Sunday, March 27, 2011

How did GE pull it off ? - "Some people rob you with a six-gun..."

"...some people rob you with a fountain pen"

And some people rob you with lobbyists re-writing the tax laws.

It's been reported widely - including here - that General Electric paid zero taxes on over $14 billion in profits for 2010. What's gotten a bit less attention is the part of the story where GE not only doesn't pay any taxes, but got a "tax benefit" of $3.2 billion - which presumably means that Uncle Sam owes GE a multi-billion dollar credit against future taxes (assuming the sharks at GE ever are liable for any.)

As the New York Times story explains in painful and anger-inducing detail, GE is typical of large corporations - although obviously more skilled than many - in employing a small army of well-funded lobbyists to work Washington for tax breaks, loopholes, "incentives", "credits", etc. - ad nauseum.

This is the background to what are called "tax expenditures" - i.e. money that the US Treasury forgoes on taxable income and corporate profits because of various "work-arounds" as fine print  written into the tax code.  It is a huge issue for corporations like GE, but it's an imbalance in our tax system that comes into play with taxation on wealthy individuals as well.