General Electric had a very good year in 2010. Over $14 billion dollars in global profits with over $5 billion coming from the United States. This story is multi-faceted. Many will demonize them as just another evil, greedy corporation. While the bulk of the country suffers through our current economic malaise, G.E. is surviving nicely, thank you. The company CEO, Jeffery Immelt, is a D.C. beltway insider of the highest order with access to the President as often as he feels the need. Not only does his company benefit from a political landscape tilted his way, he has actively helped in shaping it.
G.E. not only didn’t pay any corporate income taxes in 2010, they will receive a $3.2 billion dollar tax credit. Of course, they employ an army of tax professionals that work 24/7 to ensure that G.E. maximizes all tax loopholes each year to minimize the tax burden. G.E. has been far more successful than virtually any other U.S. corporation at reducing their tax burden.
Should you be upset at General Electric? Mad that they make out like a bandit while the average Joe is getting pummeled? Absolutely not! Let’s remember exactly who pays corporate taxes in America. You do. The consumer. Corporate taxes are simply a portion of the cost structure that goes into pricing a product or service. Corporations do not pay these taxes. They are merely the middleman who collects the tax from the consumer and pays it to the government.
The same goes for wages. Henry Ford was infamous for stating that it was Ford’s customers that paid the companies payroll. They merely served as the middleman. This can be said to be true for any costs that a business incurs. It is factored into the price they charge and those costs are ultimately borne by the end consumer.
It’s interesting to see the screaming headlines about G.E. making huge dollars and not paying taxes. It fits right in with the Obama public posturing that demonizes excessive corporate profits, yet it is in many respects a direct result of his “green” agenda that has benefited G.E. so well through subsidies. Obama likes to play both sides of the fence. Publicly deride corporations while greasing palms in the shadows.
What’s the guy on the street supposed to think? He can see the CEO’s with the phenomenal pay and benefit packages they seem to get regardless of the profitability of the company or the status of the economy. When the economy dips, the companies tighten their belts and Americans lose their jobs or take concessions. They make multi-billions in profits and pay no taxes at all? It’s enough to drive a guy mad.
Let’s remember a few things concerning corporate America first. The United States has the second highest corporate tax rate in the free world at 35%. Only Japan is higher. That was set to be lowered but we’ll have to see how the earthquake/tsunami disaster will affect tax policy going forward. At any rate, this is precisely why G.E. has billions of profit dollars parked overseas in tax havens and shelters they created themselves through their army of lobbyists. They don’t want to bring it home and invest it here domestically because of the huge tax hit awaiting them if they do.
This is a common theme throughout corporate America. It’s why a high tax rate always results in less overall tax revenue. Corporations will exploit every loophole possible to protect their profits. It’s no different from what an individual does when doing his personal taxes. Corporations have a fiduciary responsibility to MAXIMIZE profits for their shareholders. It is their obligation and duty. Any of this rhetoric we hear concerning a corporation having any type of moral obligation toward creating jobs or reducing profits as some sort of consumer benefit is just garbage. A company is in business for one reason and one reason only. To maximize profits and realize as great a return on their investor’s investment as possible. Period.
If we as Americans have a problem with this simple fact, we need to amend our Constitution and move towards more of a government controlled economy rather than a free market, capitalist economy. Hey, come to think of it, that’s exactly what our government is doing already! That’s Obamanomics!
If you watch the media spin machine, you will see lots of demonizing of G.E., including Fox News and many on the right. They don’t understand a market economy any more than the left that hates corporate America, at least publicly.
They should view a highly profitable corporation as a good thing. That means they’re employing Americans and their investors are making money. They should view a corporation paying no corporate income taxes as a good thing. That means those tax burdens aren’t being passed on to the consumer through higher prices.
We need to do away with our backwards thinking taxation policies. High tax rates lead to proven less overall revenues. They are a deterrent to attracting global business. They encourage companies to spend resources in devising ways to hide or shelter income from burdensome taxation. In short, nothing good comes from high tax rates. Simplifying the tax code and eliminating the myriad complex of loopholes will eliminate the incentive to hide profits. Doing away with high tax rates will lead to lower prices, higher tax revenues and more jobs for Americans.
You can be mad at G.E. for exploiting the system and retaining as much of their profits as they can. You would be better served to direct your anger at the taxation policies of our government. They hold all the cards. They have the key to unlock business growth through tax rates and they hold the key to eliminating tax evasion efforts by streamlining the tax collection policies. The forgotten benefactors from the whole taxation scheme are the accountants and lawyers that are necessary to decipher the tax code maze and find a way for their clients to beat the system. That’s a huge lobby. It’s the last thing they want to see is a simple tax system implemented that would obsolete their professions.
This translates over into Wall Street and the big banks as well. The banksters always, always, always profit off of us in good times and bad. That’s a byproduct of the system in place that allows it. Getting mad at the banks doesn’t solve a thing. Their certainly not going to grow some sort of conscience and change their ways. We must change the system. It starts with the Federal Reserve. They are the ultimate enabler of the plots and schemes hatched by the banks that pilfer our wealth away. The Fed must go away.
It’s analogous to getting mad at the criminal for stealing our car when we leave it unlocked with the keys in the ignition. We have a flawed system in place that allowed it to happen. Locking up that criminal is fine, but they will just be replaced by another one. Corporate policies only serve to maximize profits through all available opportunities. Lobbying politicians is a completely legal way of tilting the playing field in their direction.
Who benefits the most when we are outraged at corporations? It’s not us. It’s the players in the scheme that the system was created for. And what do we demand when we see the players benefit? Why, we ask for more involvement from the system creators leading to more of the same. The definition of insanity. Unfortunately, most of us are simply too short-sighted to see the big picture.