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.
The Times says that changes in tax laws have reduced the "corporate share of the nation's tax receipts" from 30 percent in the mid-1950s -- when times were pretty good -- to 6.6 percent two years ago. Sounds to me like we need a return to the tax policies of the 1950s if we want the economic boomtimes that occurred then.
Even so, corporate heads cry about today's high -- even "job-killing" -- tax rates. Shall we pity them?
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.
What makes GE so effective at avoiding taxes in America? Lobbyists!
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.
Quick question: If GE is spending so much of its tax-deductible research and development budget on building wind turbines to harness and use wind energy, where is all the wind energy going? Why isn't the price of oil and gas dropping as wind energy becomes competitive? Put simply, where's the benefit to you and me for all the tax write-offs for GE's wind?
I don't hear an answer.
Did you know that GE has a "tax department," and that its 975 employees are paid to find ways to avoid paying taxes?
At a tax symposium in 2007, a G.E. tax official said the department’s “mission statement” consisted of 19 rules and urged employees to divide their time evenly between ensuring compliance with the law and “looking to exploit opportunities to reduce tax.”
This is exactly like electing a governor and paying him not to govern for eight years.
So, what do these tax experts at GE do?
Transforming the most creative strategies of the tax team into law is another extensive operation. G.E. spends heavily on lobbying: more than $200 million over the last decade, according to the Center for Responsive Politics. Records filed with election officials show a significant portion of that money was devoted to tax legislation. G.E. has even turned setbacks into successes with Congressional help. After the World Trade Organization forced the United States to halt $5 billion a year in export subsidies to G.E. and other manufacturers, the company’s lawyers and lobbyists became deeply involved in rewriting a portion of the corporate tax code, according to news reports after the 2002 decision and a Congressional staff member.
By the time the measure — the American Jobs Creation Act — was signed into law by President George W. Bush in 2004, it contained more than $13 billion a year in tax breaks for corporations, many very beneficial to G.E. One provision allowed companies to defer taxes on overseas profits from leasing planes to airlines. It was so generous — and so tailored to G.E. and a handful of other companies — that staff members on the House Ways and Means Committee publicly complained that G.E. would reap “an overwhelming percentage” of the estimated $100 million in annual tax savings.
Our government at work.
Here's a question that I'd love to see our state media investigate: How many corporations registered to do business in South Carolina pay no corporate income tax whatsoever?
If you're like me and would like to know how many of our mammoth corporate neighbors contribute nothing to the general treasury of our state in exchange for OUR investment in good roads, schools, public health and safety, clean water, etc, cut and paste this post into an email, sign your name at bottom and send it to your local newspaper and television news editors.
You and I have no political power individually, and I'm sure that asking Governor Nikki Haley's Department of Revenue for that data would leave us whistling 'til Judgment Day. But the media have a bit more power and could, if nothing else, file some Freedom of Information Act requests. Is anyone from the Associated Press listening? I smell a Pulitzer...