April 3, 2011

Sunday School 4/3/11: GE pays no federal tax (but I do)

By now pretty much everyone has heard that corporate giant GE paid no federal taxes on their $5.1 billion in US profits (about 36% of their $14.2B world-wide profit), and I think even the most jaded of us had to be at least a little shocked when the story appeared in the NY Times last month. 

How did GE do it?  Well, based on the article, it's a combination of aggressive lobbying; brilliant hiring (of former IRS and Treasury officials); expanding their mission-driven tax department to almost a thousand employees; shifting the company's focus from primarily manufacturing to a manufacturing/financial services combo; moving a lot of business to other countries; and of course, helping to write the rules that they live by. 

And clearly they're good at it, having realized a net tax benefit of $4.1B on American profits of $26B in the past five years.  They're also good at spinning their positions. Here's John Samuels, head of GE's tax department, speaking about our largest corporation's overseas success:
“We believe that winning in markets outside the United States increases U.S. exports and jobs,” Mr. Samuels said through a spokeswoman. “If U.S. companies aren’t competitive outside of their home market, it will mean fewer, not more, jobs in the United States, as the business will go to a non-U.S. competitor.”
In the past several years, GE has increased its offshore profits by some $77 billion, so that would seem like they're pretty competitive in markets outside the US. But at the same time, they've cut about a fifth of its domestic workforce. So, that means they're not competitive? Or do they just need to pay less taxes?  I'm so confused.

What's even more dismaying than the fact that GE's effective tax rate is less than zero is that, at the same time companies are enjoying this kind of tax management success, leaders in Washington are very focused on reducing the corporate tax burden even more. Here's what my Representative, Ann Marie Buerkle (R-Onondaga) had to say in a recent interview:
But we also need to reduce corporate taxes in this country. We are second (to Japan) in our corporate rate ... We’ve got to do things that are going to entice businesses to stay here, and work with them, and create certainty and not regulate them to death and not tax them to death.
And never mind the fact that businesses are sitting on oodles of cash, just waiting for the "stability" that will come from more business-friendly legislation, including tax code revisions.  Rep. Buerkle, again:

Right now we know businesses are sitting on billions of dollars because they are so uncertain as to what’s coming down the pike, they don’t spend it. They don’t expand, they don’t hire.
So, to recap today's lesson: huge businesses are paying very little federal tax, moving jobs and profits offshore, sitting on boatloads of cash, and feeling uncertain. 

And then there's me and millions of Americans like me: paying our taxes, sitting on our small nest eggs, hoping we'll be able to keep our American jobs, praying we can retire before we're 80 (or 90), and that there'll be some return on the money we've paid into Social Security, our pensions, our 401(k)s, and our IRAs.

Well, here's a thought, Washington: before you "create any more certainty" and stop "taxing them to death", what commitments are you going to get from companies like GE that they're actually going to put Americans to work, and help get us our of our uncertainty?

No comments:

Post a Comment