Why is General Electric like the Catholic Church?

March 31, 2011 • 5:08 am

A:  Neither of them pay taxes.

Yesterday’s New York Times has a damning report on General Electric’s tax-avoidance strategy, which includes the clever use of tax loopholes and the sequestering of profits in offshore accounts.  Last year GE made a profit of 14.2 billion dollars. Not only did it pay no taxes, but claimed a tax benefit of 3.2 billion dollars. That means they’re actually making money from the rest of us taxpayers.

This egregiously unfair (but legal) strategy is abetted by the adoption of liberal tax laws in the U.S. beginning in the 1990s and by the many tax breaks contained in George W. Bush’s 2004 American Jobs Creation Act.   The Obama administration is considering cracking down on stuff like this, but G.E., who spent over 4 million dollars in lobbying last year, will of course fight back hard.

A sub-plot involves congressman Charles Rangel, who was head of the Ways and Means Committee in 2008, a committee considering doing away with a lucrative tax break for G.E.  As the Times reports,

The head of [G.E.’s] tax team, Mr. Samuels, met with Representative Charles B. Rangel, then chairman of the Ways and Means Committee, which would decide the fate of the tax break. As he sat with the committee’s staff members outside Mr. Rangel’s office, Mr. Samuels dropped to his knee and pretended to beg for the provision to be extended — a flourish made in jest, he said through a spokeswoman.

That day, Mr. Rangel reversed his opposition to the tax break, according to other Democrats on the committee.

The following month, Mr. Rangel and Mr. Immelt stood together at St. Nicholas Park in Harlem as G.E. announced that its foundation had awarded $30 million to New York City schools, including $11 million to benefit various schools in Mr. Rangel’s district. Joel I. Klein, then the schools chancellor, and Mayor Michael R. Bloomberg, who presided, said it was the largest gift ever to the city’s schools.

Rangel denies a tit-for-tat deal, which would be illegal, but the Times reports that Rangel actually asked G.E. for school donations earlier in 2008.  And Rangel was of course censured by Congress last year for ethics violations.

G.E.’s behavior of course violates our evolved ethical penchant for fairness (a monkey offered a cucumber slice will refuse it if it sees another monkey getting a grape).  Let’s hope the Obama administration makes corporations like General Electric cough up their just due. In the meantime, you can sign a petition urging the removal of G.E. CEO Jeffrey Immelt, whose salary went from 5.6 million dollars to 15.2 million dollars in 2010.  Disgustingly, Obama has named Immelt as head of the President’s Council on Jobs and Competitiveness and as Obama’s liaison to the business community.

And while we’re getting rid of this kind of corruption, can we also deep-six the no-tax provision for churches?  LOL! Imagine what a fracas that would cause!

h/t: Matthew Cobb

64 thoughts on “Why is General Electric like the Catholic Church?”

  1. I don’t know how many people realise this, but this kind of unfair manipulation of the masses by corporations feeds into religious delusions about the end of the world.

    I’ve spoken to countless Muslims who see situations such as this, decide that these companies are run by “The Jews”, and then believe that this is proof that The Jews are trying to take over the world and must be stopped.

    It ties in with lots of rubbish about how the world’s media is owned by Jews and therefore manipulated to make Islam look bad when in truth it is the beautiful creation of Allah.

    Just thought I’d share 🙂

  2. I wonder how the GE shareholders/investors feel about this? Would they take less return on investment to pay tax, or would they decrease staff/wage to maintain returns? Also who are said investors, how many of us know where (exactly) our mutuals are invested, and are the investments in line with our values??

    1. I think you know the answer to your first question – I can’t imagine why anyone would buy GE stock except for the purpose of making a profit.

    2. I’ll go you one further:

      1) How much of the University of Chicago’s endowment is invested in the stock of tax-avoiding corporations like GE?

      2) Would groundbreaking research in biology and, even more so, in medicine and physics, be possible without the massive monetary donations to universities made by managers/owners of these companies?

      1. I can’t speak for all fields, but in theoretical physics most of the money for research seems to come from the government (DOE etc.), which would gain money by raising taxes on corporations and the wealthy.

  4. In regards to the “American Jobs Creation Act” you forgot to mention that GE reduced its US workforce by 20% in the last nine years. I assume, of course, that the “while we’re getting rid of this kind of corruption” phrase was just a rhetorical flourish – because you can’t possibly believe that, can you?

    1. “Corruption” here meant the unethical collusion of legislators and lobbyists, leading to those tax breaks. Even though GE’s actions are legal, I still consider the whole system corrupt.

      2. I didn’t mean to sound critical, but I don’t even think “the unethical collusion of legislators and lobbyists” has abated in the slightest. I’m sure we don’t really disagree at all, because the worst manifestation of our corrupt system is that all these things are “legal”, and if they aren’t legal, legislators have now shown themselves willing to make illegal acts “legal” retroactively.

        1. Remember how Dubya incessantly yammered about “the rule of law”?

          G.E.’s V.P of Comms. and P.R. responded with a letter in the 3/31/11 NY Times in defense. Is he blowing smoke or not?

      3. I think Tim meant that you can’t be serious when you say that we will get rid of this type of behavior, not that he disagrees with calling this type of behavior “corruption”. I could be wrong though…

  5. (living in Denmark (tax around 47-48% of wages, plus all the gas, luxury-items, alcohol… taxes – all payed with a SMILE!) tends to make my headasplode when I read stuff like this) I have no coherent or meaningful reply to this (headasplode)

    1. Americans have a deep-seated, pathological hostility to the word “tax.”

      Even when used in contexts like “we propose that a 3% income tax increase be made to those people earning in excess of $250,000 instead of having to make another cut to public school funding.”

      1. I’m sure relative societal wealth can be managed in other ways than through taxes … I just haven’t met any other way, and though the Danish society is FAR from perfect, on this point I do think we’re on to something.
        But I’m aware that the most of the US – among other countries – recoil at the thought

          1. Yes, of course (It probably makes no sense to say ‘most of US’ about anything, given the diversity of the country). Sorry.

          2. Oh, no worries. I say equally sweeping things about my countrypeople regularly. 😉

            I’m at a loss to know why progressives/liberals aren’t able to get their act together anymore; very discouraging for those of us who forged our politics in the 60’s.

      2. I think everyone hates taxes. What seems to be unique in the U.S. is this idea that somehow people are entitled to pay nothing in taxes.

        1. Especially weird when it’s applied to people who have such a high volume of wealth that a tax increase that would have no effect on their lifestyle yet bring in a very large amount of revenue for the government is being protested by people who aren’t anywhere close to being affected by it.

          1. I agree. Apart from whether or not it’s smart economic policy, it baffles me that Republicans are able to motivate middle class Americans to protest against an estate tax that only impacts people worth more than $2 million.

  6. Not sure why you’re blaming G.E. – they’re simply playing the game established by the politicians, many of whom are beholden to the leftist/progressive paradigm that the state can and should shape economic decision-making. They find willing comrades among the major CEOs, who have both the lobby power and economic clout to ensure such decision-making goes to benefit their businesses.

    1. “leftist/progressive paradigm”

      As soon as I read a phrase like this, I know I’m dealing with ideology, rather than idea. At that point, I conclude that that the discussion with the individual is over.

      Your mileage may vary.

    2. Yes, if we’d only let Hank Reardon and John Galt be the heroes they so desperately want to be, they wouldn’t ever be tempted to use or institute a system, such as the one currently in place (and established by the politicians, of course) to shape economic decision-making. Tell me about the rabbits, Robert.

      1. I can’t speak for Galt or Reardon, being fictional characters in a novel, but even a modest knowledge of economic history demonstrates that corporate big-wigs are more than happy to exploit the state for their own ends when given the opportunity. Solution? Deny them the opportunity.

        To me, it’s laughable that the individuals who complain about this kind of corporate exploitation are often the very same who opened the door to it in the first place. For a prime example, look no further than our current president, who had just recently named G.E.’s CEO to head up the Jobs Council.

        1. Our current president doesn’t do much complaining about it. He’s pretty open about being a plutocrat.

        2. Yeah, cuz Karl Marx wouldn’t STFU about how corporations should benefit by getting government subsidies… What planet do you live on? How is it “leftist/progressive” to let corporations NOT pay taxes and to take benefits FROM taxpayers?

          Yes, Obama is facilitating now, but it doesn’t matter who’s prez. This has gone on ever since the rise of capitalism.

          Reality check time, Robert…

          1. Sorry, I’m not much in the habit of listening to the prognostications of failed apocalyptic prophets, like Karl Marx.

            In any case, you need to re-read what I wrote more closely.

        3. What’s laughable to me is the idea that we could deny the opportunity to exploit the state to a small minority of the population who own virtually all the wealth.

          1. You can certainly limit the opportunity to a significant degree, and an excellent way to do that is by limiting the extent to which the government can direct economic activity.

            If you have a better idea, let’s hear it.

          2. How about starting with the fact that complex problems do not have simple solutions. I suppose if your only tool is a hammer…

    3. “Not sure why you’re blaming G.E. – they’re simply playing the game established by the politicians”

      GE pays those politicians to write the rules of the game.

      1. How about this? Severely limit the politicians’ ability to write the rules of the economic game.

        Problem is, some regard this ability as a necessary and proper role of politicians. Then they react with shock and anger that those who are impacted by such economic rule-making devote significant resources to influence the politicians.

        1. It’s Congress’s job to set tax rates and write the laws that empower the IRS to enforce the tax code.

          1. Well yea, but when the tax code is (ab)used by Congress to direct economic activity that can result in billions of dollars in profits or losses, little wonder why corporations and other actors are so heavily invested in influencing Congress.

        2. The answer is a more accountable government – accountable to voters not corporations?

    4. GE’s tax return may be semi-legit, but we’ll never know. It’s 24000 pages and a strategically underfunded IRS can’t possibly examine it in detail. However, GE is part of the paradigm that guts the IRS and revises the tax code in their favor. In that, they are guilty of cheating the rest of us.

      There was a tax watchdog guy on Stewart or Colbert about 5 years ago, who writes on tax issues for some east coast newspaper or magazine. He also has a couple of books out on the subject of how the rich rig the system, which I have misplaced. Anybody have any idea who that is? Anyway, don’t read his books unless you have your blood pressure medication nearby.

  8. Why should people who otherwise have no connection to GE have any authority over deciding who holds the position of Chief Executive Officer of that private corporation?

    I get the whole GE-should-pay-taxes thing, it’s clearly an ethical violation in a modern rule-of-law society; just because you spend $X on lobbying (which is basically talking to politicians, over and over, right?) does not mean you get to recieve $X * 1000 in tax reductions or direct hand-outs (!)

    But, that’s a separate issue from the public making decisions about who runs the company or how much he gets paid. If Mr. Immelt’s salary had been $1 million, or $100 million, or $25 plus some coins from behind a sofa, would you be any more or less angry at the tax situation?

    1. Agreed.

      From GE’s standpoint, Immelt has been a very effective executive. There is no question that he has returned value to GE’s stockholders. Why would they want to remove him?

      1. I meant to add that it is completely improper for the public to petition GE for Immelt’s removal. He did his job, and he did it well. If the public wants to have a say, they can buy shares.

        Bribing Rangel, if that is what GE did, is illegal. If the case is proved, involved GE executives should go to jail.

        If Rangel accepted a bribe, he should go to jail, too.

        As for Obama appointing Immelt to his Jobs Council. Disappointing. And unsurprising. Geithner, after all, is still running Treasury.

        1. The problem is that “private” companies aren’t.

          Large corporations such as GE wield huge amounts of power over the public; just look at this very story for how they’re the ones determining tax policy. There are heads of state that never wielded anywhere near as much power as a corporate CEO.

          They have become our de facto governors. So why should we not decided whether or not we grant them our consent to govern us?

          If the corporations don’t want the public to meddle in their affairs, they should stop meddling in public affairs. And that goes treble if they expect us to give them billions in cash on top of all the government services (police, transportation infrastructure, military, etc., etc., etc.) we give them for free.

          Cheers,

          b&

          1. It’s a tempting argument, that GE is really a public entity. But, no.

            They consume products in their processes that belong to the public commons, for which the public is not compensated. They produce waste that contaminates the public commons. The public is not compensated for this either.

            Because we are the public commons, we have the right to regulate and tax them, at least to the extent that both sides of the equation are kept in balance.

            No part of this implied contract is being policed by the government, the entity that is elected to represent the public commons, and whose job it is to ensure that the corporation does not make a pig of itself at the public trough.

            We have very bad policing, but that still doesn’t make GE a quasi-public entity.

          2. Please provide a clear example of a case in which a corporation was able to utterly dominate a national government. Not “gets a tax break” or “doesn’t clean up a mess”, but something of the same order as the many cases of governments (national or sub-national) utterly dominating corporations.

            Does the term “nationalization” mean anything to you? It’s opposite isn’t “privatization”, it’s “corporate piracy”; “privatization” is a transaction that involves voluntary actions on both sides, while nationalization often involves the forced sale of assets by one party.

        2. I meant to add that it is completely improper for the public to petition GE for Immelt’s removal. He did his job, and he did it well. If the public wants to have a say, they can buy shares.

          I understand what you are saying, but I just don’t get it. GE, and many other big corps of course, is crapping all over the economy that we all have to live with. They are making great efforts to get billions of dollars in free money out of the federal government, including using their clout to have the rules written so that they can do so legally. Those billions either come out of the taxpayers pockets and/or get added to the federal deficit. Either way that impacts everyone in the country whether they own shares in GE or not. In that case how in the hell could it be completely improper for the public to put whatever pressure it can on GE?

          It really seems very simple to me. GEs actions adversely affect everyone, not just their shareholders. In fact non shareholders get the shaft worse. And the impact is real. Whether it is technically legal or not, they are stealing money from the public. And they know it. Why in the fuck should the public have to put up with that? Because the current rules say they have to? That is pure crap.

          1. I don’t disagree with anything you’ve said. It’s just that it doesn’t matter.

            GE can conduct business as rapaciously as it wishes, within the framework of what it is legally permitted to do. Like individual taxpayers, GE can avoid paying as much tax as it legally can. It may not EVADE taxes, but it can avoid them all it wants. If your elected representatives assist GE in avoiding what would otherwise be fair payment, that is too bad for us, and good for GE.

        3. The public has a right to petition anyone for anything (free speech, and all that). On the other hand, there is no right to have that petition acted on in anyway, or even listened to.

  9. The smart guys have figured out how to corrupt otherwise decent elected officials by contributing to their elections/re-elections.

    Some sort of revolution, hopefully non-violent, will be necessary in order to return power to the individual vs. corporations.

  10. I would say the CEO’s raise was quite justified. After all, he got a multi-billion dollar tax credit for GE… The government’s role here is shameful, and certainly GE appears to be behaving unethically… But you can’t say he isn’t doing his job!

  11. For several years I have advocated a much simpler taxation method: corporate tax on gross revenues. Some businesses like grocery stores have a high volume of money, with small margins. Others (derivative trading) have high volume, high profit. The amount of tax would be set by a widely-known chart of rates, with type of business on one axis, and years in business (age) on the other.

    Oh, no personal income tax. The entity you work for pays your tax, same as the deduction now, but you don’t get any offsets for charity, interest payments, etc. Progressive rate, but you don’t see it, don’t file, etc. Unless you’re self-employed or unemployed, in which case you’re filing a “business return” just like GE, GM, and the University of Chicago.

    I doubt that I’ll ever see this in my lifetime, unless American society is reduced to a smoldering ruin and we’re starting all over…:^(

    1. The scary part is that the level of corruption we see today is, historically, exactly what one sees before an empire reduces itself to a smoldering ruin.

      60 Minutes (Westinghouse) this past week ran a story on how the corporate tax rate is higher in the US than in any other developed world, which they claimed is why all the corporations are moving their headquarters to PO boxes in Switzerland and Ireland. The heavy-handed editorial message was an unabashed plea to cut the corporate tax rate to no more than a third its current rate. Never once did they mention the effective rate after deductions, exemptions, and subsidies.

      But the real reason the corporations are leaving is that they’re rats fleeing a sinking ship. All the real industrial production has long since been outsourced, and now the heavy hitters are outsourcing themselves as well.

      There’s no doubt but that the US is utterly dependent on cheap oil, and the cheap stuff is almost all gone. Sure, there’s plenty of expensive oil left — the Canadian tar sands are the most popular example — but we’re already so far in debt that we can barely keep our financial heads above water with the cheap stuff. So, “the powers that be” are doing the obvious: raiding the pantry and stealing the silverware while they have the chance. They’re doing an excellent job, too — the mortgage “crisis” was a brilliant success from their perspective, whereby they stole wholesale the American public’s personal savings and real estate wealth in one fell swoop.

      Frankly, I’m not sure there’s all that much left to be stolen, but I trust they’re hard at work sucking out every last little drop. GE’s antics would seem to confirm that they’ve got as much as they reasonably expect and now they’re just shooting for the moon. I don’t think they care much if they get caught; the latest crises have just confirmed that the “punishment” will be some stern words, yet another government bailout, and even bigger CEO bonuses.

      These are the waning days of the American Empire. I just hope that its death throes are benign, historically considered — more like Britain’s passing from the world stage (and very successful resurrection as a healthy regional power) than like Rome’s collapse and transformation into a totalitarian theocracy.

      Cheers,

      b&

      1. Many good points there. If the US were more efficient in its energy comsumption a lot less would be required – people & businesses have been wasteful. Also, it is surely natural that business moves the manufacturing base periodically to places where labour is cheaper. A point will come when China is no longer the cheapest place perhaps. The longer term worry that is not being addressed by anyone as far as I can see is what a rising population does for employment when business are more & more mechanised & require very few people.
        What is also crazy is that the US insists on being the strongest military power on earth by borrowing money rather than taxing. Up to now the US has relied on growth to cover that. Can that continue?
        http://en.wikipedia.org/wiki/United_States_public_debt

    2. So then the lobbying will be about where on the axes an industry or a specific company should be.

      I can readily imagine special adjustment formulae for “age.”

  12. An indictment of GE:
    1. It did encourage and employ tax rules to avoid its fair share.
    2. Id did devise a flawed reactor design, as employed at Fugyiama and here at home, which relies on pumps and the entire electrical system,for critical cooling, Which a new Westinghouse design does with fewer components and relying on gravity
    3. It forces the CFL on us by law, which, while more economical in the use of power, presents an ecological and human safety threat
    4. Its President, Immelt, serves as Obama top advisor creating more policy to GE’s advantage
    5, It floods the media with shamefully slanted “news” on NBC, MSNBC and CNB, epitomized by Crhis Matthews’ “tingly feeling” over Obama
    6. It promotes a second jet engine that the Deaprtment of defence says it doesn’t need
    Need more? Join me in boycotting GE.

  13. Re: G.E.’s nuclear activities, remember “Neutron Jack” Welch?

    What is the legitimate warrant anyway for corporations? “The Rule of Law”? Any such law an oligarchy or plutocracy can manhandle through a legislative body?

    The law deems a corporation a “legal person.” What duties of loyalty, solidarity – dare I say it? – patriotism, does an American corporation owe? Less than what any flesh-and-blood American owes? Are corporate irresponsibility, misbehavior and exploitativeness among those cherished “American values” in defense of which the flower of our “human resources” – er, uh Ah mean youth – join the military and go in harm’s way to be killed or maimed for life? Too bad corporations cannot similarly sign up for that “privilege.”

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