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.
While I think you raise a valid frustration with regards to GE, I would recommend a little bit more homework around why GE was able to claim a tax benefit. Much of this was related to NBC, as well as GE’s reporting of GE Capital outside the balance sheet; in other words, while I agree that GE isn’t paying their ‘share’, I disagree that either:
1) they made $14.2B in profit (simply look at their annual filing, that number is factually incorrect),
2) they didn’t pay any taxes (they paid a lot of other taxes, but they also took a very real capital loss on certain operations, and thank goodness that we’re a country that doesn’t tax companies that lose money).
In summary, while GE’s balance sheet is factually misleading, so is this article, in that both don’t clearly disclose the reason behind the numbers that appear to be outrageously good for GE.
Tl;dr page 101, Note 14 of GE’s 2010 annual report pdf, available on their website.
The country is in massive debt and deficit and a company the size of GE pays no Federal taxes. This reminds me of the loophole that Oil companies still enjoy to the tune of Billions. This is one of many things that will need to end for the country to get back on a solid financial footing.
If the Supreme Court says that big corporations have rights to political speech under the Constitution, they certainly should pay taxes like the rest of us peasants.
With such a low tax rate, GE must be the most hiring, job-creating business in the whole country!
And if they’re not, there’s something not only very wrong with the tax code, but with the Republican/Tea Party philosophy.
Another way that corporate america is screwing the rest of america; and the U.S. congress is saying to corporate america “yes, can we be screwed some more? Let’s see: corporate america doesn’t want environmental laws; it doesn’t want public servants to get retirement pay; it doesn’t want murals of workers to hang in labor departments, and now, it doesn’t pay any taxes. How many things and how many ways does corporate america want to destroy america?
I am having problems finding the correct namesz or even the reference to where I heard it today. I believe I heard some of if not ALL of GE’s tax lawyers were in congress, IRS and treasury positions. Actually WRITING the laws they are now paid to exploit?!?!?! WTF? Can anyone locate the names of these lawyers?
big corporate america sends our jobs overseas -pay nothing to have their products shipped back to america -if they don’t want to pay thier share of taxes than we need to ship those people overseas and let them live there. the rich are always complaining about different problems to help the poor but they should ‘n even have a voice they don’t pay for these programs the people of america who pay taxes do. so please corporate america shut up .you all belong in jail!!!!!
big corporate america sends our jobs overseas -pay nothing to have their products shipped back to america -if they don’t want to pay thier share of taxes than we need to ship those people overseas and let them live there. the rich are always complaining about different programs to help the poor but they should ‘n even have a voice they don’t pay for these programs the people of america who pay taxes do. so please corporate america shut up .you all belong in jail!!!!! what if people of america didn’t pay their taxes what would happen to us ? right we would go to jail
WE are heading for a WALLSTREET crash again —–don’t ask for us to bail you out again . it WON’T happen again. this time it will be MAIN STREET we bail out. not you FOOLS.
It’s not a loophole that allows these companies to do what they do. They are enticed away from the US because we have in essence told them we don’t want you here with our tax rate. If you are currently a business owner in the US making substantial profits and you aren’t a multinational then you need your head examined. So I’m forced to leave my profits overseas, no problem at all there I will build factories and hire employees there. Until the powers that be in Congress start telling big business we want you here in the US then Ireland and Switzerland will be the place to be.
10 posts and not one says boycott G.E.
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