[quote=livinincali][quote=CA renter]
In states with high income tax it might make sense to offer corporate tax breaks. For example Facebook made about 1.5 billion last year and CA corporate tax is 8.84% so CA got $126 million in corporate tax from Facebook barring some kind of tax break that I don’t want to investigate. Facebook spent 6.4 billion to generate that 1.4 billion in profits and let’s just guess that at least 75% of that expense is in labor costs. So 4.8 billion but let’s just round to $5 billion in labor to make the math easier. Income tax in CA is 9% and for many people at Facebook it’s higher than that. So let’s just assume a blended rate of 8% on that $5 billion in labor. So CA collected 5.0*0.08 = $400 million in income tax from the Facebook employees. So CA get’s 3+ times the amount of revenue from Facebook employee incomes vs corporate tax rates. So keeping those jobs is far more of a revenue benefit than losing them because of a couple of percentage points in corporate tax breaks.[/quote]
Agree with the point you are trying to make — increasing business activity is the best way to increase tax revenues. However, the math you used to calculate CA’s tax revenues from FB has seriously flawed assumptions. 1 – Not all FB employees are California tax payers, 2 – The computation used to derive GAAP income (which you probably pulled from a 10K filing), is significantly different than the calculation of Taxable income. FB likely reported a significantly lower tax (vs. GAAP) income due to employee exercises of in-the-money stock options (Per the 10K, these “excess” tax deductions resulted in a reduction of cash tax liability greater than $600M in 2013), 3- California only gets to tax income attributable to California sources — which is very likely significantly less than world wide income (apportionment rules).
Proof of this is in the financial statements — FB’s US state CASH income tax liability for all of 2013 was only $69M. You can assume less than 50% of this was paid to California due to apportionment rules and the Company’s global presence.
My best guess is that FB pay little or no Corporate income tax in California due to the facts above and the availability of R&D tax credits.
