G.E. pays no corporate income taxes in 2010 – are you mad?

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.

21 thoughts on “G.E. pays no corporate income taxes in 2010 – are you mad?”

  1. A most excellent analysis. =)

    I came up with the need to streamline the tax system on my own, but your suggestion of higher end prices for the consumer is very astute. Good stuff.

  2. Thanks Colin. It seems the very basic fact of who actually pays corporate taxes always seems to get lost in the shuffle with these types of issues.

  3. Excellent point, 5e. Thanks for it. I’ve seen the “GE is bad” notion amongst even some conservative bloggers. It’s easy to fall into that, because we all know that crony capitalism is to blame and GE is playing its role. But you are right: keep the blame focused on the one that holds the cards. The government.

  4. We also know that Immelt is using G.E. profits to advance his leftist political agenda. People can be mad about that and if they are stakeholders, they should pursue his accountability through the board and also by voting with their purchasing dollars. But the notion of believing company profits are a bad thing goes against everything capitalism is about.

    We really see this with the oil companies as well. Everybody hates high gas prices so the demonization really clicks when Exxon-Mobil reports its billions in profits. It makes you wonder how many are really in the Obama camp that at some point you’ve made too much money. Try to limit or control private company profits and you kill the free market.

  5. As you know, I lump big companies and the banking cartel in with the rest of the Ruling Class. I don’t make a clear distinction between GE and the government because both are central players in the Ruling Class. So count me among those “mad” at GE and all the rest of the crony capitalists-they’re completely complicit in building the system, and the CEOs have access to the White House that most businesses do not.

    It’s no surprise, then, that the tax simplification proposals of the Simpson-Bowles deficit commission have gone nowhere. Both the Dems and the GOP are wedded to the stealth corporate welfare embedded in the tax code.

    Small businesses are the ones who really take it on the chin with this kind of crony capitalism, and they employ most Americans. Chalk this up as another reason why unemployment remains stubbornly high.

  6. Why would you be mad about their tax bill? Go ahead and try to assess high taxes on these corporations. They will pass it right on to you in the form of higher prices. Tax policy is set by the government. Businesses, both large and small, operate under their parameters. Do the big guys have a heavily weighted influence toward their side? Of course they do. But the logic of attempting to punish business, even a large crony capitalist corporation, through high taxes that will simply be passed down to the consumer makes no sense.

    That’s why I raised the example of the oil companies in a previous comment. People believe that a windfall profits tax will really “stick it” to the big guys. Not a chance. You can’t get to big business through a system of tax penalties. They will either pass the cost on, spend large sums on tax avoidance, keep their profits off-shore, or in the worst case scenario they will simply relocate overseas and take their corporate profits with them. In all of those scenarios, the taxpayer and consumer end up suffering.

    You are certainly correct on the crony capitalists being complicit. But the only way that stops is from the government side of the aisle. Government is the enabler. They are the beneficiaries of the lobbyist payoffs. Who ultimately must stop the system in place? We the people.

  7. I’m angry at the entire system. GE, the government, and all the lobbyists in between. Yes, people can take advantage of the crony system, but they CHOOSE to participate. It’s a moral decision, even if all parties deny it.

  8. The only problem I have is when people get mad at corporate America, they then turn to government to rein them in. As has been pointed out here repeatedly, they’re all in bed together. Using the IRS as an enforcer, or worse yet, Congress through legislation, just makes things worse. I would still prefer to let the markets dictate the winners and losers rather than any form of government intervention.

    I also believe this issue is far more commonplace than we may know. It’s just that G.E. is so large, everything is magnified. Percentage wise, smaller companies may be equally guilty as G.E., they just don’t get the headlines.

  9. I have been witness first hand to one of my coworkers being completely out of sorts with the oil companies. He places the blame for our high gas prices directly in their lap and gives no thought to the policies of the government and the role they play in this fiasco. All he sees is the profits that are being made and he sees red. He would be glad to see the profits taken away from them and trying to explain what is going on gets me nowhere.

    You are completely right, trying to punish the corporations for following the “rules” will produce higher prices to the end consumer. That’s why it is so important to change the “rules” by which they are playing.

  10. I would simply ask people, in particular those on the right, this question. If you promote the idea that consumers ultimately pay corporate income taxes, how can you then be upset at G.E. for not paying any and passing them on to you? In essence, a corporate tax cut is a consumer tax cut.

    The charge is that G.E. makes their own tax cuts through collusion with the government, otherwise known as crony capitalism. That’s undoubtedly the case, but the result is the same. A tax cut for the consumer. It would seem to satisfy more people if this were all done “cleaner” with no making or bending of the rules in place. Fine with me. Let’s reduce the corporate tax rate to one of the best in the world and be done with it.

  11. Two points. First, corporations also have to pay several types of state taxes as well. I think when those are factored in corporate taxes are the highest in the world.

    Second, I find it odd that GE isn’t taking a beating in the public square like GM and Chrysler have for taking a government ‘bail out’ while GE is feeding at the public trough all day long and barely a peep.

  12. It pays to be on the “left” side of all things Washington. You don’t face the biased media bashing.

    And you’re right. The total cost of doing business, particularly when you factor in the regulatory burden on top of the taxes, makes the U.S. an expensive place to do business.

  13. Thanks Robot. Lots of confusion on this issue. To me, it’s crystal clear. I don’t want any corporate taxes for any corporation even if they are leftist. Not when they are just passed on to the consumer.

  14. Do you own a corporation? J/k… sort of. I might agree with you if it has not been pointed out time and time again that corporations constantly take advantage of any loophole to maximum effect and consequently continue to abuse not only the working class of the USA, but world wide. I know, that’s a pretty far out liberal opinion, but for the same fact that you pointed out, “Corporations will exploit every loophole possible to protect their profits,” I don’t trust corporations.

    It does not benefit the American people if a corporation makes billions of profits, so why not tax their profits to benefit my great country? It might not benefit me personally, but when their prices go up I can make the decision to purchase their products based on my budge instead of being forced to pay higher taxes because the corporations are abusing loop holes that I don’t have an army of accountants and lawyers to help me do.

    Sorry, I’m not trying to start an argument, I just care about people, and the treatment the common people (i.e. not shareholders) get from corporations is very frustrating. I don’t know what the answers is, but I’m so tired of reading about the next crisis we are facing largely because of the “exploit every loophole possible to protect their profits” mindset, which, if I understand correctly, has your wholehearted support.

    So yes, to answer your question, I’m mad at G.E. because the people running it don’t feel they should support American when they have an abundance of profit. Let’s be clear, it’s not like they are paying no taxes, they are getting a $3.2 billion dollar tax credit. 3.2 billion. When you are counting in the billions, is one little measly million going to matter? I’m not saying a million dollars is inconsequential, but how many individuals income tax does it take to add up to a million dollars? I honestly have no idea no idea, but I’m sure it’s quite a few.

  15. The only way to stop this whole issue is to pass the FAIR TAX HR-25 .Go to Fair Tax. org. Get involved.This is the only way to bring jobs back to the USA.

  16. I don’t see anyone mentioning the fact that the EPA and it’s regulations have cost more jobs and money than anything else ever has. My cousin grows natural foods and in order for him to receive a special ‘compliance’ sticker, as required by his buyers, he needs to make an over $200,000 investment. Now, when ObamaCare comes into full play with more than 150 new government regulatory ‘compliant’ agencies (all in the name of healthcare), it may just put him out of business. Everything in our lives can be construed as to being under the healthcare umbrella of these new regulatory agencies. Right now his asparagus gets a little more play due to the ‘USA country of origin’ labels. However, the UN feels that this is an unfair advantage for USA growers and want to ban ‘country of origin’ labeling.

Comments are closed.