Partly Cloudy79° WeatherPartly Cloudy79° Weather
A Times Editorial

Big companies, big tax breaks

When Benjamin Franklin wrote, "In this world nothing is certain but death and taxes," he didn't know about General Electric. The nation's largest corporation has avoided one of these inevitabilities by using every possible trick to avoid paying taxes. That only shifts the burden to individual taxpayers, and it underscores the need for tax reform.

General Electric's 975-person tax department is so successful that last year the company reported worldwide profits of $14.2 billion with $5.1 billion coming from its U.S. operations — and paid not one nickel in U.S. corporate income taxes. Instead, it claimed a tax benefit of $3.2 billion.

Putting aside the technical legality, at its core this constitutes a massive transfer of wealth from American taxpayers to a giant corporation, reinforcing calls by President Barack Obama to close corporate tax loopholes.

The top corporate income tax rate in the United States is a rather substantial 35 percent, but a large swath of America's multinational companies don't come close to paying that rate. According to an analysis commissioned by the New York Times, 115 of the 500 big companies in the Standard & Poor's stock index paid an effective corporate tax rate of less than 20 percent over the last five years.

General Electric's strategy is to construct ways to declare its profits in low-tax countries, as well as accumulate tax credits and writeoffs. As reported by New York Times writer David Kocieniewski, over the last three years, GE received 46 percent of its revenue in the United States but claimed only 18 percent of its profits from here.

When its nationally renowned tax department can't exploit loopholes in current law, the company unleashes an army of lobbyists to get Congress to change tax laws. It spent more than $200 million in lobbying over the last decade, and its return on investment has been significant.

But rather than create jobs, GE has been methodically dropping American workers in favor of their overseas counterparts. Since 2002, GE has cut a fifth of its U.S. work force while simultaneously increasing employment in other countries. Nice corporate patriotism.

The consequences of all this tax avoidance is to shift the tax burden from wealthy corporations to individual taxpayers. In the mid 1950s, the corporate share of federal revenue was 30 percent. In 2009, it was 6.6 percent.

This cannot continue, and a bipartisan response is needed. Obama has called for the restructuring of corporate income taxes through lowering rates and closing loopholes. He needs congressional partners who can say no to corporate lobbyists, otherwise expect GE and other rich multinationals to starve the Treasury of whatever they can get away with, year after year.

Big companies, big tax breaks 04/07/11 [Last modified: Thursday, April 7, 2011 11:34pm]

    

Join the discussion: Click to view comments, add yours

Loading...