31 March 2011

A tale of corporate taxes - and not paying taxes

Last week, the New York Times reported that General Electric
  • a) had worldwide profits of $14,200,000,000, and
  • b) paid NO corporate income tax in the United States.
AND...
  • c) "In fact, G.E. claimed a tax benefit of $3.2 billion." 
Excerpts from the article:
Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore...

G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.

Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.

Yet many companies say the current level is so high it hobbles them in competing with foreign rivals. Even as the government faces a mounting budget deficit, the talk in Washington is about lower rates...

The assortment of tax breaks G.E. has won in Washington has provided a significant short-term gain for the company’s executives and shareholders. While the financial crisis led G.E. to post a loss in the United States in 2009, regulatory filings show that in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from the I.R.S. of $4.1 billion.

But critics say the use of so many shelters amounts to corporate welfare, allowing G.E. not just to avoid taxes on profitable overseas lending but also to amass tax credits and write-offs that can be used to reduce taxes on billions of dollars of profit from domestic manufacturing. They say that the assertive tax avoidance of multinationals like G.E. not only shortchanges the Treasury, but also harms the economy by discouraging investment and hiring in the United States.
There's a lot more in the long NYT article; this is a complicated topic that can't be summarized in a brief blog post.

You have already heard this story if you watch Jon Stewart's Daily Show - or Rachel Maddow's program.  It was also carried by ABC News and Fox News, but NBC Evening News gave the story a pass - General Electric is their "parent."  They say it was an "editorial" decision based on many factors, but...
The satirical “Daily Show” on Monday noted that “Nightly News” had time on Friday to squeeze in a story about the Oxford English Dictionary adding such terms as “OMG” and “muffin top,” but didn’t bother with the GE story...

What’s more, Hart notes, NBC News has covered corporate tax-avoidance stories before — that is, when they didn’t involve GE. All three networks’ news divisions, according to Hart, have become reliable sources of publicity for their parents’ other corporate interests, doing news stories about upcoming sporting events or new TV shows carried on their own networks.

Addendum: Convoluted partial rebuttal here.

7 comments:

  1. This is obscene. We need to change laws so that companies cannot move monies (and jobs) offshore. Come to think of it, many very wealthy individuals pay little or no income tax because they shelter so much income. The inequities we are seeing today make a mockery of our claim to have a democratic government (note small "d").

    ReplyDelete
  2. Businesses shouldn't be taxed, anyway. They are not people. We should repeal the income tax amendment and fund the government by taxing imports and consumption.

    ReplyDelete
  3. Oh please - our Congress critters write the rules so that money invested for the benefit of their vested interests are tax deductible and then they're shocked (shocked) that corporations take advantage of that.

    I own a chunk of a Subchapter S corporation and guess what, it doesn't pay any taxes either.

    ReplyDelete
  4. Corporations don't pay taxes; they collect taxes for the government. A corporation faced with increased taxes can either raise prices (i.e. tax you) or eat the difference. Guess which one you would do?

    ReplyDelete
  5. Yes, I've heard that argument many times. And the extension of it, which is that people don't actually pay taxes, either. A person faced with increased taxes either increases his/her charges for labor or the price of what they produce, or else they decrease their spending in the marketplace, hurting other businesses and consumers. Therefore noone should pay any taxes to any government.

    Q.E.D.

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  6. My argument was actually that the tax system is intentionally byzantine to hide the fact that it transfers money from one set of citizens to another with the winners selected by politicians motivated by the desire to retain power.

    The income tax is highly progressive - 50% of the population pays nothing.

    The corporate tax is highly regressive - purchasers of baby formula, used cars, macaroni and cheese, and menthol cigarettes pay the corporation's tax as part of their purchase.

    Our system is crazy. Every citizen should cut a check to the government every year (no withholding) and get thrown in the hoosegow if they don't have the money. If that was the only money the government got every year, you wouldn't see many wasteful government programs.

    ReplyDelete
  7. Immelt is a great CEO, no doubt. But he's not great for modern American workers (http://increaseourtaxes.com/the-political-economy-of-general-electric/). A tax department is not a profit center.

    ReplyDelete

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