Tax Me Like G.E.!
G.E. made $5.1 billion in the U.S. -- tax-free, writes David Kocieniewski in The New York Times, via MSNBC:
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.
..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.'s giant tax department, led by a bespectacled, bow-tied former Treasury official named John Samuels, is often referred to as the world's best tax law firm. Indeed, the company's slogan "Imagination at Work" fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
While General Electric is one of the most skilled at reducing its tax burden, many other companies have become better at this as well. Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.
Our tax system is a serious mess and needs fixing. I'm a small governmenter -- for lower taxes and better business environments -- but if the rest of us are paying for big government, big companies shouldn't be able to game the system like this.
And so what do you think a corporation should pay?
Who do you think really pays what a corporation is taxed?
What a corporate tax really does is divert money, received from the corporation's customers, to the government. It's a cost of doing business. The corporation is a legal fiction to coordinate activity, just like a city, county or state government.
But once the dollars get to the government, just what mechanism sees that they are used correctly?
Profits go to stockholders and to programs to improve the corporation's market position. Stockholders are people, just like you...
Don't you say that you know better than government what to do with your money?
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There's an artificial bias here that's big as a house. It takes the form of the general statement, "I'm an employee, and therefore superior."
Wrong.
Though the actions of corporations require monitoring just like the general public - through laws and law enforcement, taxation is not automatically deserved by any entity.
Radwaste at March 25, 2011 4:55 AM
Corporations don't pay taxes. They collect taxes, from their customers. We pay the taxes, and the costs for the corporation to collect these taxes.
You couldn't design a more inefficient system if yu tried, but I'm sure Congress is working on it for us.
MarkD at March 25, 2011 5:53 AM
Simple solution:
Don't tax corporations.
Simplify the tax code. If it cant fit in a 1" three-ring binder, it's too complex.
Cut most federal "aid" - to companies, individuals, states, and countries.
Watch GDP growth.
brian at March 25, 2011 6:34 AM
If it cant fit in a 1" three-ring binder, it's too complex.
Yes, this. If a super genius like Timmy Gietner can't figure out what he's supposed to pay in taxes, or what income is actually taxable, then it's too difficult.
I R A Darth Aggie at March 25, 2011 6:46 AM
"Corporations don't pay taxes. They collect taxes, from their customers."
Mark, truer words were never spoken. No corporation, I repeat, no corporation has ever and never will pay taxes. Corporate taxes are quite simply a consumer tax, spin doctored by our liberal government to give the appearance of sticking it to those evil, greedy corporations. Unfortunately the sheeple of this once great country are just stupid enough to buy into it.
Using all legal means to enrich their shareholders and their market share is one of their responsibilities as a publicly traded business. This may come as a shock to a lot of people but businesses are in business to make money. Oh the horror!
“Simple solution: Don't tax corporations.”
Abso-fucking-lutely correct Brian…..
Ed at March 25, 2011 7:05 AM
This is silly. GE (like many Dow 50 corps) is audited every year. And, despite what the movies tell you, moving taxable income "offshore" isn't some kind of tricky maneuver. Doing so requires that you actually have an honest to gosh business in a foreign jurisdiction in which taxes are paid. With a global operation like GE I'd be shocked if they didn't have any foreign subs.
Snakeman99 at March 25, 2011 7:36 AM
@Brian: "Simplify the tax code. If it cant fit in a 1" three-ring binder, it's too complex."
Nice idea, if you're assuming that the whole purpose of taxes is to raise money for government operations. I'm pretty sure that's not true; if it were, the whole argument on either side of the aisle would be over where to set tax rates to allow for maximum GDP growth. Seeing the tax code as a system designed to bribe some, punish others, and bamboozle the rest makes the whole convoluted system a lot easier to understand.
Sorry for the rant, but even my accountant would prefer some kind of flat tax.
Old RPM Daddy at March 25, 2011 7:47 AM
1) corporations pay no taxes. We do in teh cost of buying whatever good/service they provide. Tax them more, we pay more. Whether they should get tax money given them is another matter, and I say no. Not ever. Sink or swim.
2)Shhh about GE until I get our 401k from them rolled over!
momof4 at March 25, 2011 10:12 AM
Rad's right in principle: taxing corporations is silly, because they just pass the cost along to customers and investors. However, Amy's moral point is that as long as corporations are taxed, they should all be taxed under the same rules. Otherwise, it's the government picking winners. I have no doubt that the IRS is allowing GE to slide on some things that, say, Koch Industries (or maybe even Pratt & Whitney) probably has to have in perfect order.
Here's another example: Whirlpool will, from what I've read, pay no taxes on billions in sales for 2010. How? Simple: they used "Energy Star" credits for making "green" (read: poor performing) appliances to wipe out their tax liability. Not surprisingly, Whirlpool spends millions lobbying for the Energy Star program, the costs of which have put most of their large-appliance competitors out of business. Had GM/Ford/Chrysler though of this strategy back in the '70s, we never would have heard of Toyota or Honda.
Cousin Dave at March 25, 2011 11:35 AM
Dave - You and ORD hit it on the head. The tax code, such as it is, is intended to pick winners and losers and to direct social and economic activity.
Taxes are used as a bludgeon to influence social policy - something the government is otherwise explicitly forbidden from doing.
GM/Ford/Chrysler did however come up with a brilliant thing - EDI. It was the best plan ever to pass the costs of doing business off on their vendors.
brian at March 25, 2011 12:46 PM
It's true that all tax costs levied against corporations are ultimately paid by consumers and/or shareholders. But the ability of well-connected corporations (usually but not always the larger ones) creates a competitive disadvantage for those not so well-connected, and hence harms the resource allocation efficiency of the overall economy. And it also creates very lucrative employment opportunities for members of the political class. The next time you hear a politician going on about the nobility of "public service", bear in mind that his personal career trajectory probably will include a couple of decades as a lobbyist or as a lawyer in a firm with a regulatory practice.
david foster at March 26, 2011 5:23 AM
If it cant fit in a 1" three-ring binder, it's too complex.
If it has more words than the constitution, it's too complex.
-jcr
John C. Randolph at March 26, 2011 9:45 AM
Baby steps, John. If we can get from the current 20,000 or so pages down to a hundred or so, that's massive progress.
brian at March 26, 2011 9:48 AM
I bought GE stock before Obama was elected, because it was cheap. I'm glad I did, it has really taken off. When Obama is voted out I will dump it.
ken at March 26, 2011 10:07 AM
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