How to make $5.1 Billion (US) and not pay federal taxes

[Norman]

A story in the NYT explains how General Electric made 5.1 Billion USD profit last year, but did not pay a single dime in federal taxes. I wish I had millions of dollars to lobby congress to make special laws for me not to pay taxes.

See the article here: http://www.nytimes.com/2011/03/25/b...580187-HWK/YsUY3H85DTyZ4E8 3Q&pagewanted=all"

Thoughts? They claim they are following the law. If they are, then the laws need to be changed.

 

[jambaugh]

The shareholders still pay capital gains and taxes on their dividends. They are just not getting taxed twice.

Note also, in so far as "paying their fair share" GE employs people who pay income tax, produces goods and services which result in sales taxes and tariffs, purchases materials on which they pay sales taxes, and own property on which they pay property taxes.

You can scream about GE getting away with something but they are making that money by productive endeavors and the taxes they do not pay will be reinvested to increase their productivity.

That having been said, the problem is that the state has discretion as to who gets taxed how much. A flat tax, equal for all income levels and means, i.e. the same rate for dividends, capital gains, passive and active income with no tax breaks for any reason would solve this. Eliminate corporate taxes all together since they result in double taxation. Successful corporations will be successful because they are more efficiently productive in a competitive market and not because their lobbyists have the ear of the senior legislators. Their profits either go toward taxable channels i.e. dividends and salaries, or toward capital growth (taxed as shareholder gains) and additionally growing the economy i.e. producing more jobs, more cheaper products of better quality, and higher quantity. You get rid of much of the "necessary" spending the State utilizes taxes to do while increasing the tax base they receive. Everybody wins!

 

[Norman]

Double tax?? So what. It happens to every private citizen on every commodity they buy. Big deal.

And you cannot guarantee that quality will increase, given your scenario. It may, but quality of goods is not so strongly related to corporate taxes.

 

[Proton Soup]

The shareholders still pay capital gains and taxes on their dividends. They are just not getting taxed twice.

Note also, in so far as "paying their fair share" GE employs people who pay income tax, produces goods and services which result in sales taxes and tariffs, purchases materials on which they pay sales taxes, and own property on which they pay property taxes.

You can scream about GE getting away with something but they are making that money by productive endeavors and the taxes they do not pay will be reinvested to increase their productivity.

That having been said, the problem is that the state has discretion as to who gets taxed how much. A flat tax, equal for all income levels and means, i.e. the same rate for dividends, capital gains, passive and active income with no tax breaks for any reason would solve this. Eliminate corporate taxes all together since they result in double taxation. Successful corporations will be successful because they are more efficiently productive in a competitive market and not because their lobbyists have the ear of the senior legislators. Their profits either go toward taxable channels i.e. dividends and salaries, or toward capital growth (taxed as shareholder gains) and additionally growing the economy i.e. producing more jobs, more cheaper products of better quality, and higher quantity. You get rid of much of the "necessary" spending the State utilizes taxes to do while increasing the tax base they receive. Everybody wins!

you're assuming the profits stay in the state/country. successful individuals prefer avoiding taxes, too.

 

[Pattonias]

Double tax?? So what. It happens to every private citizen on every commodity they buy. Big deal.

And you cannot guarantee that quality will increase, given your scenario. It may, but quality of goods is not so strongly related to corporate taxes.

Well, given your analogy you are wishing for a triple tax...

Quality of goods, or even the existence of goods is related to the cost of production. Taxes increase the cost of production. Not the case for every corporation, but when you increase the taxes you force the company to either reduce the quality or raise the price of the item.

The exception is the company that maximizes their profit at all costs e.g. making a product a cheaply as possible at the expense of quality to maximize profit. Of course if you make a poor product no one will buy it. Most companies find a happy middle ground.

Anyway, what exactly is your point about the taxes? If you raise the taxes high enough companies will just move somewhere where the taxes are lower. Making deals with the Federal and local governments for tax breaks to build new plants is a common occurrence. If this kind of dealing was illegal you would see industry moving to countries that would deal. Our jobs would leave with them. This kind of dealing has been going on since the advent of government and taxes.

 

[Norman]

Well, given your analogy you are wishing for a triple tax...

Technically, you are wrong. The US taxes corporations on Gross Income. Gross Income is calculated minus the cost of the product produced. Some of which is the cost of labor paid to employees.

Quality of goods, or even the existence of goods is related to the cost of production. Taxes increase the cost of production. Not the case for every corporation, but when you increase the taxes you force the company to either reduce the quality or raise the price of the item.

The exception is the company that maximizes their profit at all costs e.g. making a product a cheaply as possible at the expense of quality to maximize profit. Of course if you make a poor product no one will buy it. Most companies find a happy middle ground.

I would agree.

Anyway, what exactly is your point about the taxes? If you raise the taxes high enough companies will just move somewhere where the taxes are lower. Making deals with the Federal and local governments for tax breaks to build new plants is a common occurrence. If this kind of dealing was illegal you would see industry moving to countries that would deal. Our jobs would leave with them. This kind of dealing has been going on since the advent of government and taxes.

My point in the post you quoted (which I assume is what you are referring to here, if not please correct me) is that private citizens get hit with the double tax also, so why argue that corporations shouldn't?

I don't disagree that using tax breaks to promote business in your region is a good way to bring in jobs. BUT, 5.1 billion dollars in profit which is not being taxed at the typical corporate rate of 30% (or is it 35%, I cannot remember for sure) is a ton of revenue that the US is missing out on. Remember that $5.1 billion is above and beyond their costs. But it doesn't really matter, since with 5.1 billion in profit they can easily afford to keep congresscritters (thanks to whoever used that term first around here - I love it) in their pocket, making laws to let them get out of paying taxes.

 

[WhoWee]

Why don't we broaden the scope of the discussion a bit?

http://www.huffingtonpost.com/2011/01/21/jeffrey-immelt-council-on-jobs-and-competitiveness_n_812005.html

"Displaying stepped-up outreach, Obama on Friday named GE's chief executive, Jeffrey Immelt, as the head of a Council on Jobs and Competitiveness."

http://news.yahoo.com/nphotos/President-Barack-Obama-accompanied-GE-CEO-Jeffrey-Immelt-left-and/photo//110121/480/urn_publicid_ap_org_edcf018655244a1dbe2dafb9a2b7c563//s:/ap/20110121/ap_on_re_us/us_obama_economy

http://www.dailymail.co.uk/news/art...bn-China-development-production-moves-US.html

http://www.theindiaexpert.com/tag/obama

 

[BobG]

That having been said, the problem is that the state has discretion as to who gets taxed how much. A flat tax, equal for all income levels and means, i.e. the same rate for dividends, capital gains, passive and active income with no tax breaks for any reason would solve this. Eliminate corporate taxes all together since they result in double taxation. Successful corporations will be successful because they are more efficiently productive in a competitive market and not because their lobbyists have the ear of the senior legislators. Their profits either go toward taxable channels i.e. dividends and salaries, or toward capital growth (taxed as shareholder gains) and additionally growing the economy i.e. producing more jobs, more cheaper products of better quality, and higher quantity. You get rid of much of the "necessary" spending the State utilizes taxes to do while increasing the tax base they receive. Everybody wins!

I agree that taxing only personal income (regardless of source) is a better way to do things economically regardless of whether it's a progressive tax or a flat tax (in other words, the flat tax part is both of secondary importance and highly unlikely).

No matter what you set the corporate tax rate at, other countries will respond and set theirs a little lower than the US rate. That's something that just accompanies being the largest economy in the world. We basically set the international level. And, a developing country desparate for jobs will set their corporate tax rates significantly lower than the developed world (so third world countries would hate us if we totally destroyed the concept of corporate taxes).

Still, the benefits of taxing only personal income would be something that would have to be seen before the general populace could appreciate them. On the surface, relying only on personal income would look like a huge incease to most people - especially if you used a flat tax. A flat tax would be a real increase for most people since the top 10% (those over $115k - $120k) are paying over two thirds of the nation's income taxes right now. Meaning however hard it would be to transition to just personal income tax, transitioning to a flat tax would be even harder.

Even though corporate taxes wind up being a flat tax included in the price of goods, eliminating them isn't guaranteed to produce an immediate reduction in prices, either. Just watching the rise and fall of gasoline prices should show that. The gasoline industry really does gouge customers on prices, just not where consumers expect it. The gouging occurs when the price of gasoline is dropping. Rises in retail prices react quickly to the cost of oil, refining the oil, etc, but drops in retail prices react slowly to drops in the cost of oil, refining, etc. Likewise, consumers would see a benefit in the long term, but the reductions in prices would be gradual instead of dramatic, making the conversion to personal income taxes even less popular immediately after they were implemented.

In other words, you're hoping for the impossible. It's easier to pass invisible taxes like a corporate tax. The consumer pays those kinds of taxes without realizing it and so they don't complain.

Note: Unrelated, but I came across a couple interesting facts about medicare. 63% of medicare expenditures go to just 10% of medicare recipients. During the last year of a person's life, they consume 4 times more than the average recipient in medicare benefits.

 

[Insanity]

A story in the NYT explains how General Electric made 5.1 Billion USD profit last year, but did not pay a single dime in federal taxes. I wish I had millions of dollars to lobby congress to make special laws for me not to pay taxes.

See the article here: http://www.nytimes.com/2011/03/25/b...580187-HWK/YsUY3H85DTyZ4E8 3Q&pagewanted=all"

Thoughts? They claim they are following the law. If they are, then the laws need to be changed.

Getting a $3.2 Billion credit on $5.1 Billion US profit as well, interesting, eh?
Wonder if they paid any foreign taxes on the remaining $9.1 Billion?

 

[D H]

I agree that taxing only personal income (regardless of source) is a better way to do things economically regardless of whether it's a progressive tax or a flat tax (in other words, the flat tax part is both of secondary importance and highly unlikely).

I agree with you in that the flat tax part is of secondary importance and that it is highly unlikely. I'm not so sure I agree with your (or BobG's) stance on personal income as the sole source of revenue for the federal government. There certainly are advantages in doing so. But what about Social Security? Yes, it is a ponzi scheme and all that, but there has been some kind of promise behind it up until now. Truly basing all taxation on income would entail a massive revamp of Social Security. Is this politically likely?

In other words, you're hoping for the impossible. It's easier to pass invisible taxes like a corporate tax. The consumer pays those kinds of taxes without realizing it and so they don't complain.

Oh, we notice. Just fill your car with gas in two different states.

Also notice that corporate taxes are a small slice of the federal government's federal receipts pie. Only 7% of federal receipts can from corporate taxes in FY 2009. The lion's share in 2009 came from personal income taxes (43%) and FICA (42%).

Note: Unrelated, but I came across a couple interesting facts about medicare. 63% of medicare expenditures go to just 10% of medicare recipients. During the last year of a person's life, they consume 4 times more than the average recipient in medicare benefits.

Dying is expensive and is going to get more expensive as we live longer and longer. That's just life -- and death.

 

[BobG]

I'd also get rid of those "Married filing jointly", "Head of household", and "Single" categories. I don't like paying a divorce tax on top of the "tax" I already pay to the ex.

 

[BWV]

Who do you think ultimately pays the corporate income tax? GE is an entity comprised of management, employees, shareholders and customers. A dollar paid in tax is a dollar not reinvested in hiring a worker, building a factory or paying a dividend to the shareholder. Any dollar the corporation spends results in taxable income to an individual, however there corporate income tax does not distinguish between rich and poor, so it is by far the most regressive form of taxation. Furthermore, individual taxation does not have to deal with concepts like profit, loss, fixed asset purchases and depreciation etc, so it can be far less complex than corporate income tax. The considerable resources devoted to compliance with the corporate tax code are a net drain on the economy, as nothing productive is generated by them. Additionally, the tax code is a mechanism for rent-seeking where corporations spend money on lobbyists to garner favorable loopholes for themselves at the expense of others. The most progressive and pro-middle class action would be to simply eliminate both the corporate income tax and special tax rates for dividend income and capital gains.

 

[WhoWee]

Who do you think ultimately pays the corporate income tax? GE is an entity comprised of management, employees, shareholders and customers. A dollar paid in tax is a dollar not reinvested in hiring a worker, building a factory or paying a dividend to the shareholder. Any dollar the corporation spends results in taxable income to an individual, however there corporate income tax does not distinguish between rich and poor, so it is by far the most regressive form of taxation. Furthermore, individual taxation does not have to deal with concepts like profit, loss, fixed asset purchases and depreciation etc, so it can be far less complex than corporate income tax. The considerable resources devoted to compliance with the corporate tax code are a net drain on the economy, as nothing productive is generated by them. Additionally, the tax code is a mechanism for rent-seeking where corporations spend money on lobbyists to garner favorable loopholes for themselves at the expense of others. The most progressive and pro-middle class action would be to simply eliminate both the corporate income tax and special tax rates for dividend income and capital gains.

Are you comfortable with their CEO working for President Obama AND the President working as a "Rainmaker" for GE?

 

[BWV]

Are you comfortable with their CEO working for President Obama AND the President working as a "Rainmaker" for GE?

no, but what does that have to do with what I posted?

 

[turbo]

Astrazeneca (sp?) has allocated over a billion dollars to settle tax-fraud claims against the company because they used the same tactics as GE. Allocate profits to divisions that are located in tax-advantaged countries, allocate expenses to divisions in countries where the expenses can result in tax refunds.

I have nothing against multi-national companies because that's how they can expand and grow. I do have a beef against companies that move American jobs overseas and exploit our tax laws to avoid taxes on their profits.

 

[russ_watters]

...exploit our tax laws to avoid taxes on their profits.

Wait, don't you do that? You should!

 

[Amp1]

It seems from the Times article that they (G.E.) also help implement those laws but an ordinary individual can't benefit from them to reduce their taxes.

 

[turbo]

Wait, don't you do that? You should!

No I pay my taxes and I don't chisel or cheat. When I was consulting (self-employed) the taxes were brutal at times, but I didn't cheat.

 

[jtbell]

The shareholders still pay capital gains and taxes on their dividends. They are just not getting taxed twice.

As far as the double-taxation argument is concerned, I would have no problem with corporations being able to deduct dividends paid to shareholders, from their taxable income.

 

[OmCheeto]

It seems from the Times article that they (G.E.) also help implement those laws but an ordinary individual can't benefit from them to reduce their taxes.

Most ordinary individuals don't employ 300,000 people, who all pay taxes, hopefully not at the 0% rate.



One thing I find interesting about GE is that they were very up front about funneling their profits overseas.

United States Securities and Exchange Commission
Annual Report
http://www.sec.gov/Archives/edgar/data/40545/000119312511047479/d10k.htm"
For the fiscal year ended December 31, 2010
General Electric Company​

At December 31, 2010, $94 billion of earnings have been indefinitely reinvested outside the United States. Most of these earnings have been reinvested in active non-U.S. business operations, and we do not intend to repatriate these earnings to fund U.S. operations. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely.

As far as the double-taxation argument is concerned, I would have no problem with corporations being able to deduct dividends paid to shareholders, from their taxable income.

Does anyone know the history of why dividend payments to investors cannot be deducted?
It doesn't make sense to me.

Does anyone know if banks get to deduct the interest they pay me?

 

[russ_watters]

No I pay my taxes and I don't chisel or cheat. When I was consulting (self-employed) the taxes were brutal at times, but I didn't cheat.

There is no "cheating" (implication: illegal activity) being alleged, turbo-1 (unless, of course, you are now making the claim). GE is just taking the best advantage of tax law that they can. That's what the word "exploit" means! And everyone should be doing that. It would be foolish not to take advantage of every available deduction.

 

[Al68]

My point in the post you quoted (which I assume is what you are referring to here, if not please correct me) is that private citizens get hit with the double tax also, so why argue that corporations shouldn't.

I've pointed this out in other threads: Corporations themselves don't, and logically cannot, pay taxes.

Any taxes claimed to be paid "by corporations" are in reality paid by private citizens in addition to other taxes.

Claiming that taxes are paid "by corporations" is logically equivalent to claiming that gas taxes are paid by the gasoline. Flesh and blood people pay all taxes. Repeat: Flesh and blood people pay all taxes.

 

[Al68]

Does anyone know the history of why dividend payments to investors cannot be deducted?

Because if they were, there would be no double taxation of the same investment income. Dividends are the corporation's profits, shareholders are its owners.

 

[jambaugh]

you're assuming the profits stay in the state/country. successful individuals prefer avoiding taxes, too.

No I'm not so assuming. They can leave in one of two ways, paying salaries overseas or being paid as dividends to overseas investors.
W.r.t. the latter, I don't think it fair that say France charge me taxes for dividends so I don't think the US should charge someone who decides to live in France as a non-US citizen.
(But this is not generally the case, e.g. I loose 1/3 of my few dividends on New Zealand Telecom.)

As to people making such a choice well I think States should have to compete for their revenue source just as should corporations. If the tax burden is too onerous for the freedoms provided...

As to overseas salaries, what right has the US to tax transactions outside their jurisdiction? (Though they do anyway...if you live and work overseas you still pay US income tax, however depending on what treaties exist with that other country and how much they take there is a prorated tax.)

The profits go where they can make the investors the most future profits. That's good and fair and if the US can't compete for that money it needs to change policy in a way that encourages its return. Granted they should do so uniformly and not just for the companies who excel at lobbying. What's good for the goose is good for the goslings.

 

[Proton Soup]

No I'm not so assuming. They can leave in one of two ways, paying salaries overseas or being paid as dividends to overseas investors.
W.r.t. the latter, I don't think it fair that say France charge me taxes for dividends so I don't think the US should charge someone who decides to live in France as a non-US citizen.
(But this is not generally the case, e.g. I loose 1/3 of my few dividends on New Zealand Telecom.)

As to people making such a choice well I think States should have to compete for their revenue source just as should corporations. If the tax burden is too onerous for the freedoms provided...

As to overseas salaries, what right has the US to tax transactions outside their jurisdiction? (Though they do anyway...if you live and work overseas you still pay US income tax, however depending on what treaties exist with that other country and how much they take there is a prorated tax.)

The profits go where they can make the investors the most future profits. That's good and fair and if the US can't compete for that money it needs to change policy in a way that encourages its return. Granted they should do so uniformly and not just for the companies who excel at lobbying. What's good for the goose is good for the goslings.

what is fair is that business pay taxes to support the services they receive from their hosts. this includes things such as roads, police protection, access to the courts, education of the labor force, military protection, etc. it really doesn't matter where they exist on paper. or at least it shouldn't. the fact is, they like setting up shop in the US because they like the quality of those services. so as far as I'm concerned, the only thing that matters is how to assess the fee. if that's some kind of value-added tax instead of income, then so be it. and if they want to try and commit fraud on that, then we can just show them the value of the executive and judicial branches.

but whatever we do, we can't allow what is going on to continue, because it will destroy us.

 

[WhoWee]

no, but what does that have to do with what I posted?

Didn't you say "Additionally, the tax code is a mechanism for rent-seeking where corporations spend money on lobbyists to garner favorable loopholes for themselves at the expense of others. "?

I merely pointed out the CEO of GE (the thread is about GE) works for the White House "creating jobs" and the President (apparently) lobbies other countries to help GE - isn't this a form of a helping oneself at the expense of others?

 

[BWV]

Didn't you say "Additionally, the tax code is a mechanism for rent-seeking where corporations spend money on lobbyists to garner favorable loopholes for themselves at the expense of others. "?

I merely pointed out the CEO of GE (the thread is about GE) works for the White House "creating jobs" and the President (apparently) lobbies other countries to help GE - isn't this a form of a helping oneself at the expense of others?

yes, also defense contracts, special tariffs against foreign competitors etc

 

[turbo]

what is fair is that business pay taxes to support the services they receive from their hosts. this includes things such as roads, police protection, access to the courts, education of the labor force, military protection, etc. it really doesn't matter where they exist on paper. or at least it shouldn't. the fact is, they like setting up shop in the US because they like the quality of those services. so as far as I'm concerned, the only thing that matters is how to assess the fee. if that's some kind of value-added tax instead of income, then so be it. and if they want to try and commit fraud on that, then we can just show them the value of the executive and judicial branches.

but whatever we do, we can't allow what is going on to continue, because it will destroy us.

Thank you! It's time for Americans to catch a clue!

 

[OmCheeto]

Because if they were, there would be no double taxation of the same investment income. Dividends are the corporation's profits, shareholders are its owners.

This doesn't really tell me why. There has to be some historical motive for doing this. I can only imagine it is based on the size of corporations. S-Class corporations pay no tax, but are severely limited in size and ownership.

But anyways, this thread is about GE, and GE paid no taxes. Therefore there is no double taxation.

 

[Al68]

Because if they were, there would be no double taxation of the same investment income. Dividends are the corporation's profits, shareholders are its owners.

This doesn't really tell me why. There has to be some historical motive for doing this..

Sorry, I was being a smarta$$.

I think the motive was to assess a double tax on investors through the corporation. In reality, though, those taxes are passed on to consumers, included in the price of their product, just like any other expense of the corporation.

And I have no problem with that in principle, it's the same as a sales tax. My problem is with the tax being hidden. The portion of a product's price that goes to government should be disclosed to everyone who buys the product.

 

[Amp1]

@Al68

... those taxes are passed on to consumers, included in the price of their product, just like any other expense of the corporation...The portion of a product's price that goes to government...

G.E. apparently keeps that portion and managed to turn the equation around so they are paid instead. Is that what is meant when the article seems to say G.E. is getting a 'Net Benefit' in some years.

(from article)

...While the financial crisis led G.E. to post a loss in the United States in 2009, regulatory filings show that in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from the I.R.S. of $4.1 billion...

Ivan, I second that thank you to Proton Soup.

-bolding mine

 

[WhoWee]

Thank you! It's time for Americans to catch a clue!

It is time - while GE is outrageous at $5 Billion...the GM tax break (or was it a union bailout?) is MUCH larger - $45 to $50 Billion?

http://www.reuters.com/article/2010/11/03/us-gm-taxbreaks-idUSTRE6A161020101103

"(Reuters) - General Motors Co GM.UL can get a tax break of up to $45 billion as part of its U.S. government-financed restructuring, documents filed with federal regulators earlier this year showed.
The Wall Street Journal earlier reported that GM would not have to pay federal taxes on up to $50 billion in profits. A later version of this story revised this figure to about $45 billion."

The best part is the "claim" that the bailout has been repaid- IMO.
http://abcnews.go.com/Business/general-motors-fire-misleading-bailout-ad/story?id=10513568
http://money.cnn.com/2009/12/15/news/companies/gm_repayment/index.htm

But the good news is the 48,000 auto workers will receive a bonus (in addition to the bailout and restructuring)
http://www.ohio.com/business/116213099.html
" Tom Krisher Associated Press Copyright © 2011 The Associated Press. All rights reserved. This material may not be published,broadcast, rewritten or redistributed.. GM announces bonus program for employees
Most hourly workers at automaker will receive more than $4,000 each"

 

[Al68]

@Al68

G.E. apparently keeps that portion and managed to turn the equation around so they are paid instead.

There is no such portion in that case.

Is that what is meant when the article seems to say G.E. is getting a 'Net Benefit' in some years.

It means that GE is one of government's favored corporations. That's what happens when we allow government so much power to tax any way they want to.

 

[OmCheeto]

There is no such portion in that case.It means that GE is one of government's favored corporations. That's what happens when we allow government so much power to tax any way they want to.

Wasn't it we that elected the government? Are they not there by our consent?

Who here wants to reincarnate T. Jefferson? I do. Let's abolish laws more that 20 years old. There is way too much old baggage in our, um, baggage.

hmmm...

Maybe I was wrong it that other thread. Maybe things are the same now as they were a long, long, time ago.

https://www.youtube.com/watch?v=7fqCS7Y_kME

 

[Al68]

Maybe things are the same now as they were a long, long, time ago.

Apparently:

https://www.youtube.com/watch?v=VNWIatFCH1Q