal income tax rate. This 71% discount is due mainly to the many huge corporate tax loopholes that many large US Multinational Corps take advantage of, including the very favorable impact of shifting income, along with the related US jobs, overseas. Given that substantially reducing the US federal income tax rate of Big US Corps by an incredible 43% is such an extreme and exceptionally economically-sensitive position, particularly so since it is in addition to the present 71% deeply discounted tax rate, I think it is only fair for voters to know if any of either his or his anesthesiologist wife's personal common stock holdings include, either directly or indirectly, any Big US Corp common stock, or other corp common stock, which would benefit significantly from this 43% reduction in the Federal Income Tax Rate proposal of Dr. Bucshon. Thus, to show that he clearly does not have a conflict of interest on his critical tax proposal here, I think that in a sense of full financial transparency, Dr. Bucshon should disclose to voters the fair market value of each of his and his wife's stock, mutual fund, and other asset holdings, both regular holdings as well as holdings included in any of his or her retirement plans. Voters in Indiana's 8th District value highly financial transparency.....if a candidate proposes a dramatic change in taxes, just how does that effect him personally?
From just all of the above items, I have to conclude that in fact Dr. Bucshon is not one of us...his privileged world is nothing like that of 99% of those in the Bloody 8th District. I am very impressed with all of his life’s accomplishments, but how in the world could he truly know who we in the 8th District are....struggling every day to make ends meet, for the unemployed to find jobs, for the underemployed to find better jobs, for the full-time employed to keep their jobs, for our kids to get the best education they can get at an affordable cost.
On the other hand, Dr. Bucshon's Democratic opponent, Trent Van Haaften, a former prosecutor from Mt. Vernon, is clearly one of us. I have yet to hear anyone say anything bad about this guy. He is very smart, cares deeply about people, and is just a flat out class guy. He can be counted on to serve all of the citizens in the 8th District.
Frankly, I think the majority of Tea Party candidates would understand the essence of who Indiana 8th District people are much better than Dr. Bucshon does.
I also think another good question to ask is whether Todd Young, a wealthy Carmel lawyer, recently carpetbagged to Bloomington, is really one of them in Indiana’s Ninth District. I know much of this Ninth District, getting very familiar with it in the 2008 Presidential Election, and having left more than my share of money at nearby horse race tracks at Churchill Downs and at Louisville Downs over the many years. Also, I have a daughter who recently graduated from the very prestigious Indiana University in Bloomington….she is now in law school in Florida, but her heart is still in Bloomington and at IU…..and she campaigned heavily for Baron Hill, when she was at IU…..and it is very difficult for a candidate to impress her. Unlike Todd Young, Baron Hill has a very clear understanding of the essence of citizens in his Ninth District.....my gosh, this guy Baron Hill was even a basketball star at Seymour High School decades ago.
Wednesday, October 13, 2010
Friday, October 8, 2010
Do Big US Corps Pay Too Much US Federal Income Tax?
In extensively reviewing websites of US Senate and US House Republican candidates running in the November 2010 election, I consistently see that a key issue of theirs is to reduce income taxes. And some of these websites specifically focus on the candidate’s position that the US Corporate Federal Income Tax Rate of 35% is way too high and needs to be substantially reduced.
Just to mention a few, US Republican Senate candidates Pat Toomey in Pennsylvania, Linda McMahon in Connecticut, and Dan Coats in Indiana all specifically and prominently mention in their websites that they would like to significantly reduce the US Corporate Federal Income Tax Rate of 35%.
So many Republican candidates assert that Big US Corps are being severely penalized because they are paying way too much US corporate federal income taxes presently, and thus they aren’t able to compete overseas. They further contend that by simply substantially reducing this 35% top US corporate federal income tax rate, somehow magically this will trickle down and create US jobs.
Given the tepid US jobless recovery, coupled with the huge US Government Debt, I think some research on just what these Big US Corps pay in US Corporate Federal Income Taxes is warranted.
Well, the conclusion is pretty clear…Big US Corps aren’t paying too much US Federal Income Tax. In fact, they are paying way too little tax. Let me explain in more detail, with this research coming from an exhaustive study of Big US Corp SEC filings.
I first studied the 30 Dow Industrial companies. From their annual report income tax footnotes, here’s the US Current Federal Corporate Income Tax Paid or Payable in the Current Year as compared with their Worldwide Pretax Income in total for each of the most recent five years for all 30 Dow companies, except for Pfizer in 2009, because it had a huge foreign earnings repatriation in connection with its acquisition of Wyeth in that year:
2005…..16.9%
2006…..15.6%
2007…..14.7%
2008…..10.5%
2009….. 7.8%
Yeah, these Big US Dow Industrial Corps are not paying anywhere near 35%. In fact, in the most recent year 2009, the US Federal Income Tax Rate they are paying is only 22% of the 35% statutory federal tax rate, or a paltry 7.8%. And look at the above incredible trend…in just the three most recent years, this effective tax rate has been cut precisely in half from 15.6% in 2006 to only 7.8% in 2009.
This downward effective tax rate trend looks to me like Arne Duncan’s Education Race to the Top in reverse….thus, I’ll call it the Big US Corp Race to the Bottom…..or who can pay the lowest effective tax rate to the US government.
Of the 30 Dow Industrial companies, 43% of them, or 13, paid a US federal income effective tax rate of less than 9% each for the most recent two years (2008 and 2009). Let me present the individual winning (?) companies in this Race to the Bottom:
…………………………..........2008-09.....2008-09…...2008-09
…………………………........US Current……………..…...US Current
……………………………........Federal……Worldwide……Federal
…………………………........Income Tax…Pretax………Effective
…………………………….......Expense……Income……...Tax Rate
……………………………......(Benefit)
…………………………….......(in millions of dollars)
#13…Procter & Gamble…..2,727………30,957………… 8.8%
#12…Coca Cola…………......1,199……….16,452………… 7.3%
#11…United Technologies….815……….12,696………… 6.4%
#10…Chevron……………....3,007……….61,585………… 4.9%
# 9…Caterpillar…………....... 230………...5,070………… 4.5%
# 8…Merck………………........ 999………..25,224………… 4.0%
# 7…IBM…………………......... 811………..34,853………… 2.3%
# 6…Hewlett Packard…….... 452……….19,888…………. 2.3%
#..5…Exxon Mobil………....2,167……..118,174…………. 1.8%
# 4…Dupont………………….......37………..4,575……………0.8%
# 3…Verizon……………….....(246)……..27,482…………..(0.9)%
# 2…Boeing……………….........(88)……….5,726…………..(1.5)%
# 1…GE…………………........(1,609)……..30,126………….(5.3)%
Total Above 13 Cos………10,501…….392,808……………2.7%
Yeah, that’s right, 13 of the 30 Dow Industrial companies had a total US Corporate effective federal tax rate in the most recent two years of an incredibly low 2.7%, which is 92% below the statutory US Federal Income Tax Rate of 35%.
And it’s not just the large Dow Industrial companies. From their annual report income tax footnotes, here’s the US Current Federal Corporate Income Tax Paid or Payable in the Current Year as compared with their Worldwide Pretax Income in total for the most recent three fiscal years for 141 large non-Dow companies, which each had Worldwide Pretax Income above $3 bil in total for the most recent three years, with also a couple more companies added, where I had a local interest:
FYE 2007-8…..20.3%
FYE 2008-9…..19.3%
FYE 2009-10…13.8%
Of these large 141 non-Dow Industrial companies, 43 of them, or 30.5%, paid an effective US federal income tax rate of less than 10% for the most recent two fiscal years (2008-9 and 2009-10). And as you can see from the below 43 companies, 12 of them were Big Oil companies. Let me present the individual winning (?) companies in this Race to the Bottom:
…………………………................Most Recent Two Fiscal Year Ends
……………………………...........US Current……………..…...US Current
………………………………..........Federal……Worldwide……Federal
……………………………...........Income Tax…..Pretax………Effective
………………………………..........Expense…….Income………Tax Rate
……………………………….........(Benefit)
……………………………….........(in millions of dollars)
#43…Occidental Petroleum…..1,574………16,040…………..9.8%
#42…Accenture………………........567………..5,786…………. 9.8%
#41…Praxair…………………….......305………...3,127…………..9.8%
#40…ConocoPhillips…………....3,820……..39,362***…..….9.7%
#39…Kimberly Clark………….......463………..4,865…………...9.5%
#38…Air Products&Chemicals....220………..2,316…………...9.5%
#37…Spectra Energy………….......275………..2,959…………...9.3%
#36…Qualcomm………………........524………..5,902…………...8.9%
#35…Loews…………………….........198………...2,317…………...8.5%
#34…PNC Financial……………......364………..4,319…………...8.4%
#33…XTO Energy…………….........473*………6,189…………...7.6%
#32…Ensco……………………..........178*………2,356…………...7.6%
#31…Honeywell……………….........466……….6,799……………6.9%
#30…Marathon………………….......697……...10,192……………6.8%
#29…Bristol Myers Squibb……....692*…....10,378……………6.7%
#28…Mosaic…………………….........261………..4,096……………6.4%
#27…Omnicom Group………….....160………..2,889……………5.5%
#26…Applied Materials…………......51………….923……………5.5%
#25…Yum Brands……………….......147……….2,687……………5.5%
#24…Western Digital…………….......94……….2,021……………4.7%
#23…Phillip Morris Intl…………....818………19,180……………4.3%
#22…AON………………………............76………..1,828……………4.2%
#21…Dow Chemical…………….........68………..1,746…………....3.9%
#20…Whirlpool…………………..........19…………..540……………3.5%
#19…EOG Resources………….........146………...4,619……………3.2%
#18…Schlumberger…………….......262……….10,786……………2.4%
#17…Heinz………………...................49………...2,610……………1.9%
#16…Weatherford………………........33*…….....1,989……………1.7%
#15…Baxter……………………….........67………...5,196…………….1.3%
#14…Cummins……………….............20*……….1,818……………..1.1%
#13…Hess………………………............49………...6,219……………..0.8%
#12…FedEx………………………............1………..2,571……………..0.0%
#11…Corning……………………...........(4)……….4,816…………….(0.1)%
#10…Apache……………………...........(2)……….1,258…………….(0.2)%
# 9…Newmont Mining…………......(67)…….....4,165…………….(1.6)%
# 8…Southern Copper………….......(65)*…......3,498……………(1.9)%
# 7…Avon Products…………….......(64)………..2,165……………(3.0)%
# 6…Eli Lilly…………………........... (162)……….4,050…………….(4.0)%
# 5…Paccar……………………..........(127)……….1,639…………….(7.7)%
# 4…Wells Fargo…………….......(1,909)**…..21,298……………(9.0)%
# 3…Halliburton………………........(531)……….5,531…………….(9.6)%
# 2…DirecTV…………………..........(851)……….4,305……………(19.8)%
# 1…Prudential Financial……......(329)…………430……………(75.3)%
Total Above 43 Cos…………….....9,031……247,780…….........3.6%
*also includes State Income Tax
**appears to also include tax benefits from IRS Audit Settlements
***excludes large asset impairments
So what’s with these extremely low effective US federal income tax rates? It’s mainly the shifting of income, along with the related US jobs offshored, to international tax havens. These Big US Multinational Corps set up in the many tax havens like China, Ireland, and Puerto Rico. They are clearly aware on the front end that to get their hands on the massive amount of low-taxed foreign earnings, hoarded in cash and investments in these tax havens, they will have to eventually pay federal income taxes in the US at 35%, like other US Corps.
And then these Big US Multinational Corps have their fingers crossed that sometime in the future, the US Congress will forgive 85% of this federal income tax owed upon their foreign earnings repatriation, as the US Congress amazingly did in 2004, when all US Congressional Republicans voted for it. Just think how crazy this is….. it’s like a US taxpayer having magically 85% of his federal income taxes paid for many years related to his W-2 earnings refunded to him, like he won a huge lottery….fat chance for that to happen…..there’s no equivalent lobbying group acting on his behalf.
And this lower effective US federal income tax rate is also due to the tons of Big Corp tax loopholes that bring the artificially high stated US corporate income tax rate of 35% down frequently to a single-digit effective tax rate actually paid, and sometimes even down to an effective tax rate below zero.
These extremely low effective tax rates are also due to the 50% bonus tax depreciation in the US in 2008 and 2009. And did the US get any job creation from this very lucrative 50% bonus tax depreciation granted to these Big US Corps? No way. If the US government permits 100% expensing of Plant and Equipment by these Big US Corps, the US job creation won’t trickle down. If you want to create US jobs, the US government should allow Big US Corps to get this effectively 100% bonus depreciation only if there are clear requirements to also sufficiently increase US full-time payroll counts by these Big US Corps on the front end, accompanied by subsequent retention requirements of these payroll count increases.
I really can’t understand how so many Big US Multinational Corps think that it is OK to pay such an incredibly low federal effective tax rate to the US Government. These companies, their Board of Directors, their executives, their non-executive employees, and their stockholders all get the massive benefits from all of these very costly services provided by the US Government, and they think it is perfectly acceptable to pay such meager amounts for these services, and in some cases, the US Government even pays these Big US Multinational Corps for providing them of all of these services, such as military protection, homeland security, and tons of others.
Given the incredibly low effective federal income tax rates paid by Big US Corps presently, I think it is really silly for any candidate to assert that he wants to reduce the Corporate US Federal Income Tax Rate. This candidate is either very financially naïve, or he is showing his clear allegiance to Big Multinational Corps over his allegiance to the country and to its many desperate US citizens. This just isn’t right and US citizens must wisely vote against these candidates.
Just to mention a few, US Republican Senate candidates Pat Toomey in Pennsylvania, Linda McMahon in Connecticut, and Dan Coats in Indiana all specifically and prominently mention in their websites that they would like to significantly reduce the US Corporate Federal Income Tax Rate of 35%.
So many Republican candidates assert that Big US Corps are being severely penalized because they are paying way too much US corporate federal income taxes presently, and thus they aren’t able to compete overseas. They further contend that by simply substantially reducing this 35% top US corporate federal income tax rate, somehow magically this will trickle down and create US jobs.
Given the tepid US jobless recovery, coupled with the huge US Government Debt, I think some research on just what these Big US Corps pay in US Corporate Federal Income Taxes is warranted.
Well, the conclusion is pretty clear…Big US Corps aren’t paying too much US Federal Income Tax. In fact, they are paying way too little tax. Let me explain in more detail, with this research coming from an exhaustive study of Big US Corp SEC filings.
I first studied the 30 Dow Industrial companies. From their annual report income tax footnotes, here’s the US Current Federal Corporate Income Tax Paid or Payable in the Current Year as compared with their Worldwide Pretax Income in total for each of the most recent five years for all 30 Dow companies, except for Pfizer in 2009, because it had a huge foreign earnings repatriation in connection with its acquisition of Wyeth in that year:
2005…..16.9%
2006…..15.6%
2007…..14.7%
2008…..10.5%
2009….. 7.8%
Yeah, these Big US Dow Industrial Corps are not paying anywhere near 35%. In fact, in the most recent year 2009, the US Federal Income Tax Rate they are paying is only 22% of the 35% statutory federal tax rate, or a paltry 7.8%. And look at the above incredible trend…in just the three most recent years, this effective tax rate has been cut precisely in half from 15.6% in 2006 to only 7.8% in 2009.
This downward effective tax rate trend looks to me like Arne Duncan’s Education Race to the Top in reverse….thus, I’ll call it the Big US Corp Race to the Bottom…..or who can pay the lowest effective tax rate to the US government.
Of the 30 Dow Industrial companies, 43% of them, or 13, paid a US federal income effective tax rate of less than 9% each for the most recent two years (2008 and 2009). Let me present the individual winning (?) companies in this Race to the Bottom:
…………………………..........2008-09.....2008-09…...2008-09
…………………………........US Current……………..…...US Current
……………………………........Federal……Worldwide……Federal
…………………………........Income Tax…Pretax………Effective
…………………………….......Expense……Income……...Tax Rate
……………………………......(Benefit)
…………………………….......(in millions of dollars)
#13…Procter & Gamble…..2,727………30,957………… 8.8%
#12…Coca Cola…………......1,199……….16,452………… 7.3%
#11…United Technologies….815……….12,696………… 6.4%
#10…Chevron……………....3,007……….61,585………… 4.9%
# 9…Caterpillar…………....... 230………...5,070………… 4.5%
# 8…Merck………………........ 999………..25,224………… 4.0%
# 7…IBM…………………......... 811………..34,853………… 2.3%
# 6…Hewlett Packard…….... 452……….19,888…………. 2.3%
#..5…Exxon Mobil………....2,167……..118,174…………. 1.8%
# 4…Dupont………………….......37………..4,575……………0.8%
# 3…Verizon……………….....(246)……..27,482…………..(0.9)%
# 2…Boeing……………….........(88)……….5,726…………..(1.5)%
# 1…GE…………………........(1,609)……..30,126………….(5.3)%
Total Above 13 Cos………10,501…….392,808……………2.7%
Yeah, that’s right, 13 of the 30 Dow Industrial companies had a total US Corporate effective federal tax rate in the most recent two years of an incredibly low 2.7%, which is 92% below the statutory US Federal Income Tax Rate of 35%.
And it’s not just the large Dow Industrial companies. From their annual report income tax footnotes, here’s the US Current Federal Corporate Income Tax Paid or Payable in the Current Year as compared with their Worldwide Pretax Income in total for the most recent three fiscal years for 141 large non-Dow companies, which each had Worldwide Pretax Income above $3 bil in total for the most recent three years, with also a couple more companies added, where I had a local interest:
FYE 2007-8…..20.3%
FYE 2008-9…..19.3%
FYE 2009-10…13.8%
Of these large 141 non-Dow Industrial companies, 43 of them, or 30.5%, paid an effective US federal income tax rate of less than 10% for the most recent two fiscal years (2008-9 and 2009-10). And as you can see from the below 43 companies, 12 of them were Big Oil companies. Let me present the individual winning (?) companies in this Race to the Bottom:
…………………………................Most Recent Two Fiscal Year Ends
……………………………...........US Current……………..…...US Current
………………………………..........Federal……Worldwide……Federal
……………………………...........Income Tax…..Pretax………Effective
………………………………..........Expense…….Income………Tax Rate
……………………………….........(Benefit)
……………………………….........(in millions of dollars)
#43…Occidental Petroleum…..1,574………16,040…………..9.8%
#42…Accenture………………........567………..5,786…………. 9.8%
#41…Praxair…………………….......305………...3,127…………..9.8%
#40…ConocoPhillips…………....3,820……..39,362***…..….9.7%
#39…Kimberly Clark………….......463………..4,865…………...9.5%
#38…Air Products&Chemicals....220………..2,316…………...9.5%
#37…Spectra Energy………….......275………..2,959…………...9.3%
#36…Qualcomm………………........524………..5,902…………...8.9%
#35…Loews…………………….........198………...2,317…………...8.5%
#34…PNC Financial……………......364………..4,319…………...8.4%
#33…XTO Energy…………….........473*………6,189…………...7.6%
#32…Ensco……………………..........178*………2,356…………...7.6%
#31…Honeywell……………….........466……….6,799……………6.9%
#30…Marathon………………….......697……...10,192……………6.8%
#29…Bristol Myers Squibb……....692*…....10,378……………6.7%
#28…Mosaic…………………….........261………..4,096……………6.4%
#27…Omnicom Group………….....160………..2,889……………5.5%
#26…Applied Materials…………......51………….923……………5.5%
#25…Yum Brands……………….......147……….2,687……………5.5%
#24…Western Digital…………….......94……….2,021……………4.7%
#23…Phillip Morris Intl…………....818………19,180……………4.3%
#22…AON………………………............76………..1,828……………4.2%
#21…Dow Chemical…………….........68………..1,746…………....3.9%
#20…Whirlpool…………………..........19…………..540……………3.5%
#19…EOG Resources………….........146………...4,619……………3.2%
#18…Schlumberger…………….......262……….10,786……………2.4%
#17…Heinz………………...................49………...2,610……………1.9%
#16…Weatherford………………........33*…….....1,989……………1.7%
#15…Baxter……………………….........67………...5,196…………….1.3%
#14…Cummins……………….............20*……….1,818……………..1.1%
#13…Hess………………………............49………...6,219……………..0.8%
#12…FedEx………………………............1………..2,571……………..0.0%
#11…Corning……………………...........(4)……….4,816…………….(0.1)%
#10…Apache……………………...........(2)……….1,258…………….(0.2)%
# 9…Newmont Mining…………......(67)…….....4,165…………….(1.6)%
# 8…Southern Copper………….......(65)*…......3,498……………(1.9)%
# 7…Avon Products…………….......(64)………..2,165……………(3.0)%
# 6…Eli Lilly…………………........... (162)……….4,050…………….(4.0)%
# 5…Paccar……………………..........(127)……….1,639…………….(7.7)%
# 4…Wells Fargo…………….......(1,909)**…..21,298……………(9.0)%
# 3…Halliburton………………........(531)……….5,531…………….(9.6)%
# 2…DirecTV…………………..........(851)……….4,305……………(19.8)%
# 1…Prudential Financial……......(329)…………430……………(75.3)%
Total Above 43 Cos…………….....9,031……247,780…….........3.6%
*also includes State Income Tax
**appears to also include tax benefits from IRS Audit Settlements
***excludes large asset impairments
So what’s with these extremely low effective US federal income tax rates? It’s mainly the shifting of income, along with the related US jobs offshored, to international tax havens. These Big US Multinational Corps set up in the many tax havens like China, Ireland, and Puerto Rico. They are clearly aware on the front end that to get their hands on the massive amount of low-taxed foreign earnings, hoarded in cash and investments in these tax havens, they will have to eventually pay federal income taxes in the US at 35%, like other US Corps.
And then these Big US Multinational Corps have their fingers crossed that sometime in the future, the US Congress will forgive 85% of this federal income tax owed upon their foreign earnings repatriation, as the US Congress amazingly did in 2004, when all US Congressional Republicans voted for it. Just think how crazy this is….. it’s like a US taxpayer having magically 85% of his federal income taxes paid for many years related to his W-2 earnings refunded to him, like he won a huge lottery….fat chance for that to happen…..there’s no equivalent lobbying group acting on his behalf.
And this lower effective US federal income tax rate is also due to the tons of Big Corp tax loopholes that bring the artificially high stated US corporate income tax rate of 35% down frequently to a single-digit effective tax rate actually paid, and sometimes even down to an effective tax rate below zero.
These extremely low effective tax rates are also due to the 50% bonus tax depreciation in the US in 2008 and 2009. And did the US get any job creation from this very lucrative 50% bonus tax depreciation granted to these Big US Corps? No way. If the US government permits 100% expensing of Plant and Equipment by these Big US Corps, the US job creation won’t trickle down. If you want to create US jobs, the US government should allow Big US Corps to get this effectively 100% bonus depreciation only if there are clear requirements to also sufficiently increase US full-time payroll counts by these Big US Corps on the front end, accompanied by subsequent retention requirements of these payroll count increases.
I really can’t understand how so many Big US Multinational Corps think that it is OK to pay such an incredibly low federal effective tax rate to the US Government. These companies, their Board of Directors, their executives, their non-executive employees, and their stockholders all get the massive benefits from all of these very costly services provided by the US Government, and they think it is perfectly acceptable to pay such meager amounts for these services, and in some cases, the US Government even pays these Big US Multinational Corps for providing them of all of these services, such as military protection, homeland security, and tons of others.
Given the incredibly low effective federal income tax rates paid by Big US Corps presently, I think it is really silly for any candidate to assert that he wants to reduce the Corporate US Federal Income Tax Rate. This candidate is either very financially naïve, or he is showing his clear allegiance to Big Multinational Corps over his allegiance to the country and to its many desperate US citizens. This just isn’t right and US citizens must wisely vote against these candidates.
Wednesday, October 6, 2010
Let’s Really Embolden US Research: The Bonus College Research Tax Credit
The world, especially China, is closing the gap on the US research and technology advantage.
The quality of US K-12 Education has declined precipitously and the Obama Administration has some high quality initiatives on this.
On higher education, the US no longer leads the world in the percentage of college graduates. The Obama Administration also has some fine initiatives here, particularly with the substantial increase in both Pell grants and Education Tax Credits.
On the positive side, the overall quality of US higher education still is unparalleled. The two authoritative sources in evaluating the world’s universities are the London Times Higher Education World University Rankings and the Shanghai Jiaotong University’s Academic Rankings of World Universities. Both of these rankings are done annually.
In the 2010 rankings, the US universities did extremely well. In the 2010 London Times rankings, 7 of the top 10 universities were in the US, 15 of the top 20 were in the US, and 53 of the top 100 were in the US. In comparison, in the 2004 London Times rankings, a much lower 35 of the top 100 were in the US.
In the Shanghai Jiaotong’s 2010 rankings, 8 of the top 10 world universities were in the US, 17 of the top 20 were in the US, and 54 of the top 100 were in the US. In comparison, in the 2004 Shanghai Jiaotong’s rankings, 51 of the top 100 were in the US.
With the substantial decline of the US economy in the 2000s decade, it is particularly important that the US retain this prestige world university status. Thus, I think there should be a big push to keep, and even add to, this US competitive advantage.
I think by far the most effective way for the US to retain, and hopefully even better, this research education advantage is to offer very attractive incentives for the very best young, creative US minds to enter the very best US research universities, objectively measured.
Thus, I think the country should consider a Bonus College Research Tax Credit initiative. Thus, US taxpayers would be granted, for individual federal income tax purposes, an additional education tax credit each year as a certain percentage of tuition paid, not funded by grants, scholarships or fellowships, above some minimum amount, such as in excess of $10,000. But this Bonus Tax Credit would only be for this tuition above $10,000 paid to the finest US research universities.
In determining which US research universities qualify, I would use the two premier worldwide ranking organizations mentioned earlier, the London Times and the Shanghai Jiaotong University.
These Bonus Tax Credits for a given year would only be given to taxpayers paying this tuition above $10,000 to a world class US research university ranked in the top 100 in the most recent year by both the London Times and by the Shanghai Jiaotong University.
So clearly, US universities will be highly motivated to step up their education quality even more and be ranked in the top 100, because they will then get even better quality students, whose related US taxpayers paying the tuition will be awarded nice Bonus Tax Credits.
And to make it even more of an attractive incentive in this Race to the US Higher Education Research Top, I would have the tax credit percentages granted be much higher for the higher ranked US universities ranked in the top 100. Thus there is a highly-charged incentive to move up the ranks by improving the education quality of the US research university.
I would consider tax credit percentages something like this:
Average of Two Rankings….Tax Credit %
Top 1-5………..........................15%
5.5-10……………………………......14%
10.5-15……………………………....13%
15.5-20……………………………....12%
20.5-25……………………………....11%
25.5-30……………………………....10%
30.5-35……………………………......9%
35.5-40……………………………......8%
40.5-45……………………………......7%
45.5-50……………………………......6%
50.5-60……………………………......5%
60.5-70……………………………......4%
70.5-80……………………………......3%
80.5-90……………………………......2%
90.5-100……………………………....1%
Thus, say a Seattle, Las Vegas, or Denver area student decides to attend the cream of the research crop on the West Coast like Cal-Berkeley, Stanford, or Caltech, which all are in the top 5 rankings. Then assume this student and/or his parents pay out-of-state tuition to Cal-Berkeley, or private tuition to Stanford or Caltech, of say $40,000. This taxpayer would be get a Bonus Research College Tax Credit of $4,500, or ($40,000 – $10,000) X 15%, in the current year.
Then, say a Chicago area student decides to attend the prestigious, private University of Chicago, which has an average ranking of 10.5. Let's assume this student or his parents pay $40,000 of tuition. This taxpayer would get a Bonus Tax Credit of $3,900, or ($40,000 - $10,000) X 13%. Likewise, a Chicago area student could decide to attend the pretty close-by, exceptionally-strong University of Wisconsin. Even though this Chicago student pays out-of-state tuition here, this will be softened some by a very nice Bonus Tax Credit. Also, a Chicago area student or a Milwaukee area student could also benefit from the Bonus Tax Credit by attending the nearby, very high quality Northwestern University.
And then just like the Chicago area student going to the University of Chicago above, if a Philly area student, New York area student, or Boston area student decides to attend close-by superb private universities like the University of Penn, Columbia, Cornell, Princeton, Yale, MIT or Harvard, a very healthy Bonus Tax Credit will result.
Also, in the case of the University of Chicago and Yale, these schools, both at an average ranking of 10.5, are just missing a higher ranking, with the resultant higher Bonus Tax Credits for many students. Thus, they are highly energized to bump up their 10.5 average ranking to at least 10.0.
And if you wanted to make it even more of an incentive, you just increase the tax credit percentages. Frankly, I would...and markedly so....the long-term payback to the country will be off the charts.
There are 40 world-class US universities that are ranked in the top 100 in 2010 by both the London Times and by the Shanghai Jiaotong University. Here are the average rankings of these 40:
Harvard………….....1.0
MIT………………......3.5
Stanford………….....3.5
Caltech…………......4.0
Cal-Berkeley……....5.0
Princeton……….....6.0
Chicago…………....10.5
Yale……………......10.5
UCLA………….......12.0
Columbia………....13.0
Cornell………….....13.0
Johns Hopkins…..15.5
Penn……………......17.0
Michigan………......18.5
U of Washington...19.5
Cal-San Diego…....23.0
Northwestern…...27.0
Illinois…………......29.0
Duke……………......29.5
Wisconsin……......30.0
Cal-Santa Barbara.30.5
Wash U -St Louis..34.0
North Carolina…..35.5
Carnegie Mellon...39.0
Minnesota………...40.0
NYU…………….......45.5
Cal-Irvine………....47.5
Cal-Davis………......50.0
Colorado………......50.0
Vanderbilt………...52.0
Southern Cal........59.5
Pittsburgh………....60.0
Brown………….......60.0
Ohio State…….......62.5
Maryland……….....67.0
Boston U………......68.0
Rice……………........73.0
Case Western….....81.0
Virginia……….......84.0
Arizona……….......86.5
To make these world class research universities even better, I also would not let any university be eligible unless both its legacy percentages are below a certain minimum percentage, and its minority group percentages are above a certain minimum percentage.
Making the Business Research Tax Credit permanent will make US businesses much more competitive in the world economy. I think by adding this Bonus College Research Tax Credit, the permanent Business Research Tax Credit will be substantially more effective, in the long run, in giving US businesses a clear edge in competing in the world economy. But this Bonus College Research Tax Credit will also do something much more….it will substantially improve the standard of living and health of all peoples around the world.
And in the long run, I say Bonus College Research Tax Credit will be monumentally more effective to the US economy than Bonus Tax Depreciation for Big US Corps.
The quality of US K-12 Education has declined precipitously and the Obama Administration has some high quality initiatives on this.
On higher education, the US no longer leads the world in the percentage of college graduates. The Obama Administration also has some fine initiatives here, particularly with the substantial increase in both Pell grants and Education Tax Credits.
On the positive side, the overall quality of US higher education still is unparalleled. The two authoritative sources in evaluating the world’s universities are the London Times Higher Education World University Rankings and the Shanghai Jiaotong University’s Academic Rankings of World Universities. Both of these rankings are done annually.
In the 2010 rankings, the US universities did extremely well. In the 2010 London Times rankings, 7 of the top 10 universities were in the US, 15 of the top 20 were in the US, and 53 of the top 100 were in the US. In comparison, in the 2004 London Times rankings, a much lower 35 of the top 100 were in the US.
In the Shanghai Jiaotong’s 2010 rankings, 8 of the top 10 world universities were in the US, 17 of the top 20 were in the US, and 54 of the top 100 were in the US. In comparison, in the 2004 Shanghai Jiaotong’s rankings, 51 of the top 100 were in the US.
With the substantial decline of the US economy in the 2000s decade, it is particularly important that the US retain this prestige world university status. Thus, I think there should be a big push to keep, and even add to, this US competitive advantage.
I think by far the most effective way for the US to retain, and hopefully even better, this research education advantage is to offer very attractive incentives for the very best young, creative US minds to enter the very best US research universities, objectively measured.
Thus, I think the country should consider a Bonus College Research Tax Credit initiative. Thus, US taxpayers would be granted, for individual federal income tax purposes, an additional education tax credit each year as a certain percentage of tuition paid, not funded by grants, scholarships or fellowships, above some minimum amount, such as in excess of $10,000. But this Bonus Tax Credit would only be for this tuition above $10,000 paid to the finest US research universities.
In determining which US research universities qualify, I would use the two premier worldwide ranking organizations mentioned earlier, the London Times and the Shanghai Jiaotong University.
These Bonus Tax Credits for a given year would only be given to taxpayers paying this tuition above $10,000 to a world class US research university ranked in the top 100 in the most recent year by both the London Times and by the Shanghai Jiaotong University.
So clearly, US universities will be highly motivated to step up their education quality even more and be ranked in the top 100, because they will then get even better quality students, whose related US taxpayers paying the tuition will be awarded nice Bonus Tax Credits.
And to make it even more of an attractive incentive in this Race to the US Higher Education Research Top, I would have the tax credit percentages granted be much higher for the higher ranked US universities ranked in the top 100. Thus there is a highly-charged incentive to move up the ranks by improving the education quality of the US research university.
I would consider tax credit percentages something like this:
Average of Two Rankings….Tax Credit %
Top 1-5………..........................15%
5.5-10……………………………......14%
10.5-15……………………………....13%
15.5-20……………………………....12%
20.5-25……………………………....11%
25.5-30……………………………....10%
30.5-35……………………………......9%
35.5-40……………………………......8%
40.5-45……………………………......7%
45.5-50……………………………......6%
50.5-60……………………………......5%
60.5-70……………………………......4%
70.5-80……………………………......3%
80.5-90……………………………......2%
90.5-100……………………………....1%
Thus, say a Seattle, Las Vegas, or Denver area student decides to attend the cream of the research crop on the West Coast like Cal-Berkeley, Stanford, or Caltech, which all are in the top 5 rankings. Then assume this student and/or his parents pay out-of-state tuition to Cal-Berkeley, or private tuition to Stanford or Caltech, of say $40,000. This taxpayer would be get a Bonus Research College Tax Credit of $4,500, or ($40,000 – $10,000) X 15%, in the current year.
Then, say a Chicago area student decides to attend the prestigious, private University of Chicago, which has an average ranking of 10.5. Let's assume this student or his parents pay $40,000 of tuition. This taxpayer would get a Bonus Tax Credit of $3,900, or ($40,000 - $10,000) X 13%. Likewise, a Chicago area student could decide to attend the pretty close-by, exceptionally-strong University of Wisconsin. Even though this Chicago student pays out-of-state tuition here, this will be softened some by a very nice Bonus Tax Credit. Also, a Chicago area student or a Milwaukee area student could also benefit from the Bonus Tax Credit by attending the nearby, very high quality Northwestern University.
And then just like the Chicago area student going to the University of Chicago above, if a Philly area student, New York area student, or Boston area student decides to attend close-by superb private universities like the University of Penn, Columbia, Cornell, Princeton, Yale, MIT or Harvard, a very healthy Bonus Tax Credit will result.
Also, in the case of the University of Chicago and Yale, these schools, both at an average ranking of 10.5, are just missing a higher ranking, with the resultant higher Bonus Tax Credits for many students. Thus, they are highly energized to bump up their 10.5 average ranking to at least 10.0.
And if you wanted to make it even more of an incentive, you just increase the tax credit percentages. Frankly, I would...and markedly so....the long-term payback to the country will be off the charts.
There are 40 world-class US universities that are ranked in the top 100 in 2010 by both the London Times and by the Shanghai Jiaotong University. Here are the average rankings of these 40:
Harvard………….....1.0
MIT………………......3.5
Stanford………….....3.5
Caltech…………......4.0
Cal-Berkeley……....5.0
Princeton……….....6.0
Chicago…………....10.5
Yale……………......10.5
UCLA………….......12.0
Columbia………....13.0
Cornell………….....13.0
Johns Hopkins…..15.5
Penn……………......17.0
Michigan………......18.5
U of Washington...19.5
Cal-San Diego…....23.0
Northwestern…...27.0
Illinois…………......29.0
Duke……………......29.5
Wisconsin……......30.0
Cal-Santa Barbara.30.5
Wash U -St Louis..34.0
North Carolina…..35.5
Carnegie Mellon...39.0
Minnesota………...40.0
NYU…………….......45.5
Cal-Irvine………....47.5
Cal-Davis………......50.0
Colorado………......50.0
Vanderbilt………...52.0
Southern Cal........59.5
Pittsburgh………....60.0
Brown………….......60.0
Ohio State…….......62.5
Maryland……….....67.0
Boston U………......68.0
Rice……………........73.0
Case Western….....81.0
Virginia……….......84.0
Arizona……….......86.5
To make these world class research universities even better, I also would not let any university be eligible unless both its legacy percentages are below a certain minimum percentage, and its minority group percentages are above a certain minimum percentage.
Making the Business Research Tax Credit permanent will make US businesses much more competitive in the world economy. I think by adding this Bonus College Research Tax Credit, the permanent Business Research Tax Credit will be substantially more effective, in the long run, in giving US businesses a clear edge in competing in the world economy. But this Bonus College Research Tax Credit will also do something much more….it will substantially improve the standard of living and health of all peoples around the world.
And in the long run, I say Bonus College Research Tax Credit will be monumentally more effective to the US economy than Bonus Tax Depreciation for Big US Corps.
Thursday, September 30, 2010
Shipping US Jobs Overseas: It's Clearly a Bush Thing
I think that the shipping of US jobs overseas by large multinational corps is the main reason for the present very high US unemployment rates, the very high US underemployment rates, and the lower median income for the middle class. It is also probably the main reason for the tepid US real GDP growth. And it is one of the main reasons for the huge US Deficit and huge US Government Debt.
This shipping of US jobs overseas isn't just manufacturing jobs. It also is non-manufacturing technology jobs. And the shipping of all kinds of US service jobs overseas has also been growing substantially.
This offshoring trend isn't just due to lower labor costs, but also due to the substantial tax holidays given to US multinational corps by many countries all throughout the world.
But just when did the financially devastating offshoring of US jobs occur? Well, only 18% of this offshoring occurred before the Bush/Cheney Presidential years.
And this offshoring really accelerated starting in 2004, when the US Congress passed the foreign earnings repatriation legislation, making 85% of foreign earnings repatriated tax free for US federal income tax purposes, which resulted in an effective tax rate on these earnings of an amazingly low 5.25%, for a one-year period. And every Republican in the US Congress voted for this 85% tax free foreign earnings repatriation legislation. Because of this very favorable legislation, large multinational corps repatriated a huge $360 bil in the one-year window period allowed by this legislation.
Yeah, 82% of the shipping of US jobs overseas happened starting in the laissez-faire Bush/Cheney Presidential years. The Obama Administration, from the very start, attempted to sharply reduce this offshoring of US jobs by trying to close the related corporate tax loophole of tax deferral, but the Big Multinational Corps, and their Republicans shills in the US Congress, stopped them in their tracks.
Recently, the Democrats in the US Senate tried to pass legislation which would curb this awful offshoring trend by large multinational corps, and perceptively even took it a step further by providing tax incentives for multinational companies to Reshore or Backshore these jobs to the US. Every Republican in the US Senate voted against this critical legislation, thereby stopping it in its tracks. I find it interesting that on the top of page 2 of the Wall Street Journal on Wednesday, Sept 29th, there is a picture there where Republican Senators John Thune and Lamar Alexander are smiling profusely about being successful in stopping this critical legislation, and thus permitting US Big Corps to again trump the US unemployed. I find such an open display of elation at the plight of workers laid off by offshoring obscene. I am sure many unemployed and underemployed feel likewise.
So clearly, the financially devastating shipping of US jobs overseas is on the Republicans. 82% of it happened after Bush/Cheney took office. And since the Democrats were in control, they tried to substantially reduce offshoring, but were stopped in their tracks by Republicans.
Thus if offshoring is important to you as a voter in the Nov 2010 election, why vote against Democrats running?....they are nearly all very staunch opponents of shipping US jobs overseas. Instead, you would want to vote against Republicans running...they are the 100% supporters of Big Multinational Corps and their massive offshoring of US jobs, which played a major role in creating the 2000s Lost Decade and its many horrible financial aftershocks.
Let me show how I got to the only 18% of this offshoring happening before the Bush/Cheney years.
Here are the 30 companies that had Total Unremitted Foreign Earnings above $10 bil at the most recent fiscal year end (2009 and 2010) and at predominantly the end of the Clinton Presidential years, thus at the end of fiscal year 2000:
..............................FYE.........FYE
............................2009-10...2000(or closest date disclosed)
...........................In Billions of Dollars
GE............................84.0........15.0 (at Dec 2002)
Pfizer.......................42.5.........14.0
Exxon Mobil.............42.0.........14.0
JNJ...........................32.2..........9.5
Cisco Systems...........31.6..........0.4
Merck.......................31.2..........9.7
Procter & Gamble.....30.0..........8.8
Microsoft..................29.5..........0.0
Citigroup...................27.3..........1.5
IBM..........................26.0.........15.5
PepsiCo.....................21.9..........7.5 (Dec 2002)
Abbott Labs..............20.6..........2.4
Chevron...................20.5..........3.3
Coca Cola.................19.0..........3.7
Schlumberger...........18.0..........4.0
Bank of America........16.7..........1.1
Bristol Myers Squibb.16.5..........6.0
Hewlett Packard........16.5.........11.5
Goldman Sachs..........16.2..........0.2 (Nov 2002)
JP Morgan Chase.......15.7..........1.4
Eli Lilly.....................15.5..........5.2
Apache.....................15.3..........0.9
Amgen......................14.3..........0.4 (Dec 2002)
Walmart....................13.7..........1.0 (Jan 2002)
Oracle.......................13.0..........0.9
Medtronic.................12.4..........0.2
Google......................12.3..........0.0 (Dec 2004)
Dell...........................11.3..........4.1 (Jan 2003)
DuPont......................11.3..........8.9
Intel..........................10.1..........4.2
Total of these 30.....687.1.......155.3
And then to get to the 18%:
(in billions of dollars)
....................................................2009-10.......2000
Total of these 30...........................$ 687.1.......$155.3 (4.42 times)
Total of all cos...............................$1,600........$362 (4.42 times)
Plus Foreign Earnings Repatriated
........in 2005 85% tax free..............$..360
.....................................................$1,960........$362 = 18%
This shipping of US jobs overseas isn't just manufacturing jobs. It also is non-manufacturing technology jobs. And the shipping of all kinds of US service jobs overseas has also been growing substantially.
This offshoring trend isn't just due to lower labor costs, but also due to the substantial tax holidays given to US multinational corps by many countries all throughout the world.
But just when did the financially devastating offshoring of US jobs occur? Well, only 18% of this offshoring occurred before the Bush/Cheney Presidential years.
And this offshoring really accelerated starting in 2004, when the US Congress passed the foreign earnings repatriation legislation, making 85% of foreign earnings repatriated tax free for US federal income tax purposes, which resulted in an effective tax rate on these earnings of an amazingly low 5.25%, for a one-year period. And every Republican in the US Congress voted for this 85% tax free foreign earnings repatriation legislation. Because of this very favorable legislation, large multinational corps repatriated a huge $360 bil in the one-year window period allowed by this legislation.
Yeah, 82% of the shipping of US jobs overseas happened starting in the laissez-faire Bush/Cheney Presidential years. The Obama Administration, from the very start, attempted to sharply reduce this offshoring of US jobs by trying to close the related corporate tax loophole of tax deferral, but the Big Multinational Corps, and their Republicans shills in the US Congress, stopped them in their tracks.
Recently, the Democrats in the US Senate tried to pass legislation which would curb this awful offshoring trend by large multinational corps, and perceptively even took it a step further by providing tax incentives for multinational companies to Reshore or Backshore these jobs to the US. Every Republican in the US Senate voted against this critical legislation, thereby stopping it in its tracks. I find it interesting that on the top of page 2 of the Wall Street Journal on Wednesday, Sept 29th, there is a picture there where Republican Senators John Thune and Lamar Alexander are smiling profusely about being successful in stopping this critical legislation, and thus permitting US Big Corps to again trump the US unemployed. I find such an open display of elation at the plight of workers laid off by offshoring obscene. I am sure many unemployed and underemployed feel likewise.
So clearly, the financially devastating shipping of US jobs overseas is on the Republicans. 82% of it happened after Bush/Cheney took office. And since the Democrats were in control, they tried to substantially reduce offshoring, but were stopped in their tracks by Republicans.
Thus if offshoring is important to you as a voter in the Nov 2010 election, why vote against Democrats running?....they are nearly all very staunch opponents of shipping US jobs overseas. Instead, you would want to vote against Republicans running...they are the 100% supporters of Big Multinational Corps and their massive offshoring of US jobs, which played a major role in creating the 2000s Lost Decade and its many horrible financial aftershocks.
Let me show how I got to the only 18% of this offshoring happening before the Bush/Cheney years.
Here are the 30 companies that had Total Unremitted Foreign Earnings above $10 bil at the most recent fiscal year end (2009 and 2010) and at predominantly the end of the Clinton Presidential years, thus at the end of fiscal year 2000:
..............................FYE.........FYE
............................2009-10...2000(or closest date disclosed)
...........................In Billions of Dollars
GE............................84.0........15.0 (at Dec 2002)
Pfizer.......................42.5.........14.0
Exxon Mobil.............42.0.........14.0
JNJ...........................32.2..........9.5
Cisco Systems...........31.6..........0.4
Merck.......................31.2..........9.7
Procter & Gamble.....30.0..........8.8
Microsoft..................29.5..........0.0
Citigroup...................27.3..........1.5
IBM..........................26.0.........15.5
PepsiCo.....................21.9..........7.5 (Dec 2002)
Abbott Labs..............20.6..........2.4
Chevron...................20.5..........3.3
Coca Cola.................19.0..........3.7
Schlumberger...........18.0..........4.0
Bank of America........16.7..........1.1
Bristol Myers Squibb.16.5..........6.0
Hewlett Packard........16.5.........11.5
Goldman Sachs..........16.2..........0.2 (Nov 2002)
JP Morgan Chase.......15.7..........1.4
Eli Lilly.....................15.5..........5.2
Apache.....................15.3..........0.9
Amgen......................14.3..........0.4 (Dec 2002)
Walmart....................13.7..........1.0 (Jan 2002)
Oracle.......................13.0..........0.9
Medtronic.................12.4..........0.2
Google......................12.3..........0.0 (Dec 2004)
Dell...........................11.3..........4.1 (Jan 2003)
DuPont......................11.3..........8.9
Intel..........................10.1..........4.2
Total of these 30.....687.1.......155.3
And then to get to the 18%:
(in billions of dollars)
....................................................2009-10.......2000
Total of these 30...........................$ 687.1.......$155.3 (4.42 times)
Total of all cos...............................$1,600........$362 (4.42 times)
Plus Foreign Earnings Repatriated
........in 2005 85% tax free..............$..360
.....................................................$1,960........$362 = 18%
Wednesday, September 22, 2010
Big US Corps Unremitted Foreign Earnings Continue Going to the Moon in 2010
Back on March 4, 2010, I made a post here that identified 606 US Multinational Corps that had unremitted foreign earnings exceeding $50 mil each, that totaled $1.263 trillion. This information was taken from income tax footnotes in SEC filings for companies with fiscal year ends of January 2010 or earlier. A very high percentage of these companies have December 2009 year ends.
Further in this March 4, 2010 post, I pointed out that this $1.263 trillion was just for companies that disclosed these amounts of unremitted foreign earnings and that my best guess was that the total unremitted foreign earnings for all companies was $1.6 trillion. I then projected what the total unremitted foreign earnings for all companies would be at the end of 2016, the end of President Obama’s second term, assuming nothing changed and the past trend continued. From a past sample, I concluded that the average annual growth of unremitted foreign earnings was 16.4%, and thus this $1.6 trillion would turn into $4.6 trillion by the end of 2016.
What has happened since then? Well, there have been 13 US Multinational Corps with unremitted foreign earnings of at least $2 bil, that have filed with the SEC for their fiscal year ends of March 2010 through July 2010. For these 13 companies, the total unremitted foreign earnings were $149.7 bil, up an incredible 32.8% above the comparable amount one year earlier.
Yeah, that’s right, the annual growth of total unremitted foreign earnings for these 13 companies of 32.8% was precisely double the 16.4% average annual growth assumption I used earlier. When you double an already high average annual growth rate of 16.4%, the number, when compounded over many years, goes to the moon. Just to show the math here, if you use an average annual growth rate of 32.8%, the $1.6 trillion grows to an amazing $11.7 trillion by the end of 2016, rather than the $4.6 trillion when using my previous 16.4% annual average growth rate assumption.
Let me show the details of these 13 large US Multinational Corps, with fiscal years ends from March 2010 to July 2010:
…………………….Unremitted Foreign Earnings at Fiscal Year End
…………………………......2010…..2009…..2008…..2007…..2006….
………………………………….......In billions of dollars……………
Cisco Systems…………....31.6…….24.1…..21.9…...16.3…….11.1
Procter & Gamble……....30.0……25.0…..21.0…...17.0……16.0
Microsoft…….................29.5…...18.0…….7.5…....6.1……...0.5
Oracle……......................13.0….....8.9…….7.2…....5.7……...3.0
Medtronic……................12.4….....9.7…….8.3…....6.6……...5.4
News Corp…....................6.8….....5.3…….6.9…....5.0……...5.0
Archer Daniels Midland...6.6….....6.0…….4.9…....3.6……...2.2
Forest Labs......................4.1….....3.4…….2.3…....1.6……...1.0
Western Digital................4.0….....2.5…….2.2…....1.1……...0.8
Heinz…............................3.7….....3.3…….3.3…....3.1……...2.5
Nike…..............................3.6….....2.6…….1.8…....1.2……...0.9
McKesson........................2.3….....1.8…….1.5…....1.1……...0.8
General Mills....................2.1….....2.1…….2.2…....1.5……...1.0
Total 13 Companies…...149.7…..112.7….91.0…..69.9…….50.2
Annual % Growth……...32.8%....23.8%...30.2%...39.2%
It's pretty clear to me that the substantial offshoring of US jobs by large US multinational corps is the main reason for the US unemployment and US underemployment rates being so incredibly high, the main reason for the real US GDP growth being so tepid, and also one of the main reasons the US Federal Deficit is so large. And this horrible present economic environment is when the total Unremitted Foreign Earnings is $1.6 trillion. If this total spikes up to $4.6 trillion by the end of 2016, people will be saying that the really good economic times for the US were in 2010! And if this total explodes upwardly to $11.7 trillion by the end of 2016, the country and the majority of its citizens will be facing a financial catastrophe. The only winners here would be the Big US Multinational Corps and their stockholders.
President Obama’s economic team now has wise proposals to deal with the very complex financial disaster caused by the massive offshoring of US jobs, and the resultant shifting of both income and real GDP growth overseas, and also the resultant depletion of both the US Federal Treasury and the US middle class. Their plan is to wisely close much of this corporate tax loophole, and use the massive proceeds from this action to spur US economic growth and US job creation.
It's clearly a stroke of genius. How can it get any better than when your funding for US job creation closes corporate tax loopholes that have themselves been a severe drag on the US economy for the entire 2000s Lost Decade?
And the crazy thing here is that there are many in the US Congress who are fighting this tooth and nail. They are more interested in helping their US Big Multinational Corp constituency than they are in helping the US economy grow and desperate US citizens find jobs. Frankly, I think that anyone who doesn't want to head off a total Unremitted Foreign Earnings number in the range of $4.6 trillion to $11.7 trillion by the end of 2016, with the resultant US financial disaster, is being unpatriotic. No one can be that financially naive. And if any of them are that incredibly financially naive, they don't belong in the US Congress.
This is the main reason that it is in the country's best interests to have both the US Senate and the US House in Democratic hands. If not, the chances of turning this horrible US economy around drops dramatically, and the chances of the total Unremitted Foreign Earnings of Big US Multinational Corps continuing to increase dramatically to in the range of $4.6 trillion to $11.7 trillion in six years, with the resultant US financial catastrophe, increases substantially.
I trust the judgment of US citizens. They won't let the US Congress stop the Obama economic team in its plan to wisely stem this massive offshoring of US jobs. I think history will show that Obama’s economic team saved the US economy from a complete financial disaster caused by this massive offshoring of US jobs by Big US Multinational Corps. US Citizens should be very thankful. My hunch is that a lot of the credit here should go to Austan Goolsbee, who is much more than just a theoretical academic economist.
Let me show why US Multinational Corps are so highly incentivized to offshore US jobs. It's not just about lower wages and lower employee benefit costs overseas. Just looking at the above 5 largest companies, below here are the annual foreign tax breaks each has received over the most recent five years. These foreign tax breaks, which directly increase reported earnings, which drives the Corp's stock price, are from the impact of getting foreign tax rates below the US federal statutory corporate income tax rate of 35%:
………………………………….Annual Foreign Tax Breaks…………
…………………………....2010……2009…..2008…...2007…..2006….
…………………………………........In millions of dollars……………....
Microsoft……………….3,027…..1,843…..1,667…..1,025……840
Cisco Systems…………1,817…...1,454…..1,651…...1,211……664
Procter & Gamble…….1,129…..1,023…..1,012……..633…….447
Oracle……………………....672……..673……..569……..580…….426
Medtronic………………...663……..505……..526……...453…….345
Total 5 Companies….7,307…..5,499…...5,425…..3,902…2,722
Annual % Growth…….32.9%......1.4%....39.0%.....43.4%
The reason Fiscal Year End 2009 growth is so low is due to the much lower income due to the horrible global recession in that year.
Now let me focus on the 114 US Multinational Corps that had Unremitted Foreign Earnings of at least $2 bil, which resulted in total Unremitted Foreign Earnings of $1.052 trillion. Of these 114 companies, 13 had information that was either missing in their disclosures or had an unusual disclosed amount. For the remaining 101 companies, here are the total Unremitted Foreign Earnings at the most recent fiscal year end (2009 or 2010) and for the four immediately preceding years, along with their related percentage increase from the immediately preceding year:
2009-2010…..$906.7 bil…..+20.4%
2008-2009…..$753.3 bil…..+21.6%
2007-2008…..$619.6 bil…..+32.4%
2006-2007…..$467.9 bil…..+38.4%
2005-2006…..$338.1 bil
It should also be pointed out that in 2004, the previous Administration and its controlled US Congress, incredibly passed a measure allowing US Multinational Corps to repatriate their foreign earnings with a massive windfall tax-free 85% Dividend Received Deduction for a one-year period. As a result, more than $300 bil of these foreign earnings were repatriated by US Multinational Corps, and yes, a gigantic amount of US federal corporate income tax previously owed by these Corps was forgiven. This has to go down in history as one of the biggest boondoggles of all time. And it substantially added to the 2000s Lost Decade for the US economy.
How many US jobs were created from this $300 bil of foreign earnings repatriation by US Multinational Corps? Well, there were a few companies that added US jobs, but when you combine all companies doing this massive amount of foreign earnings repatriation, you get a net of US jobs lost, rather than a net of US jobs created. I kid you not! No doubt, Big Corp lobbyists are still chuckling about that one.
I think the right thing to do now would be for US voters to do some research and vote against anyone running in the November 2010 election, who voted in 2004 for this Big Multinational Corp forgiveness of US federal corporate income taxes. It's been a while, but I am pretty sure that every Republican in both the US House and the US Senate voted for this 85% Dividend Received Deduction on Foreign Earnings Repatriation. I would be very skeptical of any Republican running now who claims that he is not for this 85% Tax-free Dividend Received Deduction on Foreign Earnings Repatriation when 100% of them voted for it back in 2004. And what this vote did was incentivize US Multinational Corps to do even more offshoring of US jobs. Heck, why not, when I can in all likelihood get 85% of these very low-taxed foreign earnings repatriated to the US tax free.
And then lastly, below here at the end of this post are the Unremitted Foreign Earnings amounts at the most recent fiscal year end for all 114 companies, which had Unremitted Foreign Earnings of at least $2 bil each.
To show how this is so front end loaded, there are only 13 Corps with Unremitted Foreign Earnings above $20 bil each, which comprise a healthy 42% of the total, only 32 Corps with total Unremitted Foreign Earnings above $10 bil each, which comprise a very healthy 68% of the total, and only 56 Corps with total Unremitted Foreign Earnings above $5 bil each, which comprise a substantial 84% of the total Unremitted Foreign Earnings for all 114 companies.
I think I wouldn’t give any Dividend Received Deduction for Repatriating their Foreign Earnings for any of these very large companies with Unremitted Foreign Earnings above a certain level. People a lot smarter than me can determine what the cutoff amount should be here. I would instead focus the incentivized Dividend Received Deductions on the smaller and medium-sized global companies.
I also wouldn't give any huge US Corp above a certain size either a 100% tax writeoff from plant and equipment investments or an annual research tax credit unless it was also 100% funded by some fair measure of additional US taxes owed from foreign earnings repatriation by this same huge US Corp in the same year.
Further, I think I wouldn't let any global US Corp have a US untaxed Unremitted Foreign Earnings amount above a certain level....perhaps some maximum like $20 bil....again, people much smarter than me can determine what a fair cutoff amount would be. And then whenever a company has its Unremitted Foreign Earnings above $20 bil, a foreign earnings repatriation would be automatically triggered for US corporate income tax purposes, with the resultant additional US tax owed. The CBO-scored positive US funding over the next ten years from just this simple provision would be off-the-charts, and should be used to fund immediate US job creation and US Deficit Reduction.
Anyway, here are the Unremitted Foreign Earnings of these 114 companies at the most recent fiscal year end:
1 GE.......................... $84.0 bil
2 Pfizer...................... $42.5 bil
3 Exxon Mobil.......... $42.0 bil
4 JNJ....................... $32.2 bil
5 Cisco..................... $31.6 bil
6 Merck..................... $31.2 bil
7 Procter & Gamble... $30.0 bil
8 Microsoft................. $29.5 bil
9 Citigroup................. $27.3 bil
10 IBM...................... $26.0 bil
11 PepsiCo.................. $21.9 bil
12 Abbott Labs........... $20.6 bil
13 Chevron................. $20.5 bil
14 Coca Cola................ $19.0 bil
15 Schlumberger........ $18.0 bil
16 Bank of America..... $16.7 bil
17 Hewlett Packard..... $16.5 bil
18 Bristol Myers Squibb $16.5 bil
19 Goldman Sachs........ $16.2 bil
20 JP Morgan Chase... $15.7 bil
21 Eli Lilly.................. $15.5 bil
22 Apache.................. $15.3 bil
23 Amgen................... $14.3 bil
24 Tyco Electronics.... $14.0 bil
25 PMI....................... $14.0 bil
26 Walmart................. $13.7 bil
27 Oracle................... $13.0 bil
28 Medtronic.............. $12.4 bil
29 Google................... $12.3 bil
30 DuPont................... $11.3 bil
31 Dell........................ $11.3 bil
32 Intel...................... $10.1 bil
33 Boston Scientific..... $9.4 bil
34 McDonald's............. $9.2 bil
35 Caterpillar.............. $9.0 bil
36 Dow Chemical......... $8.7 bil
37 Qualcomm............. $8.6 bil
38 Alcoa.................... $8.1 bil
39 Xerox.................... $8.0 bil
40 Ebay...................... $7.9 bil
41 Corning.................. $7.3 bil
42 News Corp.............. $6.8 bil
43 Baxter.................... $6.8 bil
44 American Express...... $6.6 bil
45 Archer Daniels Midland $6.6 bil
46 Danaher................... $6.5 bil
47 Ingersoll-Rand......... $6.0 bil
48 Kimberly Clark......... $5.8 bil
49 Kraft......................... $5.7 bil
50 Illinois Tool Works.... $5.7 bil
51 3M............................ $5.6 bil
52 Occidental Petroleum. $5.5 bil
53 General Motors.......... $5.5 bil
54 Praxair...................... $5.3 bil
55 Honeywell.................. $5.1 bil
56 Apple......................... $5.1 bil
57 Eaton......................... $4.9 bil
58 Emerson Electric......... $4.3 bil
59 EMC............................ $4.3 bil
60 Bunge.......................... $4.2 bil
61 Valero Energy.............. $4.1 bil
62 Forest Labs.................. $4.1 bil
63 Western Digital............. $4.0 bil
64 Murphy Oil................... $4.0 bil
65 Morgan Stanley............ $4.0 bil
66 Johnson Controls......... $3.8 bil
67 Berkshire Hathaway..... $3.8 bil
68 Heinz........................... $3.7 bil
69 Nike............................. $3.6 bil
70 Mattel.......................... $3.5 bil
71 International Paper....... $3.5 bil
72 Monsanto..................... $3.4 bil
73 Hess............................. $3.4 bil
74 Franklin Resources........ $3.4 bil
75 Thermo Fisher Scientific $3.2 bil
76 Stryker.......................... $3.2 bil
77 Gilead Sciences.............. $3.2 bil
78 Texas Instruments.......... $3.1 bil
79 Paccar........................... $3.1 bil
80 Marsh & McLennan......... $3.1 bil
81 EOG Resources................ $3.0 bil
82 CBS................................. $3.0 bil
83 Air Products & Chemicals $3.0 bil
84 Agilent Technologies....... $3.0 bil
85 US Steel........................... $2.9 bil
86 GMAC.............................. $2.9 bil
87 Colgate Palmolive........... $2.9 bil
88 National Oilwell Varco..... $2.8 bil
89 Goodyear Tire & Rubber... $2.8 bil
90 Celgene............................ $2.8 bil
91 Celanese.......................... $2.8 bil
92 Ensco.............................. $2.6 bil
93 Becton Dickinson............. $2.6 bil
94 TRW Automotive Hldgs.... $2.5 bil
95 Whirlpool........................ $2.4 bil
96 Overseas Shiphldg Grp..... $2.4 bil
97 Motorola........................ $2.4 bil
98 Dole Food Co................... $2.4 bil
99 McKesson....................... $2.3 bil
100 Baker Hughes................. $2.3 bil
101 United Parcel Service..... $2.2 bil
102 Biogen Idec.................... $2.2 bil
103 Avon Products............... $2.2 bil
104 Allergan........................ $2.2 bil
105 General Mills................. $2.1 bil
106 ConcoPhillips................ $2.1 bil
107 Black & Decker................ $2.1 bil
108 Aon................................ $2.1 bil
109 AGCO.............................. $2.1 bil
110 Yahoo............................. $2.0 bil
111 Western Union................. $2.0 bil
112 Pride International.......... $2.0 bil
113 PPG Industries................ $2.0 bil
114 Carefusion....................... $2.0 bil
Total 114 Companies....... $1,051.9 bil
Further in this March 4, 2010 post, I pointed out that this $1.263 trillion was just for companies that disclosed these amounts of unremitted foreign earnings and that my best guess was that the total unremitted foreign earnings for all companies was $1.6 trillion. I then projected what the total unremitted foreign earnings for all companies would be at the end of 2016, the end of President Obama’s second term, assuming nothing changed and the past trend continued. From a past sample, I concluded that the average annual growth of unremitted foreign earnings was 16.4%, and thus this $1.6 trillion would turn into $4.6 trillion by the end of 2016.
What has happened since then? Well, there have been 13 US Multinational Corps with unremitted foreign earnings of at least $2 bil, that have filed with the SEC for their fiscal year ends of March 2010 through July 2010. For these 13 companies, the total unremitted foreign earnings were $149.7 bil, up an incredible 32.8% above the comparable amount one year earlier.
Yeah, that’s right, the annual growth of total unremitted foreign earnings for these 13 companies of 32.8% was precisely double the 16.4% average annual growth assumption I used earlier. When you double an already high average annual growth rate of 16.4%, the number, when compounded over many years, goes to the moon. Just to show the math here, if you use an average annual growth rate of 32.8%, the $1.6 trillion grows to an amazing $11.7 trillion by the end of 2016, rather than the $4.6 trillion when using my previous 16.4% annual average growth rate assumption.
Let me show the details of these 13 large US Multinational Corps, with fiscal years ends from March 2010 to July 2010:
…………………….Unremitted Foreign Earnings at Fiscal Year End
…………………………......2010…..2009…..2008…..2007…..2006….
………………………………….......In billions of dollars……………
Cisco Systems…………....31.6…….24.1…..21.9…...16.3…….11.1
Procter & Gamble……....30.0……25.0…..21.0…...17.0……16.0
Microsoft…….................29.5…...18.0…….7.5…....6.1……...0.5
Oracle……......................13.0….....8.9…….7.2…....5.7……...3.0
Medtronic……................12.4….....9.7…….8.3…....6.6……...5.4
News Corp…....................6.8….....5.3…….6.9…....5.0……...5.0
Archer Daniels Midland...6.6….....6.0…….4.9…....3.6……...2.2
Forest Labs......................4.1….....3.4…….2.3…....1.6……...1.0
Western Digital................4.0….....2.5…….2.2…....1.1……...0.8
Heinz…............................3.7….....3.3…….3.3…....3.1……...2.5
Nike…..............................3.6….....2.6…….1.8…....1.2……...0.9
McKesson........................2.3….....1.8…….1.5…....1.1……...0.8
General Mills....................2.1….....2.1…….2.2…....1.5……...1.0
Total 13 Companies…...149.7…..112.7….91.0…..69.9…….50.2
Annual % Growth……...32.8%....23.8%...30.2%...39.2%
It's pretty clear to me that the substantial offshoring of US jobs by large US multinational corps is the main reason for the US unemployment and US underemployment rates being so incredibly high, the main reason for the real US GDP growth being so tepid, and also one of the main reasons the US Federal Deficit is so large. And this horrible present economic environment is when the total Unremitted Foreign Earnings is $1.6 trillion. If this total spikes up to $4.6 trillion by the end of 2016, people will be saying that the really good economic times for the US were in 2010! And if this total explodes upwardly to $11.7 trillion by the end of 2016, the country and the majority of its citizens will be facing a financial catastrophe. The only winners here would be the Big US Multinational Corps and their stockholders.
President Obama’s economic team now has wise proposals to deal with the very complex financial disaster caused by the massive offshoring of US jobs, and the resultant shifting of both income and real GDP growth overseas, and also the resultant depletion of both the US Federal Treasury and the US middle class. Their plan is to wisely close much of this corporate tax loophole, and use the massive proceeds from this action to spur US economic growth and US job creation.
It's clearly a stroke of genius. How can it get any better than when your funding for US job creation closes corporate tax loopholes that have themselves been a severe drag on the US economy for the entire 2000s Lost Decade?
And the crazy thing here is that there are many in the US Congress who are fighting this tooth and nail. They are more interested in helping their US Big Multinational Corp constituency than they are in helping the US economy grow and desperate US citizens find jobs. Frankly, I think that anyone who doesn't want to head off a total Unremitted Foreign Earnings number in the range of $4.6 trillion to $11.7 trillion by the end of 2016, with the resultant US financial disaster, is being unpatriotic. No one can be that financially naive. And if any of them are that incredibly financially naive, they don't belong in the US Congress.
This is the main reason that it is in the country's best interests to have both the US Senate and the US House in Democratic hands. If not, the chances of turning this horrible US economy around drops dramatically, and the chances of the total Unremitted Foreign Earnings of Big US Multinational Corps continuing to increase dramatically to in the range of $4.6 trillion to $11.7 trillion in six years, with the resultant US financial catastrophe, increases substantially.
I trust the judgment of US citizens. They won't let the US Congress stop the Obama economic team in its plan to wisely stem this massive offshoring of US jobs. I think history will show that Obama’s economic team saved the US economy from a complete financial disaster caused by this massive offshoring of US jobs by Big US Multinational Corps. US Citizens should be very thankful. My hunch is that a lot of the credit here should go to Austan Goolsbee, who is much more than just a theoretical academic economist.
Let me show why US Multinational Corps are so highly incentivized to offshore US jobs. It's not just about lower wages and lower employee benefit costs overseas. Just looking at the above 5 largest companies, below here are the annual foreign tax breaks each has received over the most recent five years. These foreign tax breaks, which directly increase reported earnings, which drives the Corp's stock price, are from the impact of getting foreign tax rates below the US federal statutory corporate income tax rate of 35%:
………………………………….Annual Foreign Tax Breaks…………
…………………………....2010……2009…..2008…...2007…..2006….
…………………………………........In millions of dollars……………....
Microsoft……………….3,027…..1,843…..1,667…..1,025……840
Cisco Systems…………1,817…...1,454…..1,651…...1,211……664
Procter & Gamble…….1,129…..1,023…..1,012……..633…….447
Oracle……………………....672……..673……..569……..580…….426
Medtronic………………...663……..505……..526……...453…….345
Total 5 Companies….7,307…..5,499…...5,425…..3,902…2,722
Annual % Growth…….32.9%......1.4%....39.0%.....43.4%
The reason Fiscal Year End 2009 growth is so low is due to the much lower income due to the horrible global recession in that year.
Now let me focus on the 114 US Multinational Corps that had Unremitted Foreign Earnings of at least $2 bil, which resulted in total Unremitted Foreign Earnings of $1.052 trillion. Of these 114 companies, 13 had information that was either missing in their disclosures or had an unusual disclosed amount. For the remaining 101 companies, here are the total Unremitted Foreign Earnings at the most recent fiscal year end (2009 or 2010) and for the four immediately preceding years, along with their related percentage increase from the immediately preceding year:
2009-2010…..$906.7 bil…..+20.4%
2008-2009…..$753.3 bil…..+21.6%
2007-2008…..$619.6 bil…..+32.4%
2006-2007…..$467.9 bil…..+38.4%
2005-2006…..$338.1 bil
It should also be pointed out that in 2004, the previous Administration and its controlled US Congress, incredibly passed a measure allowing US Multinational Corps to repatriate their foreign earnings with a massive windfall tax-free 85% Dividend Received Deduction for a one-year period. As a result, more than $300 bil of these foreign earnings were repatriated by US Multinational Corps, and yes, a gigantic amount of US federal corporate income tax previously owed by these Corps was forgiven. This has to go down in history as one of the biggest boondoggles of all time. And it substantially added to the 2000s Lost Decade for the US economy.
How many US jobs were created from this $300 bil of foreign earnings repatriation by US Multinational Corps? Well, there were a few companies that added US jobs, but when you combine all companies doing this massive amount of foreign earnings repatriation, you get a net of US jobs lost, rather than a net of US jobs created. I kid you not! No doubt, Big Corp lobbyists are still chuckling about that one.
I think the right thing to do now would be for US voters to do some research and vote against anyone running in the November 2010 election, who voted in 2004 for this Big Multinational Corp forgiveness of US federal corporate income taxes. It's been a while, but I am pretty sure that every Republican in both the US House and the US Senate voted for this 85% Dividend Received Deduction on Foreign Earnings Repatriation. I would be very skeptical of any Republican running now who claims that he is not for this 85% Tax-free Dividend Received Deduction on Foreign Earnings Repatriation when 100% of them voted for it back in 2004. And what this vote did was incentivize US Multinational Corps to do even more offshoring of US jobs. Heck, why not, when I can in all likelihood get 85% of these very low-taxed foreign earnings repatriated to the US tax free.
And then lastly, below here at the end of this post are the Unremitted Foreign Earnings amounts at the most recent fiscal year end for all 114 companies, which had Unremitted Foreign Earnings of at least $2 bil each.
To show how this is so front end loaded, there are only 13 Corps with Unremitted Foreign Earnings above $20 bil each, which comprise a healthy 42% of the total, only 32 Corps with total Unremitted Foreign Earnings above $10 bil each, which comprise a very healthy 68% of the total, and only 56 Corps with total Unremitted Foreign Earnings above $5 bil each, which comprise a substantial 84% of the total Unremitted Foreign Earnings for all 114 companies.
I think I wouldn’t give any Dividend Received Deduction for Repatriating their Foreign Earnings for any of these very large companies with Unremitted Foreign Earnings above a certain level. People a lot smarter than me can determine what the cutoff amount should be here. I would instead focus the incentivized Dividend Received Deductions on the smaller and medium-sized global companies.
I also wouldn't give any huge US Corp above a certain size either a 100% tax writeoff from plant and equipment investments or an annual research tax credit unless it was also 100% funded by some fair measure of additional US taxes owed from foreign earnings repatriation by this same huge US Corp in the same year.
Further, I think I wouldn't let any global US Corp have a US untaxed Unremitted Foreign Earnings amount above a certain level....perhaps some maximum like $20 bil....again, people much smarter than me can determine what a fair cutoff amount would be. And then whenever a company has its Unremitted Foreign Earnings above $20 bil, a foreign earnings repatriation would be automatically triggered for US corporate income tax purposes, with the resultant additional US tax owed. The CBO-scored positive US funding over the next ten years from just this simple provision would be off-the-charts, and should be used to fund immediate US job creation and US Deficit Reduction.
Anyway, here are the Unremitted Foreign Earnings of these 114 companies at the most recent fiscal year end:
1 GE.......................... $84.0 bil
2 Pfizer...................... $42.5 bil
3 Exxon Mobil.......... $42.0 bil
4 JNJ....................... $32.2 bil
5 Cisco..................... $31.6 bil
6 Merck..................... $31.2 bil
7 Procter & Gamble... $30.0 bil
8 Microsoft................. $29.5 bil
9 Citigroup................. $27.3 bil
10 IBM...................... $26.0 bil
11 PepsiCo.................. $21.9 bil
12 Abbott Labs........... $20.6 bil
13 Chevron................. $20.5 bil
14 Coca Cola................ $19.0 bil
15 Schlumberger........ $18.0 bil
16 Bank of America..... $16.7 bil
17 Hewlett Packard..... $16.5 bil
18 Bristol Myers Squibb $16.5 bil
19 Goldman Sachs........ $16.2 bil
20 JP Morgan Chase... $15.7 bil
21 Eli Lilly.................. $15.5 bil
22 Apache.................. $15.3 bil
23 Amgen................... $14.3 bil
24 Tyco Electronics.... $14.0 bil
25 PMI....................... $14.0 bil
26 Walmart................. $13.7 bil
27 Oracle................... $13.0 bil
28 Medtronic.............. $12.4 bil
29 Google................... $12.3 bil
30 DuPont................... $11.3 bil
31 Dell........................ $11.3 bil
32 Intel...................... $10.1 bil
33 Boston Scientific..... $9.4 bil
34 McDonald's............. $9.2 bil
35 Caterpillar.............. $9.0 bil
36 Dow Chemical......... $8.7 bil
37 Qualcomm............. $8.6 bil
38 Alcoa.................... $8.1 bil
39 Xerox.................... $8.0 bil
40 Ebay...................... $7.9 bil
41 Corning.................. $7.3 bil
42 News Corp.............. $6.8 bil
43 Baxter.................... $6.8 bil
44 American Express...... $6.6 bil
45 Archer Daniels Midland $6.6 bil
46 Danaher................... $6.5 bil
47 Ingersoll-Rand......... $6.0 bil
48 Kimberly Clark......... $5.8 bil
49 Kraft......................... $5.7 bil
50 Illinois Tool Works.... $5.7 bil
51 3M............................ $5.6 bil
52 Occidental Petroleum. $5.5 bil
53 General Motors.......... $5.5 bil
54 Praxair...................... $5.3 bil
55 Honeywell.................. $5.1 bil
56 Apple......................... $5.1 bil
57 Eaton......................... $4.9 bil
58 Emerson Electric......... $4.3 bil
59 EMC............................ $4.3 bil
60 Bunge.......................... $4.2 bil
61 Valero Energy.............. $4.1 bil
62 Forest Labs.................. $4.1 bil
63 Western Digital............. $4.0 bil
64 Murphy Oil................... $4.0 bil
65 Morgan Stanley............ $4.0 bil
66 Johnson Controls......... $3.8 bil
67 Berkshire Hathaway..... $3.8 bil
68 Heinz........................... $3.7 bil
69 Nike............................. $3.6 bil
70 Mattel.......................... $3.5 bil
71 International Paper....... $3.5 bil
72 Monsanto..................... $3.4 bil
73 Hess............................. $3.4 bil
74 Franklin Resources........ $3.4 bil
75 Thermo Fisher Scientific $3.2 bil
76 Stryker.......................... $3.2 bil
77 Gilead Sciences.............. $3.2 bil
78 Texas Instruments.......... $3.1 bil
79 Paccar........................... $3.1 bil
80 Marsh & McLennan......... $3.1 bil
81 EOG Resources................ $3.0 bil
82 CBS................................. $3.0 bil
83 Air Products & Chemicals $3.0 bil
84 Agilent Technologies....... $3.0 bil
85 US Steel........................... $2.9 bil
86 GMAC.............................. $2.9 bil
87 Colgate Palmolive........... $2.9 bil
88 National Oilwell Varco..... $2.8 bil
89 Goodyear Tire & Rubber... $2.8 bil
90 Celgene............................ $2.8 bil
91 Celanese.......................... $2.8 bil
92 Ensco.............................. $2.6 bil
93 Becton Dickinson............. $2.6 bil
94 TRW Automotive Hldgs.... $2.5 bil
95 Whirlpool........................ $2.4 bil
96 Overseas Shiphldg Grp..... $2.4 bil
97 Motorola........................ $2.4 bil
98 Dole Food Co................... $2.4 bil
99 McKesson....................... $2.3 bil
100 Baker Hughes................. $2.3 bil
101 United Parcel Service..... $2.2 bil
102 Biogen Idec.................... $2.2 bil
103 Avon Products............... $2.2 bil
104 Allergan........................ $2.2 bil
105 General Mills................. $2.1 bil
106 ConcoPhillips................ $2.1 bil
107 Black & Decker................ $2.1 bil
108 Aon................................ $2.1 bil
109 AGCO.............................. $2.1 bil
110 Yahoo............................. $2.0 bil
111 Western Union................. $2.0 bil
112 Pride International.......... $2.0 bil
113 PPG Industries................ $2.0 bil
114 Carefusion....................... $2.0 bil
Total 114 Companies....... $1,051.9 bil
Wednesday, September 8, 2010
Obama 3-Pronged Initiative Enhances US Status as Worldwide Economic Powerhouse
Like JFK’s visionary economic initiatives under pretty similar circumstances about a half century ago, I think President Obama’s very recent bold, visionary economic initiatives will turn this long-lasting US jobless, tepid recovery into a long-lasting, robust private sector job-creating economic recovery.
The three main items he is now proposing is just the right mixture of near term, medium term and long term economic initiatives:
…..100% Tax Writeoff of Plant and Equipment Investments….near term economic jolt
…..Research Tax Credit Made Permanent…..near term, medium term, and long term innovation and certainty
…..Transportation Infrastructure Investments…..near term, medium term, and long term foundation to facilitate business growth
I think this three-pronged economic stimulus will immediately and substantially enhance the status of the US as a Worldwide Economic Powerhouse. It builds up the necessary infrastructure and provides high powered tax incentives to markedly elevate primarily two critical US industries…..Technology and Manufacturing. It will put these two US industries, as well as many other US industries, in much better positions to effectively compete in the world economy.
And this economic initiative here is fully paid for by wisely closing a small portion of the many Big Corp tax loopholes, that have served as an unfortunate drag on the US economy.
Without this bold economic initiative, I think that real US GDP growth would be in the 0% to 1% range for the 4Q 2010 and also for all of 2011. Assuming the 100% writeoff of plant and equipment is effective starting today, Sept 8, 2010, through the end of 2011, I think that real US GDP growth will be bumped up to average in the 4% to 6% range for the next five quarters (i.e. 4Q 2010 and all of 2011), and to average in the 2.5% to 4.5% range for many years thereafter. And the single most important driver of US deficit reduction is robust, long-lasting real GDP growth.
It will take a bit longer on the job front. Given the just horrible financial aftershocks to the US structural economy resulting from the 2000s Lost Decade, without this bold economic initiative, I don’t think you’ll see US unemployment below 9% or see the total US unemployment and underemployment rate below 15% through the end of President Obama’s second term.
With this bold economic initiative, and assuming it also includes both new plant facility investments and existing plant facility remodeling costs, as well as also including some wise measures to better insure that the 100% plant and equipment writeoffs by businesses also directly result in full-time payroll count increases and subsequent employee retention by these same businesses, I see a substantial increase in private sector jobs right away, which will continue at a very robust level for the next five quarters, and then continue at a less robust, but still very nice level of increase, for many years thereafter.
However, with so many people presently underemployed or out of the labor force completely, even with this economic initiative, I don’t see the unemployment rate going down right away. But keep your eye out starting in say March 2011….you should see the unemployment and underemployment rates start dropping significantly by then and continue to decline for many years thereafter.
I think you’ll see this economic initiative quickly pass the US Congress. Businesses should love this three-pronged economic initiative. They will put a lot of pressure on the Republicans in the US Congress to quickly pass this measure. Corporations haven’t been able to record the increased earnings from the R&D tax credit in the first half of 2010. They would really like to get the reported GAAP earnings increase from this but it has to pass first. In addition, businesses of all sizes would love to get the income tax benefit of the 100% plant and equipment writeoff before this year end in order to shelter some of their current year profits.
The only thing that will stop this freight train from passing are the Republicans in the US Senate, bent on having the President fail, even if US citizens suffer severely in the process.
Since this economic initiative is so critically important to the country, I wish there could be some way for temporary changes to be made to the Senate Finance Committee process to make it much more effective. First, I would consider killing the Senate Finance Committee Chairmanship by seniority process. Instead, I would like to see the very brightest and most effective Senate Finance Committee members on both side of the aisle take over temporary chairmanships…in my opinion, from very close observation, either Idaho’s Crapo or Maine’s Snowe on the Republican side, and either Washington’s Cantwell or Oregon’s Wyden on the Democratic side. And then I would consider temporarily adding to the Senate Finance Committee a couple of the very brightest US Senators, who in my opinion are Indiana’s Lugar on the Republican side and Wisconsin’s Feingold on the Democratic side. These two former Rhodes Scholars both have incredibly brilliant minds and could really help get this critical economic initiative done well and in quick order. And then I’d consider adding a couple of US Senators temporarily to the Senate Finance Committee who are flat out fiscal experts, like Indiana’s Bayh.
On another point, I think one of the most important aspects of this three-pronged economic initiative is the establishment of a federal government infrastructure bank, which will facilitate both the quality of selection, and the speed of the start and completion of, infrastructure projects. And frankly, I think this federal government infrastructure bank could eventually also be wisely used to facilitate the reduction of the massive number and amounts of underwater homeowner mortgages that are out there. Further, to think outside the box, I’d even consider having this federal government infrastructure bank make some prudent direct loans to small and medium-sized businesses that were unsuccessful in getting their plant and equipment investments, spurred by this economic initiative, financed by private sector financial institutions.
The whole country should be proud of what the Obama economic team has designed here. It’s a winner and by far the best economic initiative that has been designed by the US government in the past decade. And the bang for the buck is great because it is so very well targeted at the critical economic issues.
The three main items he is now proposing is just the right mixture of near term, medium term and long term economic initiatives:
…..100% Tax Writeoff of Plant and Equipment Investments….near term economic jolt
…..Research Tax Credit Made Permanent…..near term, medium term, and long term innovation and certainty
…..Transportation Infrastructure Investments…..near term, medium term, and long term foundation to facilitate business growth
I think this three-pronged economic stimulus will immediately and substantially enhance the status of the US as a Worldwide Economic Powerhouse. It builds up the necessary infrastructure and provides high powered tax incentives to markedly elevate primarily two critical US industries…..Technology and Manufacturing. It will put these two US industries, as well as many other US industries, in much better positions to effectively compete in the world economy.
And this economic initiative here is fully paid for by wisely closing a small portion of the many Big Corp tax loopholes, that have served as an unfortunate drag on the US economy.
Without this bold economic initiative, I think that real US GDP growth would be in the 0% to 1% range for the 4Q 2010 and also for all of 2011. Assuming the 100% writeoff of plant and equipment is effective starting today, Sept 8, 2010, through the end of 2011, I think that real US GDP growth will be bumped up to average in the 4% to 6% range for the next five quarters (i.e. 4Q 2010 and all of 2011), and to average in the 2.5% to 4.5% range for many years thereafter. And the single most important driver of US deficit reduction is robust, long-lasting real GDP growth.
It will take a bit longer on the job front. Given the just horrible financial aftershocks to the US structural economy resulting from the 2000s Lost Decade, without this bold economic initiative, I don’t think you’ll see US unemployment below 9% or see the total US unemployment and underemployment rate below 15% through the end of President Obama’s second term.
With this bold economic initiative, and assuming it also includes both new plant facility investments and existing plant facility remodeling costs, as well as also including some wise measures to better insure that the 100% plant and equipment writeoffs by businesses also directly result in full-time payroll count increases and subsequent employee retention by these same businesses, I see a substantial increase in private sector jobs right away, which will continue at a very robust level for the next five quarters, and then continue at a less robust, but still very nice level of increase, for many years thereafter.
However, with so many people presently underemployed or out of the labor force completely, even with this economic initiative, I don’t see the unemployment rate going down right away. But keep your eye out starting in say March 2011….you should see the unemployment and underemployment rates start dropping significantly by then and continue to decline for many years thereafter.
I think you’ll see this economic initiative quickly pass the US Congress. Businesses should love this three-pronged economic initiative. They will put a lot of pressure on the Republicans in the US Congress to quickly pass this measure. Corporations haven’t been able to record the increased earnings from the R&D tax credit in the first half of 2010. They would really like to get the reported GAAP earnings increase from this but it has to pass first. In addition, businesses of all sizes would love to get the income tax benefit of the 100% plant and equipment writeoff before this year end in order to shelter some of their current year profits.
The only thing that will stop this freight train from passing are the Republicans in the US Senate, bent on having the President fail, even if US citizens suffer severely in the process.
Since this economic initiative is so critically important to the country, I wish there could be some way for temporary changes to be made to the Senate Finance Committee process to make it much more effective. First, I would consider killing the Senate Finance Committee Chairmanship by seniority process. Instead, I would like to see the very brightest and most effective Senate Finance Committee members on both side of the aisle take over temporary chairmanships…in my opinion, from very close observation, either Idaho’s Crapo or Maine’s Snowe on the Republican side, and either Washington’s Cantwell or Oregon’s Wyden on the Democratic side. And then I would consider temporarily adding to the Senate Finance Committee a couple of the very brightest US Senators, who in my opinion are Indiana’s Lugar on the Republican side and Wisconsin’s Feingold on the Democratic side. These two former Rhodes Scholars both have incredibly brilliant minds and could really help get this critical economic initiative done well and in quick order. And then I’d consider adding a couple of US Senators temporarily to the Senate Finance Committee who are flat out fiscal experts, like Indiana’s Bayh.
On another point, I think one of the most important aspects of this three-pronged economic initiative is the establishment of a federal government infrastructure bank, which will facilitate both the quality of selection, and the speed of the start and completion of, infrastructure projects. And frankly, I think this federal government infrastructure bank could eventually also be wisely used to facilitate the reduction of the massive number and amounts of underwater homeowner mortgages that are out there. Further, to think outside the box, I’d even consider having this federal government infrastructure bank make some prudent direct loans to small and medium-sized businesses that were unsuccessful in getting their plant and equipment investments, spurred by this economic initiative, financed by private sector financial institutions.
The whole country should be proud of what the Obama economic team has designed here. It’s a winner and by far the best economic initiative that has been designed by the US government in the past decade. And the bang for the buck is great because it is so very well targeted at the critical economic issues.
Wednesday, September 1, 2010
Big US Corps Have Rocked in 2010 While the Rest of the US Got Rolled
The US economy has weakened further in 2010, with 2Q US real GDP growth of only 1.6%, with very high unemployment and underemployment, with the housing crisis getting even worse, and with the substantial US government debt increasing even more markedly.
So what has been going on with the Big US Corps in 2010? Well, the Dow and the S&P 500 index have both exploded upwardly since their lows in the first half of 2009. As any stock market guru will tell you, stock prices are driven by earnings, both past earnings and expected future earnings. Let me take a closer look at these very recent past earnings of Big US Corps.
Well, the 30 Dow Industrials in total generated core Worldwide Pretax Income of $206 bil for the first half of 2010, an increase of 40% from the $147 bil earned in the first half of 2009. Productivity Cost Savings were the principal driver of these massive earnings increases, as Total Worldwide Revenues of these Dow Industrials for the first half of 2010 increased by a much lower 11%.
As you can see below, more than half of these Dow 30 Industrials generated core Pretax Profits in the first half of 2010 that were more than $1 bil higher than that experienced in the first half of 2009, with Big Oil leading the list:
………………………....First…….First
………………………....Half……..Half
………………………....2010……2009…Increase..Increase
…………………..........Profit…..Profit…Amount…….%
…………………………...(in billions of dollars)
1 Chevron…………....16.4……..6.5………9.9…....152%
2 Exxon Mobil………24.8……15.4………9.4……...61%
3 Intel…………………..7.6……..0.6………7.0…...1218%
4 Pfizer………………..14.3……..9.7………4.6……...46%
5 JP Morgan Chase..11.6……..7.1………4.5……...63%
6 Merck………………...7.0……..3.7………3.3……...87%
7 Microsoft…………..11.4……..8.2………3.2……...39%
8 DuPont……………....3.2……..1.2……….2.0….....158%
9 American Express..2.8……..1.0……...1.8….....196%
10 AT&T……………....11.7……..9.9……...1.8……...18%
11 Cisco Systems…...4.8……..3.2……….1.6……...50%
12 JNJ………………....10.5…….8.9……….1.6……...18%
13 GE…………………....7.1……..5.7……….1.4……...24%
14 Alcoa………………..0.1……(1.2)………1.3……..112%
15 Caterpillar…………1.4……..0.2……….1.2……..649%
16 Disney………………3.9……..2.7……….1.2……....46%
17 3M…………………..3.0……..1.9………..1.1……....55%
All 30 Dow Cos....206.1….146.9……...59.2……..40%
And when I expand my research here to also include 132 of the largest non-Dow Industrial companies, I get very similar strong earnings and Productivity Cost Savings results. For these 132 large non-Dow companies, core Worldwide Pretax Income for the first half of 2010 was $228 bil, up 47%, whereas Worldwide Revenues were up a much lower 15%.
There were 22 of these 132 non-Dow Industrial companies generating core Pretax Profits in the first half of 2010 that were more than $1 bil higher than that experienced in the first half of 2009, with 6 Big Oil companies among the top 15 of these 22:
………………………….......First…….First
………………………….......Half……..Half
………………………….......2010……2009….Increase..Increase.
…………………................Profit…..Profit…Amount……..%
………………………...........(in billions of dollars)
1 Berkshire Hathaway….8.0……..2.2……….5.8……...257%
2 Morgan Stanley………..4.2…….(1.2)……….5.4…......445%
3 Ford…………………........5.0…….0.6………..4.4…......760%
4 ConocoPhillips………...7.3……..3.9………..3.4…….....86%
5 Apple…………….…........8.3……..5.1………..3.2…….....64%
6 Prudential Financial….2.5……..0.0……….2.5……....
7 Andarko Petroleum…..1.3…….(0.9)………2.2……...241%
8 Dow Chemical……........1.4…….(0.7)………2.1….......311%
9 Capital One Financial...2.1……..0.2…….....1.9….....1092%
10 Occidental Petroleum3.6….....1.7………..1.9……...113%
11 FedEx………………........1.1…….(0.7)………1.8……...247%
12 Texas Instruments......2.1……..0.4……….1.7……...456%
13 Devon Energy……….....2.2……..0.5……….1.7……...304%
14 Apache…………….........2.6……..1.2………..1.4……...126%
15 Hess………………..........1.7……...0.3……….1.4……....500%
16 Corning……………........1.9……..0.6………..1.3……....235%
17 Freeport McMoran…..3.2……..1.9………..1.3…….....68%
18 Google…………….........4.9……..3.7………..1.2…….....32%
19 PNC Financial……......2.0……..0.9………..1.1……....128%
20 Qualcomm………........1.9……..0.9………..1.0……....119%
21 Applied Materials…...0.6…….(0.4)……….1.0……....224%
22 Johnson Controls……0.8…….(0.2)……….1.0……....572%
All 132 non-Dow Cos.228.4…...155.0……...73.4………47%
I think that primarily six subgroups of Big Corps have played major roles in creating the 2000s Lost Decade, the financial aftershocks of which are the main reason for the country’s present horrible jobless recovery, with sky high unemployment and underemployment, very modest real GDP growth, high US government debt level, and the awful housing crisis.
The six are:
…Big Multinational Corps
…Big Oil Corps
…Big Financial Corps
…Big Health Insurance Corps
…Big Pharma Corps
…Big Hospital, both For-Profit Corps and Non-Profits
Let me isolate how each of these six subgroups of Big Corps have done in the first half of 2010 by further analyzing the operating performance of the 162 large companies (30 Dow Industrials and 132 non-Dow companies) I have studied above, as well as adding a few other health care industry companies.
Big Multinational Corps
A large portion of the 162 companies are big multinational corps. In the aggregate, the core Pretax Earnings in the first half of 2010 of these 162 corps totaled $434.5 bil, up an incredibly high 44% from the $301.9 bil earned in the first half of 2009.
A surprising finding here for me is that this $434.5 bil of total core Pretax Earnings in the first half of 2010 were just barely short of the all-time peak total first half earnings of these same 162 companies experienced in the first half of 2008 of $436.3 bil. And these first half 2010 earnings of $434.5 bil slightly surpassed the $433.2 bil of comparable earnings experienced in the first half 2007. I have to wonder what percentage of US individuals and purely domestic US businesses, both large and small, were doing just as well financially in the first half of 2010 and they were doing in the first half of 2008 and 2007? My hunch is less than 10%. Clearly, all boats haven't risen, it's just been the Big Corp Boats.
Clearly, the earnings of the Big Multinational Corps have bounced back in 2010. And since Total Revenues in the first half of 2010 of these 162 companies are up only 13%, whereas Total Earnings increased by a much more robust 44%, Productivity Cost Savings have played a major role, not just the layoffs of US employees and the wage and employee benefit trade-down replacements of US employees, but also the movement of jobs overseas, due to lower income taxes, lower wages, and lower employee benefit costs. And the very robust earnings and revenue growth here are mostly overseas.
Big Oil Corps
There were 15 Big Oil Corps included in these 162 large corps. The total core Pretax Earnings of these 15 Oil companies for the first half of 2010 were $68.7 bil, up a massive 86% from the comparable earnings in the first half of 2009. And these nosebleed increased earnings occurred in a period marred in part by the Gulf Oil spill. With its awesome economic power and government influence, it seems that nothing can stop this Big Oil industry from generating windfall profits.
Big Financial Corps
There were 25 Big Financial Corps included in these 162 large corps. The total Pretax Earnings of these 25 Financial companies in the first half of 2010 were $70.3 bil, up a surprisingly very strong 44% from the comparable earnings in the first half of 2009. The only ones suffering in the Big Financials arena are its homeowner mortgage customers, its credit card customers, its small business customers, and US taxpayers from the US government bailouts of Fannie Mae, Freddie Mac and AIG.
Big Health Insurance Corps
The Big 4 of Health Insurance are United Health Group, Wellpoint, Aetna and Humana. The total pretax earnings of these 4 companies in the first half of 2010 were $8.7 bil, up a strong 29% from the first half of 2009. The total earnings of these four stalwarts of the Health Insurance industry has now significantly surpassed its previous peak earnings experienced in the first half of 2007 of $7.8 bil. The only ones suffering in the health insurance industry are the customers of health insurance, both businesses and individuals, paying sky high premiums in an industry continuing to generate windfall profits. And once the new health care legislation totally kicks in, the health insurance industry will do even substantially better. Just like Big Oil, it seems that nothing can stop this health insurance industry.
Big Pharma Corps
The total core Pretax Earnings for these 12 Big Pharma Corps, included in these above 162 Big Corps, for the first half of 2010 were $48.9 bil, precisely matching the 29% earnings growth over the first half 2009 also experienced by the Big Health Insurance industry. The total core earnings of the Big Pharma industry has now significantly surpassed by 23% its previous peak earnings in the first half of 2008 of $39.6 bil. The only ones suffering in this Big Pharma industry are the customers of Big Pharma, including individuals and the US Government. And once the new health care legislation totally kicks in, just like the Big Health Insurance industry, Big Pharma will also do even substantially better. And just like Big Oil and Big Health Insurance, it seems that nothing can stop this Big Pharma industry. For all three industries, it’s all about effective lobbying.
Big Hospital
There are six large for-profit hospital organizations which file with the SEC:
…HCA
…Community Health Systems
…Universal Health Services
…Tenet Healthcare
…Health Management Associates
…Lifepoint Hospitals
This publicly-held Big Hospital industry has had back-to-back superb years. In the first half of 2010, the total Pretax Earnings of this publicly-held Big Hospital industry were $2.1 bil, up 9% from the first half of 2009, which had an increase of a massive 74% over the first half earnings of 2008. The only ones suffering in the total Big Hospital industry, which also includes the many Non-profit Big Hospital organizations, are the hospital patients and the US Government. And once the new health care legislation totally kicks in, just like the Big Health Insurance and the Big Pharma industries, Big Hospital will also do even substantially better. Just like Big Oil, Big Health Insurance, and Big Pharma, it seems that nothing can stop this Big Hospital industry. For all four industries, it’s all about effective lobbying.
=============================================
In summing up, it’s just not right for all of these six subgroups of Big Corps to be rocking in the first half of 2010 when both so many US citizens and so many US small businesses are in such desperate straits financially. It’s all about Big Corps obscene power through effectively lobbying the US Congress.
In the 2000s Lost Decade, US Big Corps have gotten way too strong relative to the US Government. I think it’s high time to reverse this very damaging trend.
I think the US Government should take steps to spread some of the massive economic benefits received by Big Corps to the entire US citizenry and to US small businesses.
First, I think it is only fair that many in the long list of tax loopholes of each of these six Big Corp subgroups be closed, and the funds raised here to be used to finance desperately needed private sector job creation.
Second, something has to be done about the damaging effect of lobbying. As one step, I would put a very stiff, highly progressive gross receipts tax on lobbying revenue, and use the funds raised here to also finance private sector job creation.
And third, I think the US Government should act to reduce the size of the largest of the US Big Corps, which have done so much damage to both the US economy and to so many US citizens. I think that when a company gets to the stage of having a massive profit, it spends way too much time in profit improvement initiatives like creative tax loophole strategies, productivity cost reduction, and business acquisitions, with this time being taken away from the highly desirable initiatives to organically grow their business. Further, when a company gets so large, it spends an inordinate amount of time lobbying the US Congress.
To approach this problem objectively, here are the top 10 of the 30 Dow Industrials in total core Pretax Earnings for the first half of the most recent five years (first half 2006-2010):
...1 Exxon Mobil............$150 bil
...2 Chevron..................$ 77 bil
...3 Bank of America......$ 55 bil
...4 Pfizer......................$ 54 bil
...5 Microsoft................$ 50 bil
...6 Walmart..................$ 49 bil
...7 GE...........................$ 49 bil
...8 AT&T.......................$ 47 bil
...9 JP Morgan Chase.....$ 47 bil
..10 JNJ.........................$ 44 bil
In total, these top ten comprise an amazingly high 63% of the total earnings of all 30 Dow Industrial companies for the same period. And there is a substantial drop in earnings after the top ten of the Dow 30, with #11 Verizon generating comparable profit of $35 bil.
In reviewing comparable profits of the large non-Dow companies, there is only one company which would make it into the Dow top ten in core Pretax Earnings....ConocoPhillips, which registered total core Pretax Earnings for the comparable period of $57 bil. After ConocoPhillips, there is a huge drop down in total profits of the largest non-Dow companies for the first half of the past five years...to #2 Wells Fargo at $37 bil.
To show the economic dominance of Big Oil, ConocoPhillips would be #3 in the above Dow 30 in profits. Thus, the top three US profit generators in the first half of the past five years (first half 2006-2010) were all Oil Companies!
I think it is helpful to compare the above top 13 profit list with what existed in the late 1990s Go-Go years of the US economy. Here are the rankings in after-tax total profit of US companies for the five years from 1995 to 1999, with the information taken from Fortune Magazine profit rankings.
... 1 GE.......................$42 bil
... 2 Exxon Mobil........$37 bil
... 3 Altria Group........$31 bil
... 4 IBM.....................$30 bil
... 5 Intel....................$29 bil
... 6 Ford....................$29 bil*
... 7 General Motors....$28 bil
... 8 Merck..................$23 bil
... 9 Citigroup..............$23 bil
...10 DuPont...............$22 bil
...11 Bank of America..$21 bil
...12 AT&T..................$21 bil
...13 Microsoft............$19 bil
* Excluding $16 bil gain from spinning off The Associates
In comparing the two lists, here are some key conclusions:
*****There was only one Big Oil company in the late 1990s decade (Exxon Mobil at #2) vs. three now, and with all three at the very top of the list. I think having so much Big Oil dominance now is extremely destructive to the US economy. Big Oil tax loopholes should be closed and Big Oil needs to be broken up.
*****There were three high tech companies in the late 1990s (#4 IBM, #5 Intel, and #13 Microsoft) and now only one (#5 Microsoft). To be a worldwide economic powerhouse, I think the US needs to have an even much more robust high tech industry. I think it would be wise to give highly-charged US tax incentives (investment tax credits, jobs tax credits, R&D tax credits) to this critical industry. And the US jobs created here are quality higher paying jobs.
*****There were six manufacturers in the late 1990s (#1 GE, #4 IBM, #5 Intel, #6 Ford, #7 General Motors, and #10 DuPont) and even a couple more that do some manufacturing vs. only one now (a much lower #7 GE) and a couple others that do some manufacturing. Clearly, the US government has to prop up its entire critical manufacturing industry with highly robust wise tax incentives like the investment tax credit, jobs tax credit and R&D tax credit. A very robust, world-class US manufacturing sector, with a particular focus on green energy, is needed for the US to be an economic powerhouse on the world scene.
*****The late 1990s list has total profits much closer together than that in the current list. It is not good for the US economy to have one company dominate a sector like Walmart, Microsoft and Exxon Mobil do. For competitive reasons, it is much better for the US economy to have profitability of the top companies to be much closer together than they are now. I wouldn't give any tax incentives to the dominant companies in an industry. Instead, I would give the tax incentives to all the other companies in a critical industry, with particular emphasis on the smaller companies and on domestic companies of all sizes.
Anyway, to substantially increase competition, I think the entire country would benefit dramatically if all of the above 11 giant pseudo-monopoly US Corps on the current top profit list (i.e. Dow top ten plus ConocoPhillips) were broken up into parts. And then due to their just incredible dominance, I would consider breaking up Exxon Mobil into five parts and Chevron into three parts. I would consider breaking up the remaining 9 companies into two parts each.
In addition, to significantly increase competition, I would also break up some of the Big Health Insurance industry. Because of their size and pseudo-monopoly status in setting prices, I would consider breaking up United Health Group into three parts and Wellpoint into two parts.
When you think about it, the only option US citizens have of turning around the financial devastation caused by Big Corp lobbyists is to vote smartly. I encourage everyone to very thoroughly research all of the candidates running in the November 2010 elections. And for the candidates who have supported Big Multinational Corps, Big Oil, Big Financial, Big Health Insurance, Big Pharma and/or Big Hospital, we should make sure that these candidates do not get elected or re-elected.
So what has been going on with the Big US Corps in 2010? Well, the Dow and the S&P 500 index have both exploded upwardly since their lows in the first half of 2009. As any stock market guru will tell you, stock prices are driven by earnings, both past earnings and expected future earnings. Let me take a closer look at these very recent past earnings of Big US Corps.
Well, the 30 Dow Industrials in total generated core Worldwide Pretax Income of $206 bil for the first half of 2010, an increase of 40% from the $147 bil earned in the first half of 2009. Productivity Cost Savings were the principal driver of these massive earnings increases, as Total Worldwide Revenues of these Dow Industrials for the first half of 2010 increased by a much lower 11%.
As you can see below, more than half of these Dow 30 Industrials generated core Pretax Profits in the first half of 2010 that were more than $1 bil higher than that experienced in the first half of 2009, with Big Oil leading the list:
………………………....First…….First
………………………....Half……..Half
………………………....2010……2009…Increase..Increase
…………………..........Profit…..Profit…Amount…….%
…………………………...(in billions of dollars)
1 Chevron…………....16.4……..6.5………9.9…....152%
2 Exxon Mobil………24.8……15.4………9.4……...61%
3 Intel…………………..7.6……..0.6………7.0…...1218%
4 Pfizer………………..14.3……..9.7………4.6……...46%
5 JP Morgan Chase..11.6……..7.1………4.5……...63%
6 Merck………………...7.0……..3.7………3.3……...87%
7 Microsoft…………..11.4……..8.2………3.2……...39%
8 DuPont……………....3.2……..1.2……….2.0….....158%
9 American Express..2.8……..1.0……...1.8….....196%
10 AT&T……………....11.7……..9.9……...1.8……...18%
11 Cisco Systems…...4.8……..3.2……….1.6……...50%
12 JNJ………………....10.5…….8.9……….1.6……...18%
13 GE…………………....7.1……..5.7……….1.4……...24%
14 Alcoa………………..0.1……(1.2)………1.3……..112%
15 Caterpillar…………1.4……..0.2……….1.2……..649%
16 Disney………………3.9……..2.7……….1.2……....46%
17 3M…………………..3.0……..1.9………..1.1……....55%
All 30 Dow Cos....206.1….146.9……...59.2……..40%
And when I expand my research here to also include 132 of the largest non-Dow Industrial companies, I get very similar strong earnings and Productivity Cost Savings results. For these 132 large non-Dow companies, core Worldwide Pretax Income for the first half of 2010 was $228 bil, up 47%, whereas Worldwide Revenues were up a much lower 15%.
There were 22 of these 132 non-Dow Industrial companies generating core Pretax Profits in the first half of 2010 that were more than $1 bil higher than that experienced in the first half of 2009, with 6 Big Oil companies among the top 15 of these 22:
………………………….......First…….First
………………………….......Half……..Half
………………………….......2010……2009….Increase..Increase.
…………………................Profit…..Profit…Amount……..%
………………………...........(in billions of dollars)
1 Berkshire Hathaway….8.0……..2.2……….5.8……...257%
2 Morgan Stanley………..4.2…….(1.2)……….5.4…......445%
3 Ford…………………........5.0…….0.6………..4.4…......760%
4 ConocoPhillips………...7.3……..3.9………..3.4…….....86%
5 Apple…………….…........8.3……..5.1………..3.2…….....64%
6 Prudential Financial….2.5……..0.0……….2.5……....
7 Andarko Petroleum…..1.3…….(0.9)………2.2……...241%
8 Dow Chemical……........1.4…….(0.7)………2.1….......311%
9 Capital One Financial...2.1……..0.2…….....1.9….....1092%
10 Occidental Petroleum3.6….....1.7………..1.9……...113%
11 FedEx………………........1.1…….(0.7)………1.8……...247%
12 Texas Instruments......2.1……..0.4……….1.7……...456%
13 Devon Energy……….....2.2……..0.5……….1.7……...304%
14 Apache…………….........2.6……..1.2………..1.4……...126%
15 Hess………………..........1.7……...0.3……….1.4……....500%
16 Corning……………........1.9……..0.6………..1.3……....235%
17 Freeport McMoran…..3.2……..1.9………..1.3…….....68%
18 Google…………….........4.9……..3.7………..1.2…….....32%
19 PNC Financial……......2.0……..0.9………..1.1……....128%
20 Qualcomm………........1.9……..0.9………..1.0……....119%
21 Applied Materials…...0.6…….(0.4)……….1.0……....224%
22 Johnson Controls……0.8…….(0.2)……….1.0……....572%
All 132 non-Dow Cos.228.4…...155.0……...73.4………47%
I think that primarily six subgroups of Big Corps have played major roles in creating the 2000s Lost Decade, the financial aftershocks of which are the main reason for the country’s present horrible jobless recovery, with sky high unemployment and underemployment, very modest real GDP growth, high US government debt level, and the awful housing crisis.
The six are:
…Big Multinational Corps
…Big Oil Corps
…Big Financial Corps
…Big Health Insurance Corps
…Big Pharma Corps
…Big Hospital, both For-Profit Corps and Non-Profits
Let me isolate how each of these six subgroups of Big Corps have done in the first half of 2010 by further analyzing the operating performance of the 162 large companies (30 Dow Industrials and 132 non-Dow companies) I have studied above, as well as adding a few other health care industry companies.
Big Multinational Corps
A large portion of the 162 companies are big multinational corps. In the aggregate, the core Pretax Earnings in the first half of 2010 of these 162 corps totaled $434.5 bil, up an incredibly high 44% from the $301.9 bil earned in the first half of 2009.
A surprising finding here for me is that this $434.5 bil of total core Pretax Earnings in the first half of 2010 were just barely short of the all-time peak total first half earnings of these same 162 companies experienced in the first half of 2008 of $436.3 bil. And these first half 2010 earnings of $434.5 bil slightly surpassed the $433.2 bil of comparable earnings experienced in the first half 2007. I have to wonder what percentage of US individuals and purely domestic US businesses, both large and small, were doing just as well financially in the first half of 2010 and they were doing in the first half of 2008 and 2007? My hunch is less than 10%. Clearly, all boats haven't risen, it's just been the Big Corp Boats.
Clearly, the earnings of the Big Multinational Corps have bounced back in 2010. And since Total Revenues in the first half of 2010 of these 162 companies are up only 13%, whereas Total Earnings increased by a much more robust 44%, Productivity Cost Savings have played a major role, not just the layoffs of US employees and the wage and employee benefit trade-down replacements of US employees, but also the movement of jobs overseas, due to lower income taxes, lower wages, and lower employee benefit costs. And the very robust earnings and revenue growth here are mostly overseas.
Big Oil Corps
There were 15 Big Oil Corps included in these 162 large corps. The total core Pretax Earnings of these 15 Oil companies for the first half of 2010 were $68.7 bil, up a massive 86% from the comparable earnings in the first half of 2009. And these nosebleed increased earnings occurred in a period marred in part by the Gulf Oil spill. With its awesome economic power and government influence, it seems that nothing can stop this Big Oil industry from generating windfall profits.
Big Financial Corps
There were 25 Big Financial Corps included in these 162 large corps. The total Pretax Earnings of these 25 Financial companies in the first half of 2010 were $70.3 bil, up a surprisingly very strong 44% from the comparable earnings in the first half of 2009. The only ones suffering in the Big Financials arena are its homeowner mortgage customers, its credit card customers, its small business customers, and US taxpayers from the US government bailouts of Fannie Mae, Freddie Mac and AIG.
Big Health Insurance Corps
The Big 4 of Health Insurance are United Health Group, Wellpoint, Aetna and Humana. The total pretax earnings of these 4 companies in the first half of 2010 were $8.7 bil, up a strong 29% from the first half of 2009. The total earnings of these four stalwarts of the Health Insurance industry has now significantly surpassed its previous peak earnings experienced in the first half of 2007 of $7.8 bil. The only ones suffering in the health insurance industry are the customers of health insurance, both businesses and individuals, paying sky high premiums in an industry continuing to generate windfall profits. And once the new health care legislation totally kicks in, the health insurance industry will do even substantially better. Just like Big Oil, it seems that nothing can stop this health insurance industry.
Big Pharma Corps
The total core Pretax Earnings for these 12 Big Pharma Corps, included in these above 162 Big Corps, for the first half of 2010 were $48.9 bil, precisely matching the 29% earnings growth over the first half 2009 also experienced by the Big Health Insurance industry. The total core earnings of the Big Pharma industry has now significantly surpassed by 23% its previous peak earnings in the first half of 2008 of $39.6 bil. The only ones suffering in this Big Pharma industry are the customers of Big Pharma, including individuals and the US Government. And once the new health care legislation totally kicks in, just like the Big Health Insurance industry, Big Pharma will also do even substantially better. And just like Big Oil and Big Health Insurance, it seems that nothing can stop this Big Pharma industry. For all three industries, it’s all about effective lobbying.
Big Hospital
There are six large for-profit hospital organizations which file with the SEC:
…HCA
…Community Health Systems
…Universal Health Services
…Tenet Healthcare
…Health Management Associates
…Lifepoint Hospitals
This publicly-held Big Hospital industry has had back-to-back superb years. In the first half of 2010, the total Pretax Earnings of this publicly-held Big Hospital industry were $2.1 bil, up 9% from the first half of 2009, which had an increase of a massive 74% over the first half earnings of 2008. The only ones suffering in the total Big Hospital industry, which also includes the many Non-profit Big Hospital organizations, are the hospital patients and the US Government. And once the new health care legislation totally kicks in, just like the Big Health Insurance and the Big Pharma industries, Big Hospital will also do even substantially better. Just like Big Oil, Big Health Insurance, and Big Pharma, it seems that nothing can stop this Big Hospital industry. For all four industries, it’s all about effective lobbying.
=============================================
In summing up, it’s just not right for all of these six subgroups of Big Corps to be rocking in the first half of 2010 when both so many US citizens and so many US small businesses are in such desperate straits financially. It’s all about Big Corps obscene power through effectively lobbying the US Congress.
In the 2000s Lost Decade, US Big Corps have gotten way too strong relative to the US Government. I think it’s high time to reverse this very damaging trend.
I think the US Government should take steps to spread some of the massive economic benefits received by Big Corps to the entire US citizenry and to US small businesses.
First, I think it is only fair that many in the long list of tax loopholes of each of these six Big Corp subgroups be closed, and the funds raised here to be used to finance desperately needed private sector job creation.
Second, something has to be done about the damaging effect of lobbying. As one step, I would put a very stiff, highly progressive gross receipts tax on lobbying revenue, and use the funds raised here to also finance private sector job creation.
And third, I think the US Government should act to reduce the size of the largest of the US Big Corps, which have done so much damage to both the US economy and to so many US citizens. I think that when a company gets to the stage of having a massive profit, it spends way too much time in profit improvement initiatives like creative tax loophole strategies, productivity cost reduction, and business acquisitions, with this time being taken away from the highly desirable initiatives to organically grow their business. Further, when a company gets so large, it spends an inordinate amount of time lobbying the US Congress.
To approach this problem objectively, here are the top 10 of the 30 Dow Industrials in total core Pretax Earnings for the first half of the most recent five years (first half 2006-2010):
...1 Exxon Mobil............$150 bil
...2 Chevron..................$ 77 bil
...3 Bank of America......$ 55 bil
...4 Pfizer......................$ 54 bil
...5 Microsoft................$ 50 bil
...6 Walmart..................$ 49 bil
...7 GE...........................$ 49 bil
...8 AT&T.......................$ 47 bil
...9 JP Morgan Chase.....$ 47 bil
..10 JNJ.........................$ 44 bil
In total, these top ten comprise an amazingly high 63% of the total earnings of all 30 Dow Industrial companies for the same period. And there is a substantial drop in earnings after the top ten of the Dow 30, with #11 Verizon generating comparable profit of $35 bil.
In reviewing comparable profits of the large non-Dow companies, there is only one company which would make it into the Dow top ten in core Pretax Earnings....ConocoPhillips, which registered total core Pretax Earnings for the comparable period of $57 bil. After ConocoPhillips, there is a huge drop down in total profits of the largest non-Dow companies for the first half of the past five years...to #2 Wells Fargo at $37 bil.
To show the economic dominance of Big Oil, ConocoPhillips would be #3 in the above Dow 30 in profits. Thus, the top three US profit generators in the first half of the past five years (first half 2006-2010) were all Oil Companies!
I think it is helpful to compare the above top 13 profit list with what existed in the late 1990s Go-Go years of the US economy. Here are the rankings in after-tax total profit of US companies for the five years from 1995 to 1999, with the information taken from Fortune Magazine profit rankings.
... 1 GE.......................$42 bil
... 2 Exxon Mobil........$37 bil
... 3 Altria Group........$31 bil
... 4 IBM.....................$30 bil
... 5 Intel....................$29 bil
... 6 Ford....................$29 bil*
... 7 General Motors....$28 bil
... 8 Merck..................$23 bil
... 9 Citigroup..............$23 bil
...10 DuPont...............$22 bil
...11 Bank of America..$21 bil
...12 AT&T..................$21 bil
...13 Microsoft............$19 bil
* Excluding $16 bil gain from spinning off The Associates
In comparing the two lists, here are some key conclusions:
*****There was only one Big Oil company in the late 1990s decade (Exxon Mobil at #2) vs. three now, and with all three at the very top of the list. I think having so much Big Oil dominance now is extremely destructive to the US economy. Big Oil tax loopholes should be closed and Big Oil needs to be broken up.
*****There were three high tech companies in the late 1990s (#4 IBM, #5 Intel, and #13 Microsoft) and now only one (#5 Microsoft). To be a worldwide economic powerhouse, I think the US needs to have an even much more robust high tech industry. I think it would be wise to give highly-charged US tax incentives (investment tax credits, jobs tax credits, R&D tax credits) to this critical industry. And the US jobs created here are quality higher paying jobs.
*****There were six manufacturers in the late 1990s (#1 GE, #4 IBM, #5 Intel, #6 Ford, #7 General Motors, and #10 DuPont) and even a couple more that do some manufacturing vs. only one now (a much lower #7 GE) and a couple others that do some manufacturing. Clearly, the US government has to prop up its entire critical manufacturing industry with highly robust wise tax incentives like the investment tax credit, jobs tax credit and R&D tax credit. A very robust, world-class US manufacturing sector, with a particular focus on green energy, is needed for the US to be an economic powerhouse on the world scene.
*****The late 1990s list has total profits much closer together than that in the current list. It is not good for the US economy to have one company dominate a sector like Walmart, Microsoft and Exxon Mobil do. For competitive reasons, it is much better for the US economy to have profitability of the top companies to be much closer together than they are now. I wouldn't give any tax incentives to the dominant companies in an industry. Instead, I would give the tax incentives to all the other companies in a critical industry, with particular emphasis on the smaller companies and on domestic companies of all sizes.
Anyway, to substantially increase competition, I think the entire country would benefit dramatically if all of the above 11 giant pseudo-monopoly US Corps on the current top profit list (i.e. Dow top ten plus ConocoPhillips) were broken up into parts. And then due to their just incredible dominance, I would consider breaking up Exxon Mobil into five parts and Chevron into three parts. I would consider breaking up the remaining 9 companies into two parts each.
In addition, to significantly increase competition, I would also break up some of the Big Health Insurance industry. Because of their size and pseudo-monopoly status in setting prices, I would consider breaking up United Health Group into three parts and Wellpoint into two parts.
When you think about it, the only option US citizens have of turning around the financial devastation caused by Big Corp lobbyists is to vote smartly. I encourage everyone to very thoroughly research all of the candidates running in the November 2010 elections. And for the candidates who have supported Big Multinational Corps, Big Oil, Big Financial, Big Health Insurance, Big Pharma and/or Big Hospital, we should make sure that these candidates do not get elected or re-elected.
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