In today's NYT, in a surprising critique of the company that is the right arm of Obama's administration, there is finally an extensive focus piece on how GE, which made $14.2 billion in 2010 ($5.1 billion of which came from the US), paid, wait for it, zero taxes in 2010. NYT summarizes this odd quandary as follows: "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." In fact, it is far, far worse. As Zero Hedge disclosed, when we looked at GE's tax allergy six months ahead of the NYT, or as early as October 2010, we observed that "between 2002 and 2009, during which timeframe the firm made a generous
$164.4 billion in pretax net income (not to mention $639 billion in domestic revenue, just over half of total revenues of $1.2 trillion) it paid only $5 billion in domestic current taxes, or a 3.17% tax rate!" In other words, GE has now made over $700 billion in domestic revenues, and has paid $5 billion in the period 2002-2010. Truly tax evasion Imagination at Work.
Back in October, with Geoffrey Batt, we observed:
One of the more popular topics recently is the collapse in corporate
tax revenues, and the resultant push by the administration to ramp up
taxation at the corporate level. As Zero Hedge has been disclosing for
two months now, it all has to do with the now discredited concept of the
"wall of money", which is mostly accumulated offshore and is thus not
only available domestically, but is not taxed by the US. However, one
company which has somehow managed to slip through the cracks is the
infamous General Electric: the company, that in addition to the banks,
has been the biggest beneficiary of Obama's taxpayer largesse. Here are
the numbers: in the period between 1991 and 2009 GE's pretax income is
cumulatively $293 billion on which however the firm has paid only $25.2
billion in current domestic taxes, or a 8.58% cumulative tax rate. Yet
where it gets wild is the narrower period between 2002 and 2009, during
which timeframe the firm made a generous $164.4 billion in pretax net
income (not to mention $639 billion in domestic revenue, just over half of total revenues of $1.2 trillion) it paid only $5 billion in domestic current taxes, or a 3.17% tax rate! So our question to the administration is how does $639 billion in domestic revenue, and $164 billion in total net income, result in $5 billion in taxes?
Perhaps if the desperately broke administration is so concerned about
refilling its empty coffers, it should first of all look at the most
profitable (presumably) company in America... And perhaps CNBC can share
some coverage on the topic of its parent company's taxation strategy.
the red line below which shows the cumulative domestic current taxes
paid by GE in the period 2002-2009, and compare it to the blue line, or
total pretax income.
It is good to know that the company headed by the man who is head of Obama's job's panel, is finally getting the tax avoidance spotlight it so truly deserves.
In the meantime, we can't wait for Immelt to head Obama's corporate tax collection task force. After all, as we disclosed previously, the man's job creation track record is truly second to none: "[Immelt] runs a big company, but Immelt has shown more skill at cutting jobs, frankly, than creating. GE finished 2009 with 18,000 fewer US workers than it had at the end of 2008, and US headcount is down 31,000 since Immelt's first full year in 2002. During his tenure, GE workers based in the US as a percentage of total employees has fallen to 44% from 52%."
Surely Immelt can repeat his "jobs miracle" in the corporate tax realm where a broke America is truly desperate for at least some corporate tax receipts.