On GE’s Tax Bill

by Pejman Yousefzadeh on March 29, 2011

Professor Stephen Bainbridge quite properly quotes Judge Learned Hand to put matters in perspective:

Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.

This should be more than enough to answer silly implications that by complying with the law and arranging its tax status in an intelligent way, GE is somehow not being patriotic.

  • Anonymous

    Isn’t the point that companies like GE have the lobbying clout to influence tax law in a way that is advantageous to them, at the expense of typical taxpayers (and small businesses) who do not?

    • Pejman Yousefzadeh

      When it is determined that GE acted illegally, I’ll get upset. Until then,
      this entire story is a giant res herring.

      • Anonymous

        That’s a dodge. Surely you don’t think that adherence to law is the only moral yardstick imaginable. Its an extreme analogy, but slaveowners mostly acted within the law prior to the Civil War.

        If you think that you and I should subsidize the operation of GE with our tax dollars, then make that argument on the merits. But I think you would have to explain how this fits into a worldview that values free markets and low income taxes.

        • Pejman Yousefzadeh

          There is nothing whatsoever immoral about minimizing one’s tax bill through all legal means. No one mentioned subsidization, and to the extent that we are discussing it, I am against corporate subsidies. But that is an entirely different matter. As for the analogy to slaveholding; come on. We are talking about an entirely different universe there.

          • Anonymous

            “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.” http://www.nytimes.com/2011/03/25/business/economy/25tax.html?_r=3&partner=rss&emc=rss

            You seem focused on the “innovative accounting” part and not on the “fierce lobbying” part. There is no substantive difference between a cash payment to a corporation and a tax incentive. They are both corporate subsidies. Which you don’t support….

          • Pejman Yousefzadeh

            There is every difference in the world between a subsidy, and proper tax planning. And as for the “fierce lobbying,” I could not care less, so long as the lobbying is legal. But seeing as how President Obama just named Jeffrey Immelt to his jobs council, I am sure that the Democratic National Committee will raise a fuss over this blatant act of corporate favoritism–not available to the CEOs of small businesses, mind you–and demand that the appointment be reversed. Right?

          • Anonymous

            Personally, I think my tax planning would end up much more favorably if my lobbyists were writing the tax code as well. Maybe it could be called the “Video Game Industry Stimulus Act of 2011!” That’s change I can believe in!

            As for Immelt: Do I understand you to be saying essentially that by by being appointed to the Jobs Council he has access to the President that he will use to gain advantages for his business and that this is equivalent to subsidization?

            Hmm. I think that’s a bit of a stretch and misunderstands the point of the jobs council, but I suppose I could be wrong. My sense has been that it was more of a cosmetic move to address a perceived weakness vis a vis the administration’s relationship with the business community.

          • Pejman Yousefzadeh

            If you can afford lobbyists, then engage them. Their prices are determined by the market. As for the appointment of Immelt, I refer to it because the appointment–above board as it is–does more than any mere tax planning to raise eyebrows, though certainly, I see no reason to make a major issue of it. But if GE’s tax planning is so objectionable, then the President will withdraw the appointment, and Democrats will insist that he does, excoriating him if he doesn’t. Right?

            —– Reply message —–

  • http://pulse.yahoo.com/_ALU3C54NEK4EQSJOVA2XOK3ILI Alan

    It’s like a vampire movie where the victims blame the non-bitten for not paying their fair share.

    I don’t care about other people’s tax bills, but I do care a lot about subsidies. Does GE get any government subsidies? In this age of government bailouts, I have to ask.

    • Anonymous

      Of course they get subsidies. They reduce their tax liability to zero (or less) via explicit subsidies, financed by those who do pay taxes.

      I’m sure a GE lobbyist could explain why those subsides are a good thing (and maybe they are right!) but the point is that large corporations like GE are in a unique position to influence the tax code in a way that advantages them at taxpayer expense.

      • http://pulse.yahoo.com/_ALU3C54NEK4EQSJOVA2XOK3ILI Alan

        Through what specific programs does GE get subsidies?

        • Anonymous

          “Over the last decade, G.E. has spent tens of millions of dollars to push for changes in tax law, from more generous depreciation schedules on jet engines to “green energy” credits for its wind turbines. But the most lucrative of these measures allows G.E. to operate a vast leasing and lending business abroad with profits that face little foreign taxes and no American taxes as long as the money remains overseas.” http://www.nytimes.com/2011/03/25/business/economy/25tax.html?_r=3&partner=rss&emc=rss

          • http://pulse.yahoo.com/_ALU3C54NEK4EQSJOVA2XOK3ILI Alan

            An expense write-off (like depreciation) isn’t a subsidy. If the depreciation schedule isn’t realistic, that’s another matter.

            Greed energy credits ARE a subsidy, as the word “credits” indicates.

            That leasing and lending business…are you talking about GE Capital? Dude, that’s why GE isn’t paying taxes. Per the link to the Ezra Klein link in Pej’s post:

            “The Times’ story missed the most important part of the story, and I wanted to make sure you have all the facts. The reality is that within the context of the 2008 financial crisis, GE Capital suffered significant losses, which impacted taxes. Take out GECapital, and GE’s effective corporate tax rate would be 21%.”

            Maybe they should put the Social Security trust fund in GE stock. Oh wait, there is no trust fund…

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