You Pay
Taxes -- Why Doesn't General Electric?
By Frank Clemente
By Frank Clemente
You
pay your fair share of taxes. Small businesses do too. It's the price we pay to
educate our kids, protect our communities and have some security in retirement.
Why shouldn't some of Americas largest corporations pay their fair share too?
Corporations
are making record profits. But 111 profitable Fortune 500 companies paid zero
federal income taxes in one or more of the past five years, according to a
recent report by Citizens for Tax Justice. What's worse -- 26 of them,
including Boeing, General Electric and Verizon, paid nothing over the entire
five-years. Astoundingly, they got tax refunds instead.
General
Electric, which in the past has been the focus of media attention because of
its record of paying an extremely low income tax rate, provides a vivid
example. GE earned a whopping $27.5 billion in profits between 2008 and 2012,
but claimed $3 billion in tax refunds -- a federal income tax rate of negative
11 percent.
Put
another way, GE paid less in federal income taxes than you paid over five
years.
CEOs
inevitably claim that their companies pay every penny they owe and they are
doing nothing illegal. That's the problem -- it's possible (but not guaranteed)
that what they're doing is perfectly legal. That's because over the years
corporate lobbyists have drilled so many holes into our tax code that it is
like Swiss cheese.
Some
of the loopholes defy logic -- like the tax break for companies that give their
CEOs lavish "performance based" bonuses. Others are outrageous --
like a tax break for companies that shuttle their executives in corporate jets.
And some are an insult to working Americans -- like a special low tax rate for
Wall Street hedge fund managers.
But
one of the most outrageous tax loopholes of all is the one that has helped GE
be such a good tax dodger. It enables Wall Street banks and other corporations
with large financial units -- like GE -- to make it appear that profits earned
in the United States were generated in offshore tax havens like the Cayman
Islands. It's as if you laundered your paycheck through the Caribbean to avoid
paying U.S. taxes.
Lobbyists
are twisting arms on Capitol Hill to try to save the "GE Loophole,"
which expired last year. A recent report by Americans for Tax Fairness and
Public Campaign shows that at least 292 lobbyists pressed members of Congress
on this issue in the past three years. GE alone pays 48 lobbyists to lobby for
the loophole. It cares so much about the loophole that its tax department chief
once got down on his knees to pretend to beg Congressional staffers to save it.
Last
week, a U.S. Senate committee voted to renew the GE Loophole and a raft of
other questionable tax breaks, including breaks for owners of thoroughbred
racehorses and NASCAR racetracks. The Senate will vote on the tax package in
May. If it passes, the entire $86 billion cost will be tacked onto the budget
deficit. You will end up paying part of the bill.
Why
should you care about the GE Loophole or about some big corporations paying nothing
in federal income taxes? It's because when corporations refuse to pay their
fair share, you end up paying higher taxes or getting less for what you pay.
You get a worse transportation system, a poorer educational system, less
reliable public safety, a weaker national defense, a less secure retirement and
a bigger budget deficit.
So
don't be fooled by the lobbyists and spinmeisters who argue that corporations
should be paying less in taxes. Many are already paying far less than they
should, and some are paying nothing at all. Let's plug up those corporate tax
loopholes, like the one that gives huge tax breaks to companies that ship jobs
and profits offshore. It's time they pay their fair share -- just like the rest
of us.
Clemente is executive director of Americans for
Tax Fairness.