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On GE's Pathological Aversion To Paying Taxes

Submitted by Tyler Durden on 03/25/2011 08:06 -0400

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.

Note
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.

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Fri, 03/25/2011 - 09:51 | 1099194 youngman

Lets put it this way...the Koch brothers...vs GE...GE donates millions to Liberal Politicians..they buy their influence...they want to be a part of the "hope and change"....Obama wants the control over them as a "government Supplier"...its a Socialist thing...the Koch Brothers will never be there...they have to work on the outside..and will be targeted by the IRS...the Media..etc as evil...Socialists like Central Planning and that is their end goal....you must have wind power...elec cars...floresent light bulbs..ethonal...etc...control the population...

Fri, 03/25/2011 - 09:57 | 1099214 alien-IQ

that's not quite "socialism"...it's actually a bit more like Fascism.

“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power”

Benito Mussolini (and he knew a thing or two about fascism)

Fri, 03/25/2011 - 10:01 | 1099222 buzzsaw99

Mussolini was a piker.

Fri, 03/25/2011 - 10:05 | 1099236 alien-IQ

but he was a very snazzy dresser and quite the dancer.

Fri, 03/25/2011 - 09:59 | 1099215 I_Rowboat

I'm going back to washing dishes and clothes by hand, and by the light of homemade beeswax candles. That'll show 'em!

Fri, 03/25/2011 - 10:00 | 1099219 Iam Rich

Please get this straight.

GE doesn't pay any taxes.

Walmart doesn't pay any taxes.

Apple pays no taxes.

Etc. Etc. Etc.

Only the consumer (ie: people) pay taxes. These companies are simply the tax collector; the conduit between you and the government. If you raise their taxes, you will pay more for their goods and services to cover it. It is that simple.

Hence, companies should pay no taxes. Corporate taxation is simply a way for the government (i) to HIDE the fact that you are paying more taxes and (ii) to tell you that the other guy is.

Why do we have this conversation at least once a week?

Fri, 03/25/2011 - 10:03 | 1099234 alien-IQ

and what about the profits made by a corporation through the buying and selling of stock in other companies? where's the "pass through" on that? or should they be pardoned their tax liabilities for that also?

Fri, 03/25/2011 - 10:24 | 1099320 Mercury

It's almost like it would behoove you to be long AAPL, GE and WMT...

Fri, 03/25/2011 - 11:26 | 1099648 anony

You ma'am, are incapable of reading, understanding, and basic economics, and logical thought. Go on being ignorant about how the world really works. That will get you real far.

Fri, 03/25/2011 - 11:30 | 1099665 anony

I have some idea. It seems the ones who finally understand that THEY are paying corporate income taxes as a consumer finally just fade away, and then some newbies get on here and they have to be educated. Then they fade away only to be replaced by yet another lacking in even a rudimentary knowledge of what is contained in the price they pay for the service or product they buy.

Another example of our public education system at its finest (for socialist activists).

Fri, 03/25/2011 - 12:08 | 1099866 Bob

There's a reason nobody bothers to debate your mindbogglingly childish Econ 101 "understanding" of the world. People are tired of it--you show no benefit, week after week after week.

If you think you've "educated" anyone, try thinking again.

Fri, 03/25/2011 - 12:24 | 1099948 anony

You could be right. Or. You could also be just stupid, bob.

I don't come here 'show you a benefit'.

If you have an argument to make that a corporation pays taxes then prove it. I've proven my point. In spades.

Now, instead of insults prove your point. But you can't or you would.

So that not only makes your post completely worthless, it too benefits no one.

You can't educate a stone, bobbo.

Fri, 03/25/2011 - 12:05 | 1099855 Double down

What is interesting is that if that is the case then corporate taxation has a much different purpose or function from tax collection. It has become a policy tool.

Fri, 03/25/2011 - 13:12 | 1100185 downwiththebanks

The corporation is actually the vehicle by which those with Capital steal surplus value from those with nothing to sell but their labor. It's an inequality creating machine, which is why you adore it.

The corporate form exists because it is the most useful and efficient tool for bleeding the working masses of people.

The state facilitates this, becuase the state is wholly owned by the Capitalists - always has been, always will be.

Fri, 03/25/2011 - 10:05 | 1099231 Greenhead

If we were smart we would have very low corporate and business income taxes but we would include high taxes for undistributed retained earnings. Point being, businesses are a pass through. Tax consumption. More income, more consumption, more taxes paid. More saved, less taxes, ultimately, more capital to invest.

Fri, 03/25/2011 - 10:05 | 1099235 Milton Waddams

It's not just your duty, but your privilege. Yes, your privilege; to help your government by paying your tax and paying it promptly. What's the hurry? YOUR COUNTRY IS AT WAR! Your country needs taxes for guns, taxes for ships, taxes for democracy, TAXES TO BEAT THE AXIS!

http://www.youtube.com/watch?v=E5CKHLlwA7U

Fri, 03/25/2011 - 10:14 | 1099253 alien-IQ

You sound exactly like the 1943 Disney pro Tax propaganda cartoons starring Donald Duck...and yes...they really made those and you really do sound like them...check it out. http://www.youtube.com/watch?v=dKvgL8Jt_60

EDIT: oops..my bad...I see that was what you were referencing.

Fri, 03/25/2011 - 10:57 | 1099250 Contra_Man

Hand to hand, until the third generation:

http://www.contramanfund.wordpress.com/2010/12/12/oligarchies-dont-pay-t...

Fri, 03/25/2011 - 10:18 | 1099286 dick cheneys ghost

word out now that 150 school districts in michigan are on verge of going broke...

http://nakedempire2.blogspot.com/

Fri, 03/25/2011 - 11:08 | 1099550 aerojet

Yes, but Michigan fucked itself. Detroit has lost 25% of its population in just the past few years.

Fri, 03/25/2011 - 13:07 | 1100177 downwiththebanks

Working people pay their taxes.

Fri, 03/25/2011 - 11:36 | 1099682 anony

You thank John Dingbat Dingell for that. 40 years of running Michigan strictly for the voters in auto industry, right into the dumpster.

Now the voters are pissed that they fucked themselves over. Too bad.

This is what is wrong with a United America. The other states' citizens have to pay for the avarice of guys like Dingell and he gets away scott free.

Fri, 03/25/2011 - 10:19 | 1099290 One_Eyed_Pony

I thought with the $3.2 BILLION Federal Tax Credit General Electric GE paid "0" ZERO taxes?

Where's my "0" tax rate? Let me writeoff ny Gulfstream 550 and Bentley. Ahhhhh, now I've got to get back to doing my taxes (which will total about 70% between all the BS levels of thieves).

We must all make our offerings to the Master Gods... for fear of having those new IRS shotguns stuck in your face and sent to PRISON!

Welcome to our Corpora-Fascist government!

Fri, 03/25/2011 - 10:41 | 1099413 steve2241

Net income isn't a good indicator of profitability.

Fri, 03/25/2011 - 10:48 | 1099445 Logan Tassajar

GOOD FOR THEM

Fri, 03/25/2011 - 10:51 | 1099454 Eureka Springs

There is no fire in Hell hot enough for this lot.

Fri, 03/25/2011 - 11:46 | 1099742 Seer

GE - Government Electric (same as Government Motors...)

These big entities cannot exist on their own, they need to externalize their costs so that they can continue to shovel the pork to their (few) shareholders. As the govt teats dry out they'll eventually fail. BIG = FAIL

Fri, 03/25/2011 - 12:44 | 1100068 SRV - ES339

"Government of the corporation, by the corporation, for the corporation shall not perish from the Earth"

Fri, 03/25/2011 - 13:06 | 1100159 downwiththebanks

This is how the system is supposed to work. Give the criminals and thieves bailouts and handouts and make those who suffer under the corporate dictators endure genocidal cuts.

The Capitalist State in all its glory! No War But the Class War.

Fri, 03/25/2011 - 14:22 | 1100506 Zero Govt

Immelt who has cut 31,000 US jobs is head of Obummas jobs team? Says it all about US Govt recruitment for 'suitable skills' needed to be a crony of the public sector!

GE does indeed have creative bookwork. This companies return on capital is barely 1% and it is dependent on all sorts of Govt props (subsidies and legislative benefits) and of course Govt contracts to keep this tired old dinosaur in business. GE is absolutely headed toward the canner when recession hits the public sector

Fri, 03/25/2011 - 15:18 | 1100831 SilverFiend

It is probably a big help to GE that they have donated 13 million dollars to split between both parties since 2002. We have to have serious campaign finance reforms in this country.

http://www.opensecrets.org/orgs/summary.php?id=D000000125

Fri, 03/25/2011 - 15:56 | 1100982 sgt_doom

No...Wait!!!.....the corporations are paying too much in taxes!!!

Why do the same douchey douchebags continue to purvey the same tired old lies when the majority off corporations pay NO fed taxes, and that is one-third of the reason for the debt and deficits, the othe one-third is the monetization of the private securitized debt peddled by those debt-financed billionaires, whle the remaining one-third is divided between war spending for the benefit off the super-rich, and the demise of individual taxes by the offshoring of American workers' jobs.

Tue, 07/26/2011 - 11:33 | 1494593 pama