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Your Take: General Electric’s Tax Rate

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Last week, one of the biggest stories in the news was how much General Electric paid in federal taxes. The genesis of the story was a New York Times article in which the third paragraph said:

Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

GE responded, tweeting:

GE paid significant U.S. fed income tax in 2010, along w/ $1B+ in payroll, state & local

Henry Blodget dug a little deeper (so did many others, such as Megan McArdle, Business and Economics Editor for The Atlantic). As always, the truth is somewhere in the middle.

Let’s be honest, GE is like any other person – they want to minimize their taxes. It’s like complaining that your friend donated a junker to a charity just for the tax deduction, it’s all part of the game. If you want to complain about something, complain about how corporate taxes work. Complain to your Senator and your Representative.

Finally, GE isn’t alone in this. Almost every major corporation pays a pittance in taxes. The only ones who benefit from our convoluted tax structure are the accountants.

How do you feel about GE and how little they paid in taxes?

{ 37 comments, please add your thoughts now! }

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37 Responses to “Your Take: General Electric’s Tax Rate”

  1. tom says:

    I’m fine with it. In fact, their accountants should get some massive bonuses this year.

    I also couldn’t care less that Immelt is also the President’s adviser. It’s probably better that he’s the one advocating for a corporate tax reform because he can use his company to point out all of the loopholes!

    They worked the system. Loopholes exist, and I don’t blame anyone, or any company for taking advantage. That said, I am fully on board with corporate tax reform.

  2. Strebkr says:

    They still pay plenty in taxes. Just not like the average Joe. Unfortunately the average Joe will never understand their tax structure.

  3. cubiclegeoff says:

    First, I think it’s ridiculous that an entity can have $0 in tax and then be “owed” money by the government. If you owe no tax, great for you, but it should end there.

    GE, and many companies, have put a lot of work into making sure they get the most benefit out of the existing law. Good for them. However, I think it’s crazy since many smaller companies are unable to get the same type of benefit because they don’t have the money to be able to find all the loopholes or lobby for benefits. I think the corporate tax system needs to be fixed and be straight forward, taking away all the benefits that generally help a select few companies. (I don’t mind supporting certain industries, but companies alone I’m not okay with.)

  4. billsnider says:

    If they did it illegally, slam them.

    My guess is that they stretched the tax rule interpretations to the maximum and took advantage of evry loophole that congress gave them.

    Bill Snider

    • Jim says:

      They’re likely all legal and taking advantage of all the breaks they successfully lobbied for. Everyone stretches everything and then you pay penalties/interest when rulings don’t go your way.

  5. mark says:

    This is not a legal issue, it is a moral point. Do GE’s rights to minimize taxes prevail over their obligations to pay their ‘fair share’ tax contribution?

    • Jim says:

      How do you define “fair?” How much is fair for GE? Or anyone?

      Also, according to the Tax Foundation, half of all taxpayers pay no federal income tax. Is that fair?

    • tom says:

      No one pays their fair share, especially 50% of the population who pay $0 in taxes.

      It has nothing to do with morals. Tax laws are tax laws, as long as they abide by them, morality means nothing.

      How do you determine what is fair? I don’t think all the taxes I pay are fair, can I have some of your money?

      • saladdin says:

        “…50% of the population who pay $0 in taxes.”

        This is the perfect example of why I hate these discussions with uneducated people.

        EVERYONE pays taxes, doesn’t matter what your legal standing is either.

        Buy a coke, pay sales tax.
        Buy gas, pay gas tax.
        Rent a house, in your rent is property tax.
        Rent a hotel room…

        Take some time away from tv and radio programs and think for yourself.

        I would try to explain payroll taxes to you but I don’t think it would help.

        saladdin

        • Texas Wahoo says:

          EVERYONE pays taxes – but some people get more back from the government through the income tax than they pay in taxes.

          • Spudpicker_01 says:

            Yeah , the rich and the corporations do this because they have lobbists to bribe lawmakers, who in turn create laws that act in there interests. Everyone, rich and poor alike as well as corporations should be made to pay 10% of their gross income into the feds as income taxes. If this were done, there would be no national debt in 6 months

          • tom says:

            @Spudpicker,

            Negative. The rich do not get more back because they have lobbyists. Guess which half of the population pays no federal taxes (I’ll give you a hint, it’s not the rich half). You are way off base with your bribery comment.

            Re: 10% tax on everyone. This I don’t disagree with. Everyone pays, rich and poor alike. What’s more American than that?

        • tom says:

          Chill out.

          You and I both know what I was referring to.

          There’s quite a difference between uneducated and speaking in generalities.

          So chill.

        • pmulroy says:

          Saladdin,

          Of course, only an uneducated person would be swayed by your attempt to distort the point Tom was making.

          This discussion is about federal income taxes and whether or not it is “fair” that GE seems to have had a federal income tax bill of 0 last year. Tom was merely making the point that half of individuals pay 0 in federal income taxes every year.

          I presume (correct me if I’m wrong) that you have no problem with 50% of individuals paying no federal income taxes because they do pay many other taxes such as the ones you listed. I’m gonna go out on a limb and say GE paid all of those same additional taxes as well.

          • Spudpicker_01 says:

            I have a problem with a corporation which makes $38 billion dollars a year and receives $3.6 billion dollars in cash back for the govt in addition to Billions of additional dollars in subsidies, getting away with paying fewer dollars in taxes a year than I do. While at the same time they continue to underutilize the US workforce and continue to ship jobs overseas where they can make even more money at us taxpayer expense, yes, I have a dam problem with that

          • tom says:

            @Spudpicker

            Take your issue up with the Government, not with GE. It’s not their problem. They are (hopefully) just following the tax laws and doing everything in their legal power to pay the minimum amount, just like you, me and every other person/corporation in America.

            Don’t like the tax laws, write your Congressman/woman and Senators.

            Re: Outsourcing. As a business owner, would you rather pay $50/hr for an unskilled worker in the US or $1/hr in India/China? You may not like it, but as long as there are labor rates cheaper, there will always be outsourcing.

        • Dan says:

          They don’t pay federal taxes.

          Tax on Coke – 6.5 cents?
          Gas tax – 40 cents a gallon?

          I know people that got a bigger refund in April than they had withheld from their paycheck.

          I paid over $15,000 in federal taxes last year. I also pay the tax on the coke, gas, rent, and hotel room.

          I would try to explain payroll taxes to you but I don’t think it would help.

          • Scott says:

            “They don’t pay federal taxes.” Exactly. Sales tax is state/local. Gas tax is at least partially state (I’m going off my own memory here). Property tax is almost always local.

      • Dave says:

        Fair share? How about the tax slayers, single moms and dads, getting $3000 to $5000 as a refund and they pay next to nothing during the year. Or the aliens gaming the system.
        There is not ONE of us who should get more than we paid in. It is not YOUR money it belongs to someone elase. You want to save billions? Stop this from happening. And I have to ask how many employees do you have?

    • Robert says:

      Considering GE Actually makes products, offers services and can make a profit not to mention employ’s THOUSANDS of people vs. the Federal Government which Produces nothing for the average citizen, I am ok with them getting tax breaks. In fact, the laws were written so they could get them. So the correct response is; contact the Senators and representatives who make these laws if we don’t like it.

  6. Evan says:

    If they did it legally they played by the rules that the IRS handed them. If the IRS/Public doesn’t like the outcome change the rules.

    • Texas Wahoo says:

      Perhaps it’s difficult for the IRS to change the rules when the CEO has more sway with the President than they do?

  7. freeby50 says:

    http://news.yahoo.com/s/afp/20110329/ts_afp/usbusinesstaxpolitics
    “”GE did not pay US federal taxes last year because we did not owe any,” [GE] spokeswoman Anne Eisele told AFP”, quoted on newswire March 28th.

    http://www.businessinsider.com/ge-taxes-2010
    “Yes. We’ve already paid some and we expect a positive U.S. federal tax liability for 2010 when we complete our U.S. income tax filing later this year.” — Anne Eisele told Businessinsider, in comments to article posted March 28th.

    I guess it is pretty complicated if GE PR can’t even explain it without looking like they directly contradict themselves in the same day.

    I don’t think GE broke the law. But it certainly doesn’t look like they paid much if any corp. income tax to the US government.

  8. Hunter says:

    Take a step back and look at the 5 yr average annual tax. Sure, they have paid zip for two years but the economy doesn’t flop and bounce back in a single year. If they had to file a tax return every 5 years there would not be a media frenzy.

    • uclalien says:

      Good point. The 5-year average would tell a very different story. With that said, the following quote from GE’s 2010 Annual Report caught my eye:

      “…research and development funding from customers, principally the U.S. government, totaled $1.0 billion, $1.1 billion and $1.3 billion in 2010, 2009 and 2008, respectively.”

      In other words, GE directly receives huge sums of money from taxpayers’ pocket books. A cost that neither the government nor taxpayer can afford.

      I didn’t too much deeper, but I assume that taxpayer handouts aren’t limited to R&D alone. After all, GE holds quite a bit in mortgage backed securities and directly/indirectly received bailouts in the aftermath of the housing bubble. In addition, GE has (and continues to) alter its business structure in a way that makes taxpayer handouts more common and plentiful. Not to mention the fact that GE puts huge sums of money toward lobbying for tax breaks, subsidies, tariffs, etc. In effect, GE has structured a large portion of its business around getting more of your tax dollars.

      I will conclude by saying that there is nothing illegal about any of this, only that the bond between big business and government needs to be broken.

  9. Bud says:

    “At GE, we believe ideas are limitless. Everyday, we go to work innovating, inventing and building the advanced technologies that are creating jobs and redefining what’s possible. We call it the American Renewal.”

    What a great idea to follow the tax code. Keep it going GE, it why I have your stock.

    • uclalien says:

      For your sake, I hope you able to time the market (either buying in early-to-mid-2009 or in the early 1990s). Otherwise, your investment has been getting pummeled for a decade and a half. Despite the recent rally, GE is still down more than 50% since 2000 and down roughly 66% since 2007. And this is before inflation is accounted for.

  10. MoneyNing says:

    I agree with you. The problem is our complicated tax structure and not GE trying to minimize their taxes.

    Even though Wall Street probably does more harm than good, they at least help some companies land capital. With tax accounting, it’s purely to satisfy a need that we created out of thin air. Simply the tax code and all those unnecessary tax accountants may just be able to create real value elsewhere in our society.

    • Spudpicker_01 says:

      Youre right, the tax code is way to complicated for the rich and the corporations, I suggest a new one, it should be as follows:

      Total Gross Income x .10 = Taxes owed to the IRS

      This would be a simple 1 line tax code, executives at all corporation found to be in violation should spend a minimum of 10 years in prison without the possibility of parole

  11. zapeta says:

    GE did the same thing that we all do, try to take any route possible to minimize our tax liability. I just think that this points to the idea that some major tax loopholes need to be addressed.

    • Spudpicker_01 says:

      Let me tell you , if you swindled your way our of Billions of dollars in federal taxes, you would find yourself in prison pretty quick insteda of debating whether or not you had met your legal tax liability

  12. Don C says:

    Unfortunaetly, the genral public does not understand many of the tax laws, especially international tax law. When they see an article like this, it’s easy to jump to conclusions of suspicious and illegal activity. I read the article AND I read the income tax portions of their financial statement. They DO pay income taxes, A LOT of taxes, but not necessarily in the US.

    When you own a company, or in this case subsidiaries, in a foreign country, the net income of that company is generally not taxed in the US until the cash is brought back to the US (i.e. dividend). Generally, if you leave it there indefinetly, the income goes untaxed indefinitely.

    When you look at the GE financial statements, they combine profitable foreign entities with non profitable US entities. So the total income looks very profitable, but as I mentioned earlier, the foreign profits are not subject to US taxation (yet). US companies that lose money generally do not pay income taxes.

    This is NOT a loophole. These were an intentional set of tax rules designed to encourage US taxpayers to expand their businesses into other countries. Stop listenting to dopey politicians beating their chests or uneducated bloggers complaining about the tax law when they don’t understand the tax law to begin with.

  13. Fran says:

    Individual tax payers and small business, chumps that we are, have been footing the bill for services rendered to these global corporations, and it must stop. We pay for the military that makes the globe safe for their overseas activites. We pay for the infrastructure from which they benefit. We pay for an educated American market (not their most important market anymore) and their educated workforce (such that it is). In return, they get tax breaks up the wazoo? Enough. Send them the bill for services rendered. Now!

  14. TomM says:

    Ok, so you raise their taxes or take the tax loopholes out of the system. GE’s profit is less and guess what?……..someone or many people loose their jobs. Now I’m not saying that I’m not for some sort of reform. Just remember their are always consequences to actions. And this might be lost jobs….more than likely.

  15. Strebkr says:

    I’m all for the government getting a little less from companies and individuals. I just don’t have faith that they know how to spend the money best. They need to control spending, not increase their intake of our taxes.

    GE is very efficient with their money. They keep tons of people employed and do a bunch to advance US technology.

  16. skylog says:

    a lot can be said here, on both sides of the argument; however, if GE did everything “by the rules,” then one can not really say anything in that regard. perhaps the “rules” need to be changed, but that is another discussion.


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