How GE Made $5.2B in the US Tax Free

rhadamanthus · Nov 3, 2011

New report out.

In 2010, Verizon reported an annual profit of nearly $12 billion. The statutory federal corporate income tax rate is 35 percent, so theoretically, Verizon should have owed the IRS around $400 million. Instead, according to figures compiled by the Center for Tax Justice, the company actually boasted a negative tax liability of $703 million. Verizon ended up making even more money after it calculated its taxes.

Verizon is hardly alone, and isn’t even close to being the worst offender. Perhaps most famously, General Electric raked in $10.5 billion in profit in 2010, yet ended up reporting $4.7 billion worth of negative taxes. The worst offender in 2010, as measured by its overall negative tax rate, was Pepco, the electricity utility that serves Washington, D.C. Pepco reported profits of $882 million in 2010, and negative taxes of $508 million — a negative tax rate of 57.6 percent.

Altogether, according to “Corporate Taxpayers & Corporate Tax Dodgers 2008-10,” a blockbuster new report put together by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy that will have you reaching for your hypertension medicine before you finish reading the third page, 37 of the United States’ biggest corporations paid zero taxes in 2010. The list is a blue-chip roll-call.

As the authors acidly note, “Most Americans can rightfully complain, ‘I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo, Verizon, etc., etc., all put together.’ That’s an unacceptable situation.”
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The list of companies that paid zero taxes is only the beginning of the travesties documented by the report. The authors looked at the tax filings from 2008-2010 of 280 of the nation’s biggest, most successful corporations. These companies reported $1.4 trillion worth of profit during a period when most Americans were struggling to stay afloat. The authors discovered that the average effective tax rate — what the companies really paid after government subsidies, tax breaks and various tax dodges were taken into account — was only 18.5 percent, less than half the statutory rate. Fully a quarter of the 280 companies paid under 10 percent.

Remember that fact, the next time someone tries to tell you that American corporations pay the highest income taxes in the free world. The only number that counts is the “effective tax rate.” One of the interesting tidbits provided by the authors is that in many cases, the tax rate on foreign income for many of these companies is actually higher than the effective U.S. rate.

The most distressing part of the tale is the big picture: The overall trend line is pointed in exactly the wrong direction. If you break out just the years 2009-2010, the effective tax rate was 17.3 percent. “In 2008, 22 companies paid no federal income tax, and got $3.3 billion in tax rebates. In 2010, 37 companies paid no income tax, and got $7.8 billion in rebates.” When measured as a percentage of total GDP, over the last three fiscal years, “total corporate income tax payments fell to only 1.16 percent of the GDP … a new sustained record low since World War II.
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The authors conclude on a wistful note, with a list of what Washington could do to bring sense and reason to corporate taxation, while providing the government with desperately needed revenue. But as the authors themselves readily acknowledge, their recommendations exist in an alternate universe from the one that we actually happen to live in.

Unfortunately, corporate tax legislation now being promoted by many in Congress seems stuck on the idea that as a group, corporations are now either paying the perfect amount in federal income taxes or are paying too much. Many members of the tax writing committees in Congress seem intent on making changes that would actually make it easier (and more lucrative) for companies to shift taxable profits, and potentially jobs, overseas. Meanwhile, GOP candidates for president are all promoting huge cuts in the corporate tax or, in several cases, even elimination of the corporate income tax entirely.
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And that, ultimately, is the most enraging fact about the new report from the Citizens for Tax Justice and the Institute on Taxation and Economic Policy. It won’t make a darn bit of difference.
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mc mark · Nov 3, 2011

to piggyback on rhad's article

30 Major Corporations Paid No Income Taxes In The Last Three Years, While Making $160 Billion

In fact, in the last three years, 78 corporations had at least one year where they paid no federal income tax at all, while 30 corporations paid not a dime over the entire three years. Those 30 corporations paid nothing, even though they made $160 billion in profits over that period:

– Seventy-eight of the 280 companies paid zero or less in federal income taxes in at least one year from 2008 to 2010…In the years they paid no income tax, these companies earned $156 billion in pretax U.S. profits. But instead of paying $55 billion in income taxes as the 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they reported negative taxes (often receiving outright tax rebate checks from the U.S. Treasury), totaling $21.8 billion. These companies’ “negative tax rates” mean that they made more after taxes than before taxes in those no-tax years.

– Thirty corporations paid less than nothing in aggregate federal income taxes over the entire 2008-10 period. These companies, whose pretax U.S. profits totaled $160 billion over the three years, included: Pepco Holdings (–57.6% tax rate), General Electric (–45.3%), DuPont (–3.4%), Verizon (–2.9%), Boeing (–1.8%), Wells Fargo (–1.4%) and Honeywell (–0.7%).

rhadamanthus · Apr 4, 2012

Buried in this article that details some of the new horrid laws passed purposely to favor corporate overlords is this interesting tidbit that I felt obliged to share...

Then there are corporate taxes, perhaps the most egregious area in which the government uses its power to shield politically significant information. As the Institute on Taxation and Economic Policy reports, “neither the SEC nor most state governments require corporations to release detailed information on their state corporate tax payments” — which deliberately makes it “hard to identify which corporations are not paying their fair share at the state level.” At the federal level, after corporate tax disclosure laws made it onto the books in the 19th and early 20th centuries, they were removed. Bloomberg News notes that the Financial Accounting Standards Board has the power to “make the income-tax returns of all companies with shares traded on U.S. stock markets available to the public,” but that it has refused — even in the wake of reports proving that many of the most profitable corporations are now paying no tax at all in America’s loophole-ridden tax system. The result is that the government empowers corporate management to prevent both companies’ shareholder-owners and the public at large from ever evaluating a firm’s tax compliance — or lack thereof.

Each of these examples — and the many others like them — are closely related to the concurrent corporate efforts to prevent labeling mandates. And as disparate as such examples may seem, they each prove that 21st-century capitalism and old-school Orwellian control are not polar opposites, as they are often portrayed. On the contrary, those two political forces now often coexist in a symbiotic relationship — one that uses state power to keep politically charged information hidden. The theory beneath the calculation is simple: Public ignorance equals corporate bliss.
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Classic · Apr 4, 2012

mc mark said: ↑

to piggyback on rhad's article

30 Major Corporations Paid No Income Taxes In The Last Three Years, While Making $160 Billion

In fact, in the last three years, 78 corporations had at least one year where they paid no federal income tax at all, while 30 corporations paid not a dime over the entire three years. Those 30 corporations paid nothing, even though they made $160 billion in profits over that period:

– Seventy-eight of the 280 companies paid zero or less in federal income taxes in at least one year from 2008 to 2010…In the years they paid no income tax, these companies earned $156 billion in pretax U.S. profits. But instead of paying $55 billion in income taxes as the 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they reported negative taxes (often receiving outright tax rebate checks from the U.S. Treasury), totaling $21.8 billion. These companies’ “negative tax rates” mean that they made more after taxes than before taxes in those no-tax years.

– Thirty corporations paid less than nothing in aggregate federal income taxes over the entire 2008-10 period. These companies, whose pretax U.S. profits totaled $160 billion over the three years, included: Pepco Holdings (–57.6% tax rate), General Electric (–45.3%), DuPont (–3.4%), Verizon (–2.9%), Boeing (–1.8%), Wells Fargo (–1.4%) and Honeywell (–0.7%).
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I missed this the first time. That's amazing. Here we are cutting teachers from public schools and yet GE & Pepco are getting tax rebates after earning billions of dollars. If corporations are people, they are the greediest bunch that ever existed.

Qball · Apr 4, 2012

Classic said: ↑

I missed this the first time. That's amazing. Here we are cutting teachers from public schools and yet GE & Pepco are getting tax rebates after earning billions of dollars. If corporations are people, they are the greediest bunch that ever existed.
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Get on board. Own a piece of the corporation. Get some stock be on the other side of screwing the general populace.

Just make sure you are diversified.

juicystream · Apr 4, 2012

Classic said: ↑

I missed this the first time. That's amazing. Here we are cutting teachers from public schools and yet GE & Pepco are getting tax rebates after earning billions of dollars. If corporations are people, they are the greediest bunch that ever existed.
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Cut the corporate tax rate and the loopholes. I'd be curious to flip through one of those returns one day.

Dubious · Apr 4, 2012

Qball said: ↑

Get on board. Own a piece of the corporation. Get some stock be on the other side of screwing the general populace.
Just make sure you are diversified.
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Just how is the paycheck-to-paycheck working class supposed to do that?

Qball · Apr 4, 2012

Dubious said: ↑

Just how is the paycheck-to-paycheck working class supposed to do that?
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My response was somewhat sarcastic.

I say somewhat because we're moving towards a pro-corporation state. Corporations will have more and more say in our everyday lives. It already sucks for the little guy but anyone in the rare middle-class will soon have to either get on board or become the little guy.

brantonli24 · Apr 4, 2012

Just to clarify, are those profits made overseas or within America? Are those profits ever taxed in those countries?

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