General Electric's "Imagination At Work"

Some posts almost write themselves. Fortunately for me, this is one of those days. The New York Times gave us the goodies in G.E.'s Strategies Let It Avoid Taxes Altogether.

General Electric, the nation’s largest corporation, had a very good year in 2010.

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

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

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm.

Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

The GE Tax Story — click on the image to enlarge in a new window or tab

This would be good time to remember that the O-Man hired GE's chief executive Jeffrey Immelt to be his liaison to the business community and the chairman of the President’s Council on Jobs and Competitiveness, which is expected to discuss corporate taxes according to the Times. But is a multinational CEO the best choice to be your jobs czar?

In the wake of Jeffrey Immelt's ascent to the chairmanship of President Obama's jobs council, some commentators have questioned whether the leader of General Electric, a company that has sharply reduced its United States payrolls over the years, is the best person to be orchestrating a jobs revival.

Among executives of multinational companies, Mr. Immelt is hardly alone in having presided over a major reduction in domestic jobs amid a major increase in foreign jobs. Witness the following chart, which shows changes in domestic and foreign employment at American multinational companies from 1998 through 2008 (that is, the decade leading up to the financial crisis):

Source

This would also be good time for us to recall all of the following—

And the madness continues: When General Electric settled SEC securities fraud charges yesterday by paying a fine of $50 million, it was chump change in the context of the volume of federal assistance the company has already received.

"GE bent the accounting rules beyond the breaking point," said Robert Khuzami, Director of the SEC's Division of Enforcement....

But the most egregious part is that the settlement is being made with our money. Back in November, the federal government agreed to insure as much as $139 billion in debt for GE Capital.

So $50 million fine or no, GE is much better off for the help of friendly regulators in Washington. This is exactly the same story as we saw with Bank of America two days ago, which settled SEC fraud charges by returning about 1/5th of 1% of the bailout money it had received.

But I digress. The usual reaction to General Electric not paying any Federal taxes is to complain about the complexity of the tax code. Everyone agrees that considerable simplification is in order. With a simplified tax code, General Electric could not use its in-house "world’s best tax law firm" to avoid paying Federal income tax. But how did the tax code get so complex? Here's a short multiple-choice quiz. The tax code—

A. was designed by dyslexic accountants at the IRS
B. was written by an army of monkeys banging on typewriters
C. was crafted by corrupt legislators rewarding those who had bribed them
D. was written by space aliens from the Virgo Cluster, who were subcontracted to do the job.

If you answered "C", congratulations!

Insert my usual acerbic comment about how far gone our society is <HERE>.

Bonus Video from The Daily Ticker (formerly Tech Ticker). Henry and Aaron talk about General Electric.

 

Comments

[Morocco Bama]

Once again, excellent post, Dave. Climate Regress had a similar post, although your's is much more informational and you're not a propagandist like that blog, and I made several comments there to the same effect. Simplifying the tax code is impossible without other things happening either before or concomitantly...for example, removing the legal status of corporations as persons and implementing public financing versus private and term limits. But I'm fooling myself, because even that's not enough at this point.

I would disagree with you on one minor point about C. being the answer. The legislators no longer craft such legislation....the industries to which they are beholden do that for them in collaboration with the legislator's staff. Isn't that nice of them?