Wednesday, March 30, 2011

General Electric Paid No Taxes! –Rant time again…

Well, General Electric, the nation’s largest corporation, had a very good year in 2010. They reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States. Which is surprising since most of it’s business is done in America, with American Companies or for the American Government….

O.K., we’ll let that go for now. Let’s look at the taxes, you know, that stuff we all have to file for by the 15th of next month? Just how much did our funds starved government get in taxes on that $5.1 billion? None. Not one dime. In fact, G.E. claimed a tax benefit of $3.2 billion.

That unbelievable piece of news may be hard to understand, but apparently 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 massive tax department, which is led by a 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 every tax-writing committee in Congress.

But, General Electric is not alone. They are one of the most skilled at reducing their tax burden, but many other companies have become better at this too. The top corporate tax rate in the United States is 35 percent, one of the highest in the world, but companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.

In a regulatory filing, 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 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. To accomplish this, he has handed the hen-house keys over to the fox. 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. Yeah, Mr. President, he sure does. But what he does not understand is the duty of Americans to pay taxes to support the government, not rob it blind at every turn. 

One of the most striking advantages of General Electric, led by Mr. Immelt, 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 financial crisis led G.E. to post a loss in the United States in 2009. But don’t fret, in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from our I.R.S. of $4.1 billion. What this amounts to is corporate welfare, allowing G.E. to avoid taxes on profitable overseas lending and also amass tax credits and write-offs that can be used to reduce taxes on billions of dollars of profit from domestic manufacturing. This not only shortchanges the Treasury, but also harms the economy by discouraging investment and hiring in the United States.

“In a rational system, a corporation’s tax department would be there to make sure a company complied with the law,” said Len Burman, a former Treasury official who now is a scholar at the nonpartisan Tax Policy Center. “But in our system, there are corporations that view their tax departments as a profit center, and the effects on public policy can be negative.” -Wow, now there is an understatement.

Let me try to put this into a little more perspective. If you accept they $5.1 billion figure as the true profits from G.E. for this last year, at the 35% tax rate they would have contributed one billion seven hundred eight five million dollars ($1,785,000,000.00) to the Treasury. Let me make this a little clearer still. The reason they get away with not paying one and three quarter billion dollars in taxes is because they have many of our elected representatives in their pocket and have gotten tax laws passed that allow them to avoid taxes by keeping jobs and profits out of America! -How is that for a good loyal American Company?

This is why we hate politicians and do not trust governments or large businesses. It is way past time to change all of this. I hope some sharp young upcoming politician will take this on as a crusade. They will have my vote if they do….

Oh, and one more piece of advice…. The Flat Tax --Now.

Live Long and Prosper....

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