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Townhall...
How Awful Is GE?
By Mona Charen
April 18 looms like a specter at this time of year, casting a pall over
the forsythia and daffodils that coax us to be cheerful. Like a sick
child who longs to play outside on a sunny day but must remain
confined, we itemizers are chained to desks or dining-room tables
littered with receipts, calendars, checkbook registers, and credit card
statements for the annual spring ordeal.
Not that we file our own taxes. No, like 71 percent of Americans
(according to Rasmussen), and like the overwhelming majority of members
of Congress, including those on tax-writing committees, we pay someone
else to prepare our taxes. The pencil-chewing dining-room table
tribulation is merely the necessary antecedent to the actual
preparation of a tax return by a professional.
The April 18 deadline predisposes one to sympathize with all other
harassed taxpayers, so when The New York Times lambasted General
Electric for paying no federal income tax, it occasions a second look.
“General Electric, the nation’s largest corporation, had a very good
year in 2010” reported the Times. “The company reported worldwide
profits of $14.2 billion, and said $5.1 billion of the total came from
its operations in the United States. Its American tax bill? None. In
fact, GE claimed a tax benefit of $3.2 billion.”
The Times is clearly scandalized -- and perhaps it should be. After
all, at least some of the tax breaks GE has been able to take advantage
of were the result of aggressive lobbying. The Times detects the scent
of corruption in the 2009 story of GE’s tax lawyer plaintively pleading
with then Ways and Means Chairman Charles Rangel to maintain a tax
exclusion important to GE’s bottom line. Apparently, in a whimsical
gesture, the lawyer actually dropped to one knee. Rangel changed his
position.
“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.”
There may be more to the story (Rangel denies a quid pro quo), but on
its face, it stinks. At the same time, so much of what the Times
decries about GE’s failure to pay more in taxes is based on false
premises. The Times is outraged, for example, that GE is able to
concentrate its profits offshore.
But as the chief cheerleader for higher taxes of every kind, including
high corporate tax rates, the Times should not be surprised that
companies respond rationally to these incentives and seek ways to avoid
taxes. The Times seeks out Len Burman of the “nonpartisan” Tax Policy
Center (actually, it’s an arm of the liberal Brookings Institution and
the Urban Institute), who offers that, “In a rational system, a
corporation’s tax department would be there to make sure a company
complied with the law. But in our system, there are corporations that
view their tax departments as a profit center, and the effects on
public policy can be negative.”
That’s one way of putting it. Another is to acknowledge that taxes are
just another cost to a corporation. And a responsible company will seek
to minimize costs and maximize profits. That’s how companies are able
to provide jobs. The corporate rate in the U.S. is 35 percent, among
the highest in the industrialized world. Even “spread the wealth
around” Barack Obama has recommended reducing it so that some of those
dollars (and jobs) currently hiding out abroad can be repatriated.
Besides, corporations collect taxes; they don’t pay them.
Alternatively, in a rational system, the tax code would not be such a
playground for the well connected and well heeled. It would not stretch
to 71,684 pages requiring high-priced lawyers and accountants to
interpret. It would not penalize the honest and reward the scofflaw, as
our current system does, imposing a $2,000 yearly fee on every taxpayer
to cover the loss in revenue from those who illegally evade taxes. It
would not chew up 6.1 billion hours a year in compliance time. It might
look more like the FairTax (www.fairtax.org).
The problem is not that companies like GE take advantage of the system.
The problem is the bloated, burdensome, Byzantine system itself.
Read it at Townhall
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