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Politics
How Much Were Your Taxes? General Electric Paid $0
By Hans Bader
“The top corporate tax rate in the United States is 35 percent, one of the highest in the world,” but General Electric, whose CEO was recently tapped to lead President Obama’s Council on Jobs and Competitiveness, pays no taxes at all, reported the New York Times.
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.
This negative tax rate is the product of lobbying aimed mostly at liberal lawmakers. “G.E. has spent tens of millions of dollars to push for changes in tax law,” such as “‘green energy’ credits for its wind turbines.” “Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment.”
In his State of the Union address, President Obama called for even more spending on forms of energy that benefit GE. Government energy spending and tax credits disproportionately benefit GE, which recently spent $65.7 million on lobbying to get government subsidies.
As the Washington Post noted earlier, GE, the “world’s largest industrial company,” received massive taxpayer bailouts on special, preferential terms not available to other companies; it became the “biggest beneficiary” of a bailout program intended “for banks,” even though it “did not initially qualify for the program,” after the government “loosened the eligibility requirements” in response to “behind-the-scenes appeals from GE.”
The “clean energy” spending Obama wants includes “initiatives aimed at building the renewable-energy sector — which received billions of dollars in stimulus funding.”
Obama’s call for more such spending is a bad omen, because such programs in the stimulus package wiped out thousands of American jobs. The stimulus package used “green-jobs” subsidies to send American jobs overseas. Seventy-nine percent of those subsidies went to foreign firms, such as an Australian firm that imported Japanese wind turbines, effectively outsourcing American jobs. Moreover, some “green jobs” funding pushed by corporate lobbyists actually harms the environment, like ethanol subsidies and mandates.
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Comments
G.E. is not the villain here.
G.E. does not force anyone to give up their property or liberty in the name of the "common good." They are a corporation whose sole purpose is to make money for it's stockholders.
The government is the problem. They take wealth and destroy it. They produce nothing. G.E. creates wealth, spends money, and increases the wealth of everyone they do business with.
When are you kids going to complete your education , and see the world as it is? Limiting government spending and taxes , and thereby decreasing the size and power of government is the best solution to any country's economic problems.
G.E., You, and Me should not be paying so much for so little in the form of taxes. We might as well lend money to our sorry brother-in-law, cause once they take it, no one sees it again.
Why do Corporations
pay taxes anyway?
And is this why they are pushing to be recognized as individuals?
I do cringe and get a little angry everytime some corporation pushes the blame onto "shareholders" or "stakeholders" as I am either or both in several companies myself.
163000 people
in the USA work for GE.
How many of them pay Taxes?
I'm not trying to be a corporate tool, but GE isn't a pimple on Big Oils rear end.
GE responds
Anne from GE here: I encourage you to read our response to the New York Times story referenced in post above here: http://www.gereports.com/setting-the-record-straight-ge-and-taxes / A few highlights:
• GE pays what it owes and rigorously complies with all tax laws. At the same time, we have a responsibility to our shareholders to reduce our tax costs as the law allows. This is not unlike how individual taxpayers avail exemptions for which they qualify to legally reduce their tax burden.
• Significant losses at GE Capital (our financial services business) during the economic crisis reduced GE’s overall tax rate below historic levels the past few years. Those losses and the subsequent reduction in taxes owed is not a “tax avoidance” strategy. If you take out the unusual GE Capital losses during what most consider to be the worst economic downturn in the past 80 years (2008-2010), GE’s effective tax rate was 21% over the period.
• GE’s consolidated (or overall) effective tax rate prior to the financial crisis was in the teens to more than 20%.
• Over the past 10 years, GE has paid almost $23 billion of corporate income taxes to governments around the world, making it one of the highest payers of corporate income taxes. We paid over $14 billion of income taxes over the past 5 years alone. The past few years have been an anomaly driven by unprecedented GE Capital losses.
• The IRS thoroughly audits all GE tax filings. Part of the reason GE’s rates have been lowered in recent years, in fact, is because of settlements with the IRS following its review and audit of our filings, where the service determined GE had in fact overpaid for prior years.
• GE employs 133,000 hard-working Americans. We’ve announced creation of more than 6,300 new U.S. manufacturing jobs since 2009, at a time when many companies have slowed or ceased hiring. We exported $17 billion of U.S. made products last year and were the nation’s second-largest manufacturing exporter.
• GE’s three largest industrial businesses (Energy, Aviation, and Healthcare) grew U.S. jobs 31% over the past decade. During that time, GE has invested $50 billion in its U.S. plants and equipment. Excluding dispositions, GE US employment is up from 2001.
just remember this
"Over the past 10 years, GE has paid almost $23 billion of corporate income taxes " - corporate taxes are paid by INDIVIDUALS, you and me, the consumer. No corporation takes a hit on this. The tax bill is simply passed on to the consumer in higher prices. So, to be more accurate, $23 billion was built into the prices GE consumers paid over the past decade.
pay
They pay taxes for the same reason that other consumers do... because they use the resources and rely on the infrastructure that those taxes support.
the point being
It's not "they" who pay the taxes ...it's us...unless you happen to use no GE products/services whatsoever. They aren't absorbing the tax bill for us because they love us so much. They're just passing it on in prices.
Wrong!
Corporate taxes are paid on profits or taxable income. Reinvestments for goods and services to use for future production and wages are not taxed as corporate taxable income.
Companies that focus on growth and reinvestment pay less in taxes. Companies that hoard income as internal profits that are not distributed as wages or dividends pay corporate income taxes.
If these hoarded profits are later paid as dividends they are deducted from that year's corporate income.
These costs are not passed along to consumers. In fact, the corporate tax encourages corporation to put get their working capital... working :-)
you need to think this through a bit
"Corporate taxes are paid on profits or taxable income" - and where do profits come from? They come from selling goods and/or services for more than they cost. So, the higher the expenses, and tax is an expense, the more the selling price must be to generate a profit. Lower taxes = higher profits, which are usually re-invested, since most companies aim to grow and generate even more profits. If I'm selling widgets and making $1.25 on each widget and paying a 20% corporate income tax, I'm taking home a buck per widget. Suddenly the corporate income tax goes up to 35%. Am I going to keep prices the same and make 81¢ per widget? Not unless I want the shareholders coming after me with torches and pitchforks. But I now have to raise the price to in excess of $1.50 to still make a buck per widget. That's how it works. Higher taxes result in higher prices. Lower taxes encourage corporations to keep their capital working because they know they get a better return on the invested capital.
Do you own a business?
Talk to an accountant. You are completely off base.
Corporate income taxes are paid *after* wages, dividends, qualified business expenses and capital investment. If I make $1.25 in profit per widget and reinvest it, I get $1.25 to reinvest. The 20% tax kicks in after the reinvestment. If I retain the $1.25 in the corporation, I pay taxes. If I reinvest this money later in another tax year then I get my taxes "'back." If I choose to spend this money on non-deductible expense like a company trip or luxury item, then the taxes stay paid. There are nuances like if the corporate tax rate changes, but the basic principles still apply.
Corporate taxes only apply to income retained and not reinvested or spent on taxable items. The money is not taxed prior to reinvestment.....that is your mistake.
it would take far too long to explain this here
Taxable income is defined by US code as the term "gross income minus the deductions allowed" - the deductions are of course business expenses - reinvested income is someone an allowable deduction and sometimes not, depending on the expense, and even when it is allowable there are many regulations regarding maximum allowable deductions. It is not the simple-minded principle of retained vs. reinvested as you've been led to believe. The US tax code is far more complex than anything we can attack in this forum. And on another vein, so you're suggesting reinvesting every penny of gross profit? I don't think your shareholders will appreciate the P/E ratio that comes from that...
Smarter minds than mine
From the congressional budget office:
"The most common form of a general cut in business taxes is a reduction in the corporate tax rate. This approach, however, is not a particularly cost-effective method of stimulating business spending: Increasing the after-tax income of businesses typically does not create an incentive for them to spend more on labor or to produce more, because production depends on the ability to sell output. . . .
[B]ecause taxes on business income essentially lower the return that firms earn from capital investment, reducing such taxes can increase firms’ willingness to acquire more capital — that is, to invest. As a result, the principal influence of taxes on a firm’s decision about investing depends on the prospective profits from its new investments, not on current profits made from old investments. However, a substantial effect of reducing current corporate tax rates is to increase the returns from past investments rather than increase the attractiveness of new investments. . . .
Consequently, a general cut in business tax rates will tend to generate significantly less investment demand for each dollar of [lost] revenue than a cut that applies only to new investment. A cut in corporate rates is also less effective because it does not apply to businesses that are not subject to the corporate tax."
--------------------------------------------
The CBO is essentially making my point in a more sophisticated manner. Cutting taxes significantly discourages growth oriented investment.
Yes I know how complex the tax code is. This is why I have in-house bookkeeper and a tax accountant, and I only have 40 employees. I effectively spend the equivalent of one full time salary on tax compliance. Simplification is something I would be all for.
Raw materials for production are directly deductible. Equipment is limited by the 179 deduction limits, and then depreciation kicks in.
Our economy is drive by spending, not the retention of capital. The more liquid money that ends up in the economy, the faster we grow. Our current recovery is being hampered by the overly cautious behavior of many individuals frightened by the down turn.
Taxes also allow for policy through incentives for things like lower pollution, economic development in depressed areas, training and hiring of the chronically unemployed, etc.
I hate paying taxes, but they have their place. Money retained by corporations actually retards economic growth. It is turnover that keeps our economic engines going.
sales
Which is rather unethical.
But then no matter how you flip it around (either tax each stage of the process, or slap a massive sales tax on at the end) the final price for the consumer is the same.