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Tax Winners/Loser? Obama - Immelt. No conflict?

Bruce Krasting's picture





 

All sides in Washington agree that the corporate tax structure is a
mess. The 35% top bracket is too high. It encourages many US companies
to shift operations outside the US. As that happens jobs leave our
borders. This has been known and understood by all the deciders in D.C.
for a long time.

Could changes in the tax code lead to a reversal of the trend? Possibly. That being the case, “Who might the winners and who might be the losers
is a good question to ask. A partial answer to that question comes from
Martin Sullivan (ex Treasury economist) in testimony last week before
the House Ways and Means Committee. He used this slide :

The following discussion makes some important points on who gets hit and who will win:

As the
table shows, low effective tax rates are common in industries like
pharmaceuticals and computer equipment where it is easy to shift
technology and manufacturing to low-tax jurisdictions. In industries
where customer markets and the provision of services are largely
domestic, the opportunities for reducing taxes through cross-border
profit shifting are limited.

This list is worth keeping as the issue of changes in the tax code is
contemplated. Should the result be that the statutory rate is lowered to
~25% (and foreign breaks are eliminated) those companies who have taken
maximum advantage of the existing Code to move profits and operations
overseas will get hit the hardest.

*******************************

Allow me a rant. In the table above it is quite clear that GE
takes the most aggressive action to shift its production/earnings
outside the country to avoid paying federal taxes. Another way to put
this is that GE has done very well in minimizing its US payroll. At the
end of 2009, GE employed 36,000 more people abroad than it did in the
U.S. In 2000, it was the opposite. Since Immelt took over in 2001, GE
has shed 34,000 jobs in the U.S. But it's added 25,000 jobs overseas.

The shareholders at GE might look at these results and vote to give Mr.
Immelt a pay raise. But the American people should look at this and say,
GE is the poster boy for our problems”.

But Obama has just made Immelt his advisor on the economy and jobs
creation. The guy who has done such a good job at GE in avoiding US
taxes and moving jobs overseas is now advising the President on how to
do exactly the opposite.

This is just crazy. The results prove that GE is no friend
of America. Jeff Immelt wakes up every morning thinking about what is
good for GE shareholders (as he should). But what is best for GE is not
best for America. Immelt has a tremendous conflict between his day job
and his responsibilities as advisor to the President.

Post the November election Obama is doing all that he can to appear to
be a centrist. He is trying to warm up to corporate America. Immelt is
his “show pony”. I don’t think he could have made a worse choice. He will regret it before the next election.

 


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Mon, 01/24/2011 - 04:23 | Link to Comment co2010
co2010's picture

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Sat, 01/22/2011 - 19:03 | Link to Comment fallst
fallst's picture

OK, Mr. Immelt, is it?

Umm, Did You Not successfully Lobby against the S.3816 Anti-Outsourcing Bill last October? 

Ron Paul says "Corpocracy", (just found out he was blocked from speaking at 2008 Convention), and he's been right about everything else, banks, wars, our future.

There's nothing wrong with Multinationals, as long as you're not an American.

So, Now it is Americans vs. The Multinationals.

OK, Let's Get Started!! No sense wasting anymore time, here!

It Is Obvious that Our "Representative's" interests conflict with Ours, our future, and America's Tax Base. So, they are also being negligent in managing their Employer's Future. Grounds For Dismissal.

This Virus has also infected The Supreme Court. Lovely!

 

Oh, Wait, edit, add POTUS to that!

 

Sat, 01/22/2011 - 16:03 | Link to Comment hooligan2009
hooligan2009's picture

I would ask, "what will the effective tax rate paid by BofA, C, GS, JPM be over the next ten years?". I suspect that FRE and FNM won't pay much in tax either. Tax losses will last for many years and I expect an active secondary market to develop in much the same way as carbon credits.

I also think that the effective tax rate on employees of these financial insitutions bears scrutiny. We might be suprised that the amount of payroll taxes and city/state taxes is a significant proportion of the tax take. On the other hand, given the UBS and other Swiss banking whistle blowing we have seen, we might not.

I would say, that I don't really care whether taxes taken from one entity within a corporate structure are low, as long as there is a clear contribution made to tax revenues somewhere by the people employed. After all, does a company or group of people exist to pay taxes? Well yes!

If the answer is though that these banking institutions are truly a giant vampire squid who do not pay a "fair share" then I say, they are outlaws.

Sat, 01/22/2011 - 16:27 | Link to Comment DonnieD
DonnieD's picture

You can probably take GE's corporate taxes paid minus subsidies and bailout money received and come to conclustion that the American taxpayer is bankrolling these corporations so they can send every American job to Timbuktu and juice the bottom line for Wall Street and bonuses. The only thing the taxpayer's received is a ridiculuously expensive light bulb that take a couple minutes to turn on.

Sun, 01/23/2011 - 06:46 | Link to Comment hooligan2009
hooligan2009's picture

for my sins, I think that there is a veritable gold mine of talent within these comapnies. leading edge thinking about quilaity like 6 sigma came from GE. I agree that the liability side of the balance sheet has poisoned the asset side, placing extreme pressure on the gold mines and failing some very basic prudent management for which the boards of these companies are culpable. Boards have simply failed to manage both sides in a way that is sustainable or justified. The lack of leadership skill and judgement is quite simply staggering at the corporate and government level.

Sat, 01/22/2011 - 17:18 | Link to Comment snowball777
snowball777's picture

GE Defense Contracts

2007 $1.15B

2008 $1.3B

2009 $1.69B

...

Sun, 01/23/2011 - 06:42 | Link to Comment hooligan2009
hooligan2009's picture

Not much out of the whole pentagon budget, or is this just the "value" of parts within contracts directly quoted for and not as part of other companies JV contracts?

from here: http://www.thefiscaltimes.com/Issues/Budget-Impact/2011/01/06/AP-Pentagon-Will-Freeze-Its-Budget.aspx

The plan calls for $553 billion to be spent in 2012 on annual defense programs such as weapons modernization and troop pay. The amount, which does not include war spending, is $13 billion less than the Pentagon wanted, but still represents 3 percent growth after inflation.

Sat, 01/22/2011 - 14:23 | Link to Comment optimator
optimator's picture

Sure Immelt is a part of the Elite Ruling Class.  They never mention GE needing funds from the FED just like the rest of the Banksters.  And they never mention that Immelt was made a Director of the NY Fed, guess they're not too proud of that.

Sat, 01/22/2011 - 15:07 | Link to Comment Careless Whisper
Careless Whisper's picture

part of the elite ruling class? nah, he's just another one of their errand boys. not much different than these guys;

http://www.youtube.com/watch?v=puQ8oA3cbLA

 

Sat, 01/22/2011 - 14:20 | Link to Comment DR
DR's picture

lol..Immelt the CEO visionary..

China to replace U.S. as top economic power says GE CEO

http://www.reuters.com/article/idUSTRE70J5JZ20110120

 

Just what the US needs in a leader in a time of crisis, someone that concedes the race without even trying.</sarcasm>

Sat, 01/22/2011 - 14:15 | Link to Comment sun tzu
sun tzu's picture

Imagine the lamestream media outrage if Exxon or Halliburton was paying a 3.6% effective corporate tax rate.

Sat, 01/22/2011 - 17:10 | Link to Comment snowball777
Sat, 01/22/2011 - 14:13 | Link to Comment Sean7k
Sean7k's picture

GE= generating entropy for American citizens.

Sat, 01/22/2011 - 14:11 | Link to Comment ConfederateH
ConfederateH's picture

Abolish the corporate income tax and all US corporations would compete against each other on an equal footing and would have large advantages over foreign corporations.  Additionally, by eliminating the distorting effects of highly politicized tax policy, investment would flow to the best investements and economic growth and employment would quickly approach capacity.

But Bruce Krasting just can't see this because he is so glued to the ivy league elite way of thinking.  He thinks the he and his ivy league cronies can steal money from the rest of the country and invest it in better (social justice) ways than the original property owners or the workers who spend the capital of their short lives earning this money only to see Bruce and his cronies piss it away.

Sun, 01/23/2011 - 09:23 | Link to Comment Bruce Krasting
Bruce Krasting's picture

CH, Where do you get this stuff? I can't imagine how you can read this piece and come away with the the thought that I am an Ivy League elite. I take a clear swing at non other than the king of insiders, Jeff Immelt, and I'm an elitest.

Think what you will CH. I don't much care. FYI I granduated college in 1972. I went to Ithaca College back then. Nothing Ivy League about me.

 

Sat, 01/22/2011 - 17:17 | Link to Comment Lord Koos
Lord Koos's picture

Another version of the trickle-down theory.  .

Sat, 01/22/2011 - 14:05 | Link to Comment spooz
spooz's picture

I sent this to my representatives.  I know at least one of them reads my email, but it sucks that it feels like spitting in the wind...

Sat, 01/22/2011 - 14:01 | Link to Comment lieutenantjohnchard
lieutenantjohnchard's picture

excellent research. as an america firster i take these type articles to heart. it's very hard to find a major corporation that seems to put america's interests first. disappointing.

Sat, 01/22/2011 - 14:00 | Link to Comment Seasmoke
Seasmoke's picture

dont buy from or trust those government companies that begin with a BIG G

Sat, 01/22/2011 - 15:01 | Link to Comment Careless Whisper
Careless Whisper's picture

hey, there's an idea for an etf.

general electric, goldman sachs, general motors, google, general dynamics. oh, and maybe we can make an exception for halliburton.

Sat, 01/22/2011 - 13:55 | Link to Comment Don Birnam
Don Birnam's picture

GE, frankly, is the poster boy for treason.

Sat, 01/22/2011 - 16:05 | Link to Comment Schmoo
Schmoo's picture

A counter-intuitive view is that Immelt's success (3.6%!) in exploiting the tax and labor laws means he may be an excellent choice for the job - he should know exactly which loopholes could be exploited. It should be a straightforward task for him to close these loopholes to the benefit of American employment.

Offshoring jobs may feel like treason, and the result certainly sucks for America, but it's just capitalism. If there's any treason, it's by the folks in DC who designed and signed these tax codes into law.

Sat, 01/22/2011 - 17:36 | Link to Comment sethstorm
sethstorm's picture

The problem is that offshoring is treason, not capitalism.

Sat, 01/22/2011 - 21:50 | Link to Comment Schmoo
Schmoo's picture

Nonsense.

Main Entry: trea·son
Pronunciation: 'trEz- & noun
Function: noun
Etymology: Anglo-French treison  crime of violence against a person to whom allegiance is owed, literally, betrayal, from Old French traïson , from traïr  to betray, from Latin tradere  to hand over, surrender
:  the offense of attempting to overthrow the government of one's country or of assisting its enemies in war; specifically :  the act of levying war against the United States or adhering to or giving aid and comfort to its enemies by one who owes it allegiancetrea·son·ous /-&s/ adjective Merriam-Webster's Dictionary of Law, © 1996 Merriam-Webster, Inc.

GE closed or shrank some US operations and opened or expanded operations elsewhere. Were they doing it as an act of war against the US, or giving comfort to its enemies? Or were they doing it to reduce labor costs and reduce their tax burden?


Sat, 01/22/2011 - 13:52 | Link to Comment the phantom
the phantom's picture

Bruce- Is GE still a short?  It's run about 50% since your short call on it a few months ago.

Sat, 01/22/2011 - 13:42 | Link to Comment Rainman
Rainman's picture

Immelt keeps his blue nose squarely up the Obama arse for obvious valid reasons. And paying taxes is just not a priority for a key administration selection, anyway. So this one goes in the Geithner/Daschle hypocrites file. Now.....let's wait for a Wesley Snipes pardon.  

Sat, 01/22/2011 - 15:16 | Link to Comment Amish Hacker
Amish Hacker's picture

heh-heh. While we're at it, let's leave the landing lights on for Amelia Earhart.

Sat, 01/22/2011 - 13:37 | Link to Comment magwal46
magwal46's picture

G E is a big mover in the squiggily cf bulb. Allowing them to close union plants in U S and make CF  overseas. I love closing union anything but this shows G E's duplicitous nature as well as B O's.

This is another example of have competeing constituencies. It makes lying to each neccesary and confusing.

Sat, 01/22/2011 - 14:39 | Link to Comment DR
DR's picture

GE is a MNC, not a US corporation. GE has more employees outside the US then inside and GE can park its revenues in any number of tax free foreign subsidiaries.  A change in the US tax code would be negligible to them and many other MNCs.

The issue is exchange rate and labor arbitrage.

Sat, 01/22/2011 - 14:21 | Link to Comment Sudden Debt
Sudden Debt's picture

You might have missed the part in history where Unions where responsible for the rise in workers wealth.

The Unions are broken down now and only there to secure the pensions for the people that once supported them.

I do think we need a renewing union system that is willing to fight the worker rights.

 

Sat, 01/22/2011 - 18:18 | Link to Comment Hey Assholes
Hey Assholes's picture

Well you "historians" certainly do not know your Economics.

Unions are thugs that, with government sanction, violate property rights of buisness owners.

They cause systemic unemployment for those not in the union by forcing "minimum wages".

The incentives created by unions are unproductive and wrong. Work  as little as you can.

I have worked in union shops, and it is the worst work experiences I have ever had.

Unions and Politics - made for each other.

I prefer peaceful means of interactions with my fellow humans without the threat of violence.

The world would be much better if unions are shut down.

Question - who is the greedy capitalist pig exploiting the workers for police, firemen, teachers, government bureaucrats etc...?

Unions suck.

Sat, 01/22/2011 - 17:34 | Link to Comment notaFerengi
notaFerengi's picture

It is a shame that so many do not know their history.  Wall Street, Big Business, and sadly the government are not serving us nearly as well as unions did in the past.  

Sat, 01/22/2011 - 17:34 | Link to Comment notaFerengi
notaFerengi's picture

It is a shame that so many do not know their history.  Wall Street, Big Business, and sadly the government are not serving us nearly as well as unions did in the past.  

Sat, 01/22/2011 - 17:14 | Link to Comment Lord Koos
Lord Koos's picture

The demonizing of workers' unions is one of the great propaganda successes of the conservative movement.  It's no accident that the history of the labor movement is not taught much in American schools.

Sat, 01/22/2011 - 13:17 | Link to Comment Its the Vatican...
Its the Vatican Stupid's picture

Don't worry, bitchez-- the "Universal" Corporate Tax Rate will be here soon enough...

 

Moowahahahahaha!

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