With the American economy continuing to sputter, lawmakers from both parties are not shying away from offering their ideas on how to boost hiring and address the issue consistently rated as the most important by the public.
Naturally, Republicans and conservative Democrats continue to call for more tax cuts as the answer to the country’s economic woes. A familiar refrain from many “pro-business” lawmakers and commentators is a proposal to slash the corporate tax rate in the United States. The GOP chairman of the House Ways and Means Committee suggested a ten percent cut in the top rate the federal government seeks from corporations, shrinking the rate to a globally-low 25 percent.
But this begs the question; what difference will a ten percent cut in America’s corporate tax rate make if the country’s top corporations are already paying zero federal taxes?
It’s a story the was first reported by the New York Times: General Electric, the nation’s largest corporation and whose CEO was recently named as a top economic advisor to President Obama, paid nary a cent in taxes to the U.S. government in 2010 despite raking in $14.2 billion in profits for what turned out to be an incredible year for the corporate giant.
Of GE’s massive returns in fiscal year 2010, $5.1 billion were reportedly attributed to the company’s operations in the United States. Again, no taxes were paid on these earnings. In fact, GE received over $3 billion in tax credits from the government.
General Electric is able to avoid writing checks to the IRS thanks to an “aggressive strategy” to move most of its profits offshore — avoiding US regulations entirely — and engaging in what the New York Times calls ” innovative accounting.” And it’s a trend shared by many of America’s largest and most profitable corporations.
General Electric, the nation’s largest corporation, had a very good year in 2010.
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.
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 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.
In a regulatory filing just a week before the Japanese disaster put a spotlight on the company’s nuclear reactor business, 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.
With GE and other companies easily keeping profits earned at home and abroad in tax-free offshore accounts, the belief that simply a lower corporate tax rate in the US would convince these companies to bring those profits back to America — and pay the taxes that would result — is hard to comprehend.
GE is not alone among huge American companies paying literally nothing in taxes. While Tax Day is greeted with dread by ordinary Americans, these corporations have nothing to worry about…
- Bank of America paid zero federal income taxes in 2010 and even received a tax break of a billion dollars — not to mention the tens of billions in bailout money they received from the government after the financial meltdown ion 2008. BofA says their non-existent tax bill was because of their poor fiscal performance last year, but critics point to numerous offshore tax havens where the banking giant sent their global profits.
- Exxon-Mobil, the world’s second-largest company, paid nothing in taxes to the United States government for fiscal year 2009. Despite record profits that led to $15 billion in taxes paid to other countries, Exxon-Mobil managed to avoid paying taxes on its operations in America thanks to creative offshore accounts that house most of its profits.