G.E.’s Strategies Let It Avoid Taxes Altogether

[Barry]

[Here's the kind of story that can make a progressive's blood boil! It's time to reform corporate tax policy to reduce rates and eliminate loopholes. - Barry]


But Nobody Pays That
G.E.’s Strategies Let It Avoid Taxes Altogether
https://www.nytimes.com/2011/03/25/b...er=rss&emc=rss

By DAVID KOCIENIEWSKI
Published: March 24, 2011

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.

Yet many companies say the current level is so high it hobbles them in competing with foreign rivals. Even as the government faces a mounting budget deficit, the talk in Washington is about lower rates. President Obama has said he is considering an overhaul of the corporate tax system, with an eye to lowering the top rate, ending some tax subsidies and loopholes and generating the same amount of revenue. He has designated G.E.’s chief executive, Jeffrey R. Immelt, as his liaison to the business community and as the chairman of the President’s Council on Jobs and Competitiveness, and it is expected to discuss corporate taxes.

“He understands what it takes for America to compete in the global economy,” Mr. Obama said of Mr. Immelt, on his appointment in January, after touring a G.E. factory in upstate New York that makes turbines and generators for sale around the world.

A review of company filings and Congressional records shows that one of the most striking advantages of General Electric is its ability to lobby for, win and take advantage of tax breaks.

Over the last decade, G.E. has spent tens of millions of dollars to push for changes in tax law, from more generous depreciation schedules on jet engines to “green energy” credits for its wind turbines. But the most lucrative of these measures allows G.E. to operate a vast leasing and lending business abroad with profits that face little foreign taxes and no American taxes as long as the money remains overseas.

Company officials say that these measures are necessary for G.E. to compete against global rivals and that they are acting as responsible citizens. “G.E. is committed to acting with integrity in relation to our tax obligations,” said Anne Eisele, a spokeswoman. “We are committed to complying with tax rules and paying all legally obliged taxes. At the same time, we have a responsibility to our shareholders to legally minimize our costs.”

The assortment of tax breaks G.E. has won in Washington has provided a significant short-term gain for the company’s executives and shareholders. While the financial crisis led G.E. to post a loss in the United States in 2009, regulatory filings show that in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from the I.R.S. of $4.1 billion.

But critics say the use of so many shelters amounts to corporate welfare, allowing G.E. not just to avoid taxes on profitable overseas lending but also to amass tax credits and write-offs that can be used to reduce taxes on billions of dollars of profit from domestic manufacturing. They say that the assertive tax avoidance of multinationals like G.E. not only shortchanges the Treasury, but also harms the economy by discouraging investment and hiring in the United States.

Continues at https://www.nytimes.com/2011/03/25/b...er=rss&emc=rss

[theindependenteye]

I guess the No-Taxes-on-the-Rich argument would be something like:

* G.E. knows better how to spend that money than the Gov't does.
* The status quo is necessary for them to exist in the global marketplace — even now their executives are living on food stamps.
* G.E. is a job-creator, and as soon as they can make a ton more money, they might create some jobs.
* G.E. is, after all, just us, if we're their shareholders, and their shareholders are mostly just average people.
* G.E. should have no special responsibility for supporting the national infrastructure, educational systems, police, fire and defense forces of the US, as they're doing us a favor just by being here.
* G.E. is actually legally an individual person who happens to have a legal dept. the size of Michigan, and so it's his/her/its right to fudge on its taxes as much as the rest of us would like to do.

Those propositions must all be true, as there are vast quantities of think-tank-sponsored conservatives with much greater subsidized time to say it more eloquently than I, so we know it's from the heart, rather than rants from people like working stiffs and radlcals who are just in it for the money.

Idea of lowering corporate taxes while closing loopholes: well, why would corporations want that if it actually meant no added profits? "Closing loopholes" is like fighting gophers: everyone has his own special tactic, but in the long run, the little fuckers come back.

Cheers,
Conrad