GE Pays No Federal Income Tax

In this time of economic austerity, I am seeing a lot of weeping and wailing, and not enough facing the issues and moving forward to fix them. The deficit continues to grow and Congress continues to tinker with “cuts.” There aren’t enough “cuts” in the entire country to take care of the budget which is beyond fixing…or is it?

I read in several different articles that General Electric paid no income taxes on a profit of $4.5 billion. How did dey do dat? The easy answer is Jeff Imelt, GE’s illustrious chairman, has his head so far up Obama’s ass it would take the jaws of life to pull it out. Crony capitalism is rampant in Obama’s Washington. But that is the easy answer. The truth is more systemic as corporations at all levels have successfully lobbied Washington to reduce their total share of the tax revenue pie at the expense of individual taxpayers. Fully 42% of all U.S. companies pay no income taxes. And 25% of the largest companies pay no taxes including GE and ExxonMobil.

It’s easy to jump onto the let’s tax the evil corporation bandwagon. The truth is that there any number of reasons why this happens. ExxonMobil pays no taxes in the United States, but it pays half of its net income in taxes to other countries. The tax rate in the United States is 35%. ExxonMobil operates in countries where the tax rates can approach 50%, and pays through the nose there. The US Government gives it credits for those taxes, which sops up anything that might be owed to our government. Those kinds of issues are political issues that extend way beyond simple tax policy…and should be addressed at many levels.

GE is another story. Much of GE’s income is made outside of the United States, and that income is not taxed until it is repatriated to the United States. GE also employs some of the most effective lobbyists in the country, and successfully turns green energy, for example, into tax credits promoting environmental policies being pushed by the United States government. That is one of many of its tactics.

At the end of the day, the lack of corporate taxes coming into the government is embedded in our screwball tax code. Corporations scream about level playing fields with other countries whose tax rates may be lower, but that would ring hollow if the United States were to revamp its tax code and take politics and ideology out of consideration relying purely on economics and sound business principles. There are a whole slew of alternative ways to tax in America other than an income tax. There is the VAT, a national sales tax, the FAIR tax…all of which could form the basis of a tax system that would generate more revenue, allow corporations to sell our goods overseas without having to pass on income tax costs to foreign customers, and actually tax foreign companies that come into the United States to do business. It would allow corporations to repatriate foreign reserves adding a new base of capital which could be reinvested in the American infrastructure.

Congress needs to stop belly aching and look at creative measures to solve our problems. The anti-tax right and the progressive income tax left need to shed the rhetoric, and look at some of these alternative ways to fund our government if we are to survive and escape the turmoil that was evident in Britain this past week, and other parts of Europe. All they need is the guts to do it. But don't bet the rent!