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A New York Times article explains how General Electric has obtained a negative corporate income tax rate on its U.S. profits. Its public filings show that it had $26 billion in U.S. profits over the last five years. Instead of paying federal corporate income taxes, G.E. actually received a net benefit of $4.1 billion from the IRS over that period.
The article quotes CTJ’s director:
“’Cracking down on offshore profit-shifting by financial companies like G.E. was one of the important achievements of President Reagan’s 1986 Tax Reform Act,’ said Robert S. McIntyre, director of the liberal group Citizens for Tax Justice, who played a key role in those changes. ‘The fact that Congress was snookered into undermining that reform at the behest of companies like G.E. is an insult not just to Reagan, but to all the ordinary American taxpayers who have to foot the bill for G.E.’s rampant tax sheltering.’”
Here are some other highlights:
– President Obama has “designated G.E.’s chief executive, Jeffrey R. Immelt, as his liaison to the business community and as the chairman of the President’s Council on Jobs and Competitiveness, and it is expected to discuss corporate taxes.”
– G.E.’s tax department includes nearly 1,000 people who are instructed to “divide their time evenly between ensuring compliance with the law and ‘looking to exploit opportunities to reduce tax.’”
– G.E.’s tax avoidance played a starring role in convincing Reagan to adopt tax reform in the 1980s. “’I didn’t realize things had gotten that far out of line,’ Mr. Reagan told the Treasury secretary, Donald T. Regan, according to Mr. Regan’s 1988 memoir. The president supported a change that closed loopholes and required G.E. to pay a far higher effective rate, up to 32.5 percent.”
– “That pendulum began to swing back in the late 1990s” when Congress enacted a tax break for “active financing.”
– G.E.’s tax department’s director, a former Treasury official, literally “dropped to his knee” when begging Ways and Means Committee staff, then under the leadership of Congressman Charles Rangel, to extend the tax break for “active financing.”
– Rangel reversed his opposition to extending the “active financing” tax break that day, after G.E.’s lobbying and after Congressman Crowley of Queens argued that it would help banks in his district.
– Provisions of President George W. Bush’s huge corporate tax cut bill in 2004 were “so tailored to G.E. and a handful of other companies — that staff members on the House Ways and Means Committee publicly complained…”
– “Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment. In that time, G.E.’s accumulated offshore profits have risen to $92 billion from $15 billion.”