The headline does not capture the essence of the GE scam. While earning $10.8 billion overseas GE somehow manages to avoid paying any U.S. taxes. The article goes on to assert that it's all perfectly legal. That assertion tends to highlight the fundamental problem with the American tax code.
Below are some excerpts from the article along with my usual, insightful commentary.
NEW YORK (CNNMoney.com) -- General Electric filed more than 7,000 income tax returns in hundreds of global jurisdictions last year, but when push came to shove, the company owed the U.S. government a whopping bill of $0.That last line about losing lots of money is just a little misleading as you will see below.
How'd it pull off that trick? By losing lots of money.
GE had plenty of earnings last year -- just not in the United States. For tax purposes, the company's U.S. operations lost $408 million, while its international businesses netted a $10.8 billion profit.There's the rub; they managed to shelter their earnings offshore so as to avoid paying taxes in this country. There is something inherently wrong with a tax system that endless persecutes taxpayers making $50 thousand a year while companies earning $10.8 billion get a free pass.
But what about the $10.8 billion profit overseas? GE is "indefinitely" deferring income tax payments on those profits, Eisele said."Indefinitely deferring income tax"? Does that mean like saying "yeah we made it but we will pay you when we get around to it"? Why don't I have the luxury of endlessly deferring income tax?
It may seem like accounting magic, but it's completely legit.Actually I think it is both; That is in fact the problem. Corporations with money and lawyers can endlessly search for ways to avoid taxes while the average Joe is forced, under penalty of arrest, to pay their taxes. There is something inherently wrong with that.
"That's one way of escaping taxes," said Scott Hodge, president of the Tax Foundation. "Companies get to deduct their losses, so if there's no earnings, then they pay no income tax."I suppose we should be able to deduct our loses in a similar fashion. The problem is most people cannot afford to pay some bottom feeding tax attorney to hunt down such loopholes.
But GE isn't exactly escaping all tax-related pain: The company paid almost $23 billion in taxes to governments around the world from 2000 to 2009, Eisele said.Truly my heart bleeds for GE.
Plus, paying the accountants to crank out 7,000 tax returns can't be cheap.