[normajean777]

Originally Posted by JerryLove

A "simple" tax might be "10% of net earnings", to which GE simply declares all its earning in Jamaca (where they have some office with 3 employees. Jamaca can afford to offer 0.5% income tax because they need offer no real services in return).

Not to mention that such a simple tax would fail to encourage growth. [hypothetical] Sure both we and Tiwan offer "10% tax" but Tiwan (not worrying about "simple") is offering to make new infrastructure 100% deductable and is willing to secure financing if GE builds there. [/hypothetical]

And so on, and so forth.

Are you saying you support these incentives now?

[Bryan]

won't the additional taxes just increase the cost of goods and the consumer ends up paying more?

[Jfool]

Originally Posted by JerryLove

Can we agree that this is an example of why the tax code should be altered to make sure we *collect* corporate taxes?

I am essentially agreeing with this statement that you made. We seem to be demonizing GE for "working the system" while not doing anything about the system.

Originally Posted by Bryan

won't the additional taxes just increase the cost of goods and the consumer ends up paying more?

Yes.

[Napoleon17]

Originally Posted by Bryan

won't the additional taxes just increase the cost of goods and the consumer ends up paying more?

I used to think this but I'm questioning it now. Pricing is a complex thing for businesses... if they could increases prices to cover the losses associated with an increase in actual taxes paid then they would have already increased the price, because it would mean more profit. Prices tend to settle into a sort of market equilibrium. There are differences in price sensitivity among companies, of course. The demand for gas is always going to be stable or high until Americans figure out another way of getting to work. But the demand for electric toothbrushes is going to be pretty sensitive. If a company raises the price of their electric toothbrush from $110 to $240 there is going to be a significant drop in demand, revenue, profits, etc.

I believe it is more likely that the employees of the companies facing an increase in taxes would be hurt as the companies try to cut costs even more than they have in the past 2-3 years. Increased workloads, less hiring, less raises, less promotions, less benefits, less healthcare, etc.

[Chrysostom]

Originally Posted by JerryLove

Can we agree that this is an example of why the tax code should be altered to make sure we *collect* corporate taxes?

I wonder if the US has high tax rates because we offer the most to companies (political stability, access to resources, infrastructure, the largest consumer market in the world)?

The US has high nominal tax rates but the taxes actually collected from corporations are not nearly as high as the nominal rates would imply, relative to other countries. In practice US corporations on average pay basically what corporations in other similar countries pay, though of course "on average" allows that some might pay much higher and some much lower than the average. GE here is a perfect example. How did it manage to avoid paying taxes?

First, by jumping on the "green" bandwagon, or "social consciousness" more generally. American culture thinks that enacting what is importantly ethical is basically the government's job, so we give gigantic tax breaks to a corporation like GE that jumps on the "green" bandwagon. So, if we're going to blame GE, also blame Al Gore and Tom's Shoes and whatever.

Second, GE has engaged in big-time lending operations in an environment heavy with fear of investment and risk-taking, government scrutiny on lenders, etc. We think it's really important for the government to guide lending operations and GE played along. So, if we're going to blame GE, also blame the folks who thought we should use FNM/FRE to provide mortgages to people who couldn't otherwise afford houses, and we had to "bail out" the big investment banks because their lending (which we also decided we needed to mix up with investment banks ten years earlier) is too important to fail.

So, conclusion time. Nominal corporate tax rates are high specifically so that we have the leverage to direct corporations with big tax deductions. The desire to accomplish "socially conscious" goals through government incentives to corporations is the basic reason that GE paid no taxes.

I'm not saying that that is a good or bad thing. You might think it is bad because they paid no taxes directly to the federal government. But keep in mind this: You might think it is good because it means that we convinced GE to do all sorts of things we wanted it to do without having to involve a middle-man (the government). Did GE do a better or worse job at the government's goals, relative to the money it saved in taxes? If better, should we be glad that GE paid no taxes, because it means the government's goals were accomplished better than they would be otherwise?

And as a corollary: This means that the size of government can grow much larger than the reported federal budget, because those tax deductions are not included in the budget.

[JerryLove]

John,

I think you rase a vary valid point, and case for why a company which earned high profits could end up with no direct tax payments.

I have more than the sneaking suspicion that it is, however, a hypothetical case not consistant with the reality of GE. I have no doubt that they did indeed benifit from tax incentives I myself might support: but I see no indication that these were sufficient to qualify for the results that actually occured; and no indication that GE itself is even trying to make that case.

..and yes: I can (and do) blame the politicians that passed these laws. These politicians gained power in the first place because they showed a willingness to pass the laws handed to them by the lobbies.

We the people elect the politicians with the best media campaigns: and those are the ones with the most money and influence: and those are the ones who are doing the bidding of those with money and power already.

The CEO of GE is Obama's corporate liason (Tzar?). The Attorney General was from the RIAA. The government exists, it seems, to cater to the combined greed of those in government and their corporate masters.

[Chrysostom]

Originally Posted by JerryLove

I think you rase a vary valid point, and case for why a company which earned high profits could end up with no direct tax payments.

It's worth saying, even though this hasn't really been a big deal on this thread, that the NYT correctly started hedging its original claims about GE. So, the original headlines made it sound as if GE had not only paid zero taxes but indeed received billions in refunds from the government. They do expect to owe taxes this year, just not a lot. And, of course, that's just federal corporate taxes; the article says nothing about finding ways to avoid the many, many other taxes they would owe.

Originally Posted by JerryLove

I have more than the sneaking suspicion that it is, however, a hypothetical case not consistant with the reality of GE. I have no doubt that they did indeed benifit from tax incentives I myself might support: but I see no indication that these were sufficient to qualify for the results that actually occured; and no indication that GE itself is even trying to make that case.

The tax stuff comes down to four things, and while deductions on the order of "green" tax credits are fourth on the list they are significant, and the others are related to what we wanted taxes to look like even if they are more along the lines of Fannie Mae / Deregulation / Bailout fiascos or "paying less taxes next year if you lost a gigantic amount of money this year" than Green Energy. (I would say, of course, remember that even you and I will take whatever tax deductions we can find, and GE is under non-stop IRS audit so it's not just going to fudge a deduction and hope nobody notices, like one of us might. Even they are due a bunch of deductions, of course they will take them.)

1. Multinational corporation able to shift most of its tax burden to low-tax nations.

2. Net Operating Loss (Note: Why didn't we hear about the GE CEO foregoing the eight figure bonuses he was contractually due when business dipped a few years back?)

3. Lending business

4. "Green" incentives, etc.

Originally Posted by JerryLove

..and yes: I can (and do) blame the politicians that passed these laws. These politicians gained power in the first place because they showed a willingness to pass the laws handed to them by the lobbies.

Maybe what I'm saying is that I'm not quite so easily convinced that blame must be placed at all. Basically, the more power we give the government to encourage and protect social good (i.e., incentives and regulation), the more we are open to this kind of stuff no matter what. Is regulation and government incentive necessarily a bad thing? I'm not so sure of that. I have a knee-jerk reaction to encourage caution, but that's probably less because of the idea of regulation/incentives so much as the general looseness of government implementation.

Example: Many expensive new subdivisions and high-rise condos here in Austin got some big-time government money (various sources) for including "low-cost" housing. Get the poor into homes and reduce economic cloistering, right? Wrong. The builders all found buyers who had just graduated from college or were for some other reason just beginning a new job that would pay big wages -- they still had money, but their tax returns let them count as "poor" for the purposes of the purchase. And, of course, they got plenty of additional subsidies for the actual loans: low or no down payments, artificially low interest rates, etc., thanks to other government programs.

You open yourself up to this kind of abuse every time the government regulates or incentivizes. That doesn't mean you shouldn't do it; sometimes there are very good intentions, and indeed you often get SOME of the intended benefit. (Although in our case, GE may have managed to keep an important incentive around for a few more years by buying off some crucial New York politicians.) Of course, the bigger that government pie gets, the more reasons to hire cadres of smart, well-equipped sharks to figure out how to squeeze the regulations and incentives for everything they allow. (Hence GE's deal with those politicians.) I guess I get increasingly skeptical the larger, less dynamic, and less local an institution gets. Still, that doesn't mean that any politician who passes an incentive or regulation for social good must have done something wrong; even if that government action allows what might look like ridiculous results (e.g., GE pays very low taxes), that might just show that it *succeeded* at modifying corporate behavior exactly as the government wanted, which might in the final accounting be looked at as a good thing despite the headlines it can create (especially when the original buzz about the NYT article was misleading, which a new headline or some such can't fix).

Originally Posted by JerryLove

We the people elect the politicians with the best media campaigns: and those are the ones with the most money and influence: and those are the ones who are doing the bidding of those with money and power already.

Although that sounds like the fault of "we the people" every bit as much as corporations. We're the mindless buffoons who uncritically receive the shamanistic lore from the colorful box. We're the ones whose only solution seems to be "the government should..."

[JerryLove]

Originally Posted by Chrysostom

Although that sounds like the fault of "we the people" every bit as much as corporations. We're the mindless buffoons who uncritically receive the shamanistic lore from the colorful box. We're the ones whose only solution seems to be "the government should..."

I live in FL. We just elected a governor with no political experience, whose corporation defrauded medicare of hundreds-of-millions, and we are surprised that he's doing a lousy job?

The people vote ignorantly.