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GE and Taxes: If Something is Legal, Does That Make it Right?

Monday, April 04, 2011 - 12:53 PM

WNYC

If something is legal, does it make it right?

That's the question that lies at the bottom of this firestorm over General Electric's lack of paying any taxes, even though it made a $5.1 billion dollar profit last year.

This is a timely post for me personally, as I'm working on my taxes now. I'm having to research some of the things you can write off as a freelancer and blog site owner. I've dropped quite a bit of money on related things, not the least of which includes traveling to New York City twice, buying a new laptop and a tablet. But as I look over some of the things I can claim, I start to get squeamish. It just doesn't feel right to claim some of the things I could claim, so I'm just not going to.

Part of it is it just doesn't make sense that I should be able to write off some of these things, like every single meal when I was in New York City for the launch of No Labels, and part of it is me thinking that our deficits are huge and I should do my part, however small, to help.

Boy wouldn't that be nice if business owners did the same? Exploiting the loopholes that businesses have lobbied to get over the years is a giant industry, and reading about how some of these companies avoid paying taxes sounds like a strange mystery novel.

To be fair, GE Capital lost $32 billion last year, which wiped out their tax burden, but should then they be allowed to get a tax return that was almost as much as they made in profit this year? Does that really make sense to anyone?

GE's CEO, Jeffrey Immelt, has been in the news a lot since his speech at the Economic Club of Washington came days after this announcement that his company had gotten such a massive tax return. Publicly, he agrees that our corporate tax system is terribly flawed, says he favors closing loopholes and lowering the overall rate so it is competitive with other developed nations' corporate tax rates.

I, of course, agree with that general idea, but one can hardly take him at his word that he actually believes this when his company spends more on lobbying to keep it's taxes low than any other company in the United States. If Immelt and GE really believed this, they would put their lobbying power where their mouths are and push for closing the loopholes and lowering the overall rate. Actions speak much louder than words. In reality, they'd much rather get special deals rather than have to pay the same rate as everyone else.

One of the quotes I've seen the most this week, from Immelt's speech, was, “Like any American, we do like to keep our tax rate low. But we do it in a compliant way, and there are no exceptions." In a very limited way, this makes some sense, but the American people don't get the same kind of sweet deals that GE gets through all the loopholes they've pushed for over the years, and the American people don't have an army of lobbyists and tax geniuses looking for ways to get out of paying their fair share.

The American people also can't just shift their means of making money overseas, as GE has done for the vast majority of the products it sells, avoiding taxes while also avoiding creating American jobs for the people who buy so many of their products. Not to mention the American people don't have the money to donate to hundreds of sitting congresspersons... which I'm sure has nothing to do with their ability to get those tax loopholes they exploit so well, or that chair at the head of the table of Obama's Council on Jobs and Competitiveness.

One would think the chair of such a advisory board would consist of people who actually are creating more jobs here in the United States, while Immelt just builds more factories overseas, sees his pay double and asks his employees to accept pay cuts. This is also the CEO of the company pushing for a jet engine for the F-35 Joint Strike Fighter, even though the military doesn't want it.

This guy shouldn't just be let go from the President's Council, he should be kicked out and rhetorically tarred and feathered for being a classic example of what a patriotic corporation in the United States isn't.

Solomon Kleinsmith is a nonprofit worker, serial social entrepreneur and strident centrist independent blogger from Omaha, Nebraska. His website, Rise of the Center, is the fastest growing blog targeting centrist independents and moderates. He is currently collaborating with other centrist independent and moderate bloggers on a news aggregation and social networking site, and is always looking for ways to help the independent groundswell as more and more people become disaffected with the two major parties.

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Comments [6]

Solomon Kleinsmith from Omaha, NE

I didn't say anything was GE's fault. I said Immelt is a terrible pick to have on an advisory board on job creation, given his company's track record. But since we're on the subject, it takes two to tango. Of course lawmakers are partially to blame, for bending to the lobbying, but GE also threw down millions to bend, find loopholes in and twist laws to their own benefit so they don't have to pay their fair share, like most companies have to do who don't have tax avoidance armies.

Apr. 06 2011 11:49 AM
Justin Krebs from NYC

Solomon -

Joe Nocera, the new Times columnist, addressed this as well -- arguing it's not GE's fault...it's in their interest to pay as little in taxes as possible...but that it's the fault of policy makers who let this happen.

While the selfishness of the the corporate sector rankles me, I hold our elected officials in large part responsible for not pursuing tax policy that prevents these tax dodges from taking place. (And that includes politicians of both parties.)

Apr. 06 2011 10:36 AM
Solomon Kleinsmith from Omaha, NE

Harrison - Fact of the matter is... if there was a hard flat tax like you suggest, there is a huge portion of the populace on the bottom of the income spectrum that would see their taxes multiply, some of them from next to nothing, and literally put them on the street since so many of them are paycheck to paycheck. Would also significantly raise lower middle class taxes, something that wouldn't help anyone. The progressive taxation system is widely popular, and wont be going away.

And it really isn't any more fair either. There is a somewhat convincing argument to be made for every form of taxation, using fairness as a guideline. Just depends on the assumptions you begin with. Is fairness just on the front end, as your logic would be reliant upon, or is it on the back end, as those who are more liberal would suggest that the wealthy clearly enjoy more government spending than the poor do per capita... or is it somewhere in between, as I would suggest?

Apr. 05 2011 06:33 PM
Harrison Bergeron from Fair Lawn NJ

Note also: "legal" and "right" are two distinct, mostly unrelated subjects.

If one is acting "legally", it means only that one is acting within the limits of a set operating rules.

If one is acting "rightly", it means that one is acting with empathy for one's fellow human beings.

Regarding the civil codes that affect most of our lives: some of the operating rules may have been drawn up with good intentions. But many of them may not have been. Generally, the politiicans who write and vote on the rules are not subject matter experts. Rather they are lawyers and must rely on others to advise them on the rules. Most of the people who have real access to the politicans are big-money types -- not regular working people. So the big-money types are in the position to make the rules in a way that serves them best. The truth of this is plain to see, by the ever-increasing concentration of wealth into the hands of a small percentage of the population.

Apr. 05 2011 09:44 AM
Harrison Bergeron from Fair Lawn NJ

Solomon, you are right on all counts.

A few of my friends and I have worked out this whole fair-share-of-taxes issue, (over a few beers). We think that every houshold and every business should pay the same percentage of their gross income. If the feds need thirty percent of our money to finance the governement -- then every houshold and every corporation pays 30%. Simple.

What we each do with the rest is our own business. I don't think that the government has any business either subsidizing or penalizing lifestyle choices, such as: buying a house or living on a boat, raising two kids or eight or none, buying health insurance or getting it through one's employer or rolling the dice and going without it, etc..

Apr. 04 2011 10:43 PM
Evgeny Volovoy from Queens, New York

It is legal, because at one point in time big business bought its way into it. The answer lays in the different plane, it is corrupted. The corrupted law, brought in by corrupted politicians. It hurts the US national interests, of which the congress, and the government like to talk so much about. It must be changed, just like the score of other laws hurting the country, and slowly bleeding it out.

Apr. 04 2011 10:01 PM

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