Guess Which Company Paid $0 in Taxes (on $14.2 Billion in Profits)? Hint: Its CEO Works for Obama.
Half of all Americans don’t pay federal taxes on their income. And neither, apparently, does General Electric, the multi-national company that reaped $14.2 billion in profits last year. Though G.E. is the largest corporation in the U.S., it did not have to pay a dime in U.S. taxes, according to the New York Times. In fact, the company claimed $3.2 billion in tax benefits.
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.
According to the Times, “one of the most striking advantages of General Electric is its ability to lobby for, win and take advantage of tax breaks.”
These tax breaks are incredibly important to G.E.-so important that G.E.’s head tax man got down on his knees and begged Rep. Charles Rangel to let a particularly lucrative one extend past its expiration date in 2008:
The head of its tax team, Mr. Samuels, met with Representative Charles B. Rangel, then chairman of the Ways and Means Committee, which would decide the fate of the tax break. As he sat with the committee’s staff members outside Mr. Rangel’s office, Mr. Samuels dropped to his knee and pretended to beg for the provision to be extended — a flourish made in jest, he said through a spokeswoman.
In an interesting sub-section of the article, the Times claims that G.E.’s tax strategy flies in the face of Ronald Reagan’s legacy:
In the mid-1980s, President Ronald Reagan overhauled the tax system after learning that G.E. — a company for which he had once worked as a commercial pitchman — was among dozens of corporations that had used accounting gamesmanship to avoid paying any taxes.
“I didn’t realize things had gotten that far out of line,” Mr. Reagan told the Treasury secretary, Donald T. Regan, according to Mr. Regan’s 1988 memoir. The president supported a change that closed loopholes and required G.E. to pay a far higher effective rate, up to 32.5 percent.
That pendulum began to swing back in the late 1990s. G.E. and other financial services firms won a change in tax law that would allow multinationals to avoid taxes on some kinds of banking and insurance income. The change meant that if G.E. financed the sale of a jet engine or generator in Ireland, for example, the company would no longer have to pay American tax on the interest income as long as the profits remained offshore.
President Obama recently tapped G.E. CEO Jeffrey Immelt as his liaison to the business world. Immelt also serves as the chair of the President’ Council on Jobs and Competitiveness. The story is that Immelt and Obama may discuss reforming the corporate tax code-not that Immelt has any incentive to!
Great post Jack!
Tax laws (and regulation) should be simple. Complexity (legalsleaze) is used for just this purpose. A single page should more than suffice, instead we have pages and pages.
The Obama coalition of a few big bank and Wall Street CEO’s and big union bosses makes for quite a destructive force; more destructive than anything that has come before it. Makes me laugh every time I think about how the left tried so hard to brand Bush/Cheney with a similar big oil connection. The connection here is startling, obvious, and quite lucrative for all involved. Meanwhile American individuals and businesses continue to get screwed. Those lefties sure know how to pick ’em:
Sparkle fizzles out in the end. The lights come on and we are left with a community organizer with questionable aliances and methods.
2012 can’t come too soon. Those who want real reform must apply great pressure on all old and newly elected representatives nonstop! We’re in a battle for our lives and our livlihoods.
Here’s more on GE and it’s relationship with this administration:
http://www.powerlineblog.com/archives/2011/03/028698.php
Between this, the Libya war, keeping open Gitmo and Obama’s support for nuclear power Libby has to be having a total meltdown.
If we charged them taxes, wouldn’t they just pass them along to us anyway?
Corporations shouldn’t have to pay taxes, according to what I read in this blog.
Observer, yes everything that is an expense is translated into a price adjustment right along with the need for a profit margin. Every business big and small works that way, not just corporations. If no business of any sort paid any taxes the government would just take it elsewhere until they achieved the revenue stream necessary to match their spending…well, in theory anyway.
The big question is which pocket do we wish to remove taxes from so that it will have the least impact on our collective prosperity? Should it be a progressive income tax, a consumption tax, a flat tax, etc? Should taxes be taken off the top where jobs are created and products developed or should taxes be taken off the bottom where wages are paid and consumers spend? Does it really matter or is net effect about the same? Your thoughts?
PS The one source of taxes nobody wants is one that takes 44,000 pages of definitions, has over 18,000 exemptions and exceptions, taxes a bit here and bit a there and NOBODY, not even the IRS is likely to give you the same answer twice to your question, yet that is the system we have…go figure?
This aricle about GE not paying any taxes is the pefect example of why this country should go to a flat tax. On corporations a flat tax of something less than 10% on GROSS sales, NOT on profit. On individuals a 3% tax on total income would work. It would make for a much more honest society. One of the biggest lies today is taxes because no one wants to pay. The richest and the coporations use tax shelters, etc., ect. to avoid paying taxes. As one accountant I know said there are many other uses of time for CPAS that would be more beneficial for all. The tax code is set up to pick winners and losers. The fact that GE gets tax credit refunds is a good example of using and abusing the system. The flat tax is also a more fair system than the fair tax which could put anything new in jeporady. Why buy a new house when you don’t have to pay taxes on a used one? Why buy a new car when you don’t have to pay taxes on a used one?
I like the flat tax and I also like the consumption tax. Either way would work for me.
I agree! Heard an “expert” present a very rational argument for the flat tax set at 12% would be more than enough to fund our govt, and it would be paid by everyone, businesses included.
He pointed out the fair tax is subjective by individuals to determine.
Peggy this is something we should discuss. Not many people know enough about the tax options to make an informed decision. I wish the Tea Party, BCRP and or the CRA would develop some sort of presentation to inform people of their choices and then lets put it to a vote. I can think of nothing more worthy for the time and money of these political groups than tax reform first and everything else second.
Okay, you gave me an idea and here’s the deal I’m going to work up a 20-25 minute presentation on our income tax history to show people how we got this often confusing, messy IRS monster and then I’ll cite how a simple consumption tax works with pros and cons and maybe toss in the flat tax for good measure, we’ll see on the latter. Don’t want to take on too much. I’ll try it out on the Tea Party and see how it goes over, then maybe our local BCRP would like to take on their version for an outreach and perhaps our CRA too?
If we set a tax of approximately 9% on the purchae of stocks, bonds, and commodities, etc. We sould raie the ame amount of money as income, Estate, and Capital Gain taxes COMBINED.
The tax would be voluntary.
The tax would be fair. Everybody has the OPTION of paying the exact same amount of tax.
The tax–by eliminating capital gains–would stimulate the bejeesus out of the market, putting more Americans to work–who could buy more stocks–who could contribute more revenue–which could be paid againt the deficit, eliminating it.