GE Taxes: Setting The Record Straight

ProPublica:

There's a heated debate over General Electric's taxes in places ranging from the front page of the New York Times to the blogosphere to, of all places, "The Daily Show." In the 10 days since the Times touched off this debate, what started out as something resembling a conversation has degenerated into posturing, name-calling, and shrieking. So, did GE really not pay any income taxes on a $5.1 billion U.S. profit last year? Is it really getting a tax refund?

Read the whole story: ProPublica

Comments

[mamacat]

05:23 AM on 04/06/2011

I remember when Reagan was Governor of California, and it came out in the press that he had paid personal income taxes at a rate of less than 2%. I remember that Reagan stated that he could have paid no taxes at all if he had wanted to, but that he had paid at a rate of between 1 and 2 percent because he felt it wasn't right not to pay any taxes at all. That is just the way things are in this country -- the rich don't pay much in the way of taxes unless they want to.

My personal opinion is that this country would be a much better place for everyone if the super rich would pay their fair share of taxes.

[abbienormal]

08:18 AM on 04/06/2011

Then work to get the tax code changed. It has been done before and it can be done again.

[ChasG]

02:10 PM on 04/06/2011

Tax the rich.  Restore a more progressive tax structure that stops the concentration of wealth in the few, and allows the many to prosper.  Yes, we have done it before, and sometimes to an excess.  But those excesses of the past were over-corrected, and we have to go at least part way back, definitely back to rates existing before the Reagan tax cuts.

[mamacat]

05:13 AM on 04/06/2011

At the end of the article it stated that GE recently had an effective tax rate of 7%, far less than its competitors. That doesn't sound good at all, although it has had a lot of losses in its real estate loan business.

How about looking into the finances of the most profitable companies in the history of the world, Big Oil? The ones that get paid by the USA to conduct business?

GE has a market cap of $215 billion, and pays 7% taxes.
Exxon has a market cap of $424 billion, and gets tax credits from the American government. How is that fair taxation?
Chevron has a market cap of $219 billion; what effective tax rate does it pay, if it pays any taxes at all?

Between them, Exxon and Chevron are three times the size of GE, but I suspect they pay far less in taxes than GE.

[abbienormal]

08:16 AM on 04/06/2011

GE capital has lost a lot of money and has loss carrryforwards. GE has a low effective tax rate because they transfer price earnings out of the country and they operate out of the country - big time. I wouldn't feel too bad for GE.

[ChasG]

02:22 PM on 04/06/2011

Keep in mind, the "effective tax rate" does not reflect the actual amount of taxes paid in any given year.  It is an accounting metric that can be a negative number even in years when GE is paying income taxes.
 
You are right to focus on the oil & gas industries, however, as they have tax rules that apply to them and no one else.  That's an issue for congress to address and correct.  Specifically, oil & gas drillers are allowed to deduct "depletion" in amounts greater than their actual costs will ever be.  This has been so for decades.
 
When I have the time, I'm going to look up Exxon and Chevron Forms 10-K to see exactly how much taxes they pay.  It would be an interesting comparison.
 
I'm not usually given to wild speculation, but didn't this whole story about GE's taxes start with an article in Forbes?  And isn't Forbes one of the most far-right libertarian rags in the country?  Why would they attack GE over income taxes when Forbes expressly advocates eliminating all corporate income taxes?  My suspicion (I'm not claiming this to be fact) is that the Forbes article is payback from Steve Forbes who is upset because GE's CEO Immelt has the affrontery to cooperate with the Obama administration, whom Forbes considers to be a socialist.  I just can't think of another reason why Forbe's would be going after GE for income taxes that Forbes believes no corporations should pay.  Doesn't that sound hypocritical?

[DonMadrid1500]

02:51 AM on 04/06/2011

I bet nobody knows what GE paid or didn't pay. Not even GE.

[ChasG]

03:23 AM on 04/06/2011

Almost everybody knows what GE paid.  It's in their form 10-K, the very last row of the statements of cash flows, on page 95.  You can see it at the SEC website, or you can download a PDF at the following link, then click left of center (I like the sound of that) screen where it says "Form 10-K" and go directly to page 95.  Here's the link to PDF:
 
http://www.ge.com/investors/financial_reporting/index.html

[DonMadrid1500]

09:25 AM on 04/06/2011

Like I said I bet nobody knows what GE paid or didn't pay.

Do you expect me to believe some SEC filing by this corporation with its dodgy accounting practices? Who knows if those numbers are true? They could be made up for all we know.

The only way to be absolutely sure is if they were audited by an independent agency.
Good luck with that.

[William Hunter Duncan]

10:55 PM on 04/05/2011

After reading this article, I can only think, "Does anyone with a voice care about America anymore?"

www.offthegridmpls.blogspot.com

[ChasG]

12:01 AM on 04/06/2011

I share the feeling, but don't despair.  Rationally, I know we all have voices, especially with the Internet.  As to how many of these voices actually care, I'm going to paraphrase (badly) something I heard Buckminster Fuller say several decades ago.
 
The trouble with this country is that only 5% of the people give a damn.  If we could just get that number up to 10%, then we'd probably be alright.

[abbienormal]

10:24 PM on 04/05/2011

Sorry folks. This is normal tax planning that every corporation does. GE is just in the spotlight now, but this applies to ExxonMobil and even Microsoft in the past. The list goes on and on. What these companies do is in the best interest of shareholders. They are corporations. That is what they do. You know, capitalism at its finest.

Corporations are not designed to have a social interest UNLESS it also happens to be in the best interest of shareholders.

The tax act of 1987 reduced corporate taxes and eliminated a huge number of loopholes. Since then, our representatives in Congress have slowly added those loopholes back and added some more. And here we are.

If you are angry, set your sights on Congress. Make your representatives eliminate the loopholes again. And, good luck with that give the current makeup of the House.

[ChasG]

11:57 PM on 04/05/2011

Fanned - Very discerning remarks, well stated, nicely done.

[ChasG]

11:58 PM on 04/05/2011

And it's #500!  Some kind of milestone, eh?

[abbienormal]

08:13 AM on 04/06/2011

Fun, huh! Fanned back.

[Duane Burnett]

09:36 PM on 04/05/2011

Look everyone here can debate the fine points of accounting and our tax system until you are all blue in the lips fingers and faces. Please go ahead it does not matter . Here is the big picture like many other giant corporations and government contractors GE will ultimately pay nothing NOTHING they will find ways to recoup everything including FICA and any other contribution. I would bet that they will even find a way to get uncle sam to pay for their coffee! I do not care what the IRS says or how many papers they fill out or if they owe 35% or two hot dogs with mustard. They will not pay! Accountants sorry they do not play by your rules nor are they even in your game.

[ChasG]

10:46 PM on 04/05/2011

You have a rich imagination, and a conspiracy theory ring to your words.  When you say GE will ultimately pay nothing, please note per GE's Form 10-K filed with the SEC, GE paid $2.5 billion to $3.2 billion in income taxes each year over the past three years. 

[abbienormal]

10:58 PM on 04/05/2011

Got to disagree with you Chas.

[Duane Burnett]

07:09 AM on 04/06/2011

your ideas are childish ! Conspiracy my butt the will pay nothing! If they pay 3 bill. that means they will get 6 bil in contracts and kissy lovey deals next year ,many secret too. Grow up ! There are different rules for the giants. Your life of forms means nothing ! Listen to all penny counters GE is not a candy factory or a shoe store. They work on most advanced weapons systems and get whatever they want from our gov. The tax crap is a public show to appease bean counters like you man.

[nopilikia]

09:25 PM on 04/05/2011

GE......We Bring Good Corporate Tax Dodges to Life.

[BBackSoon]

02:19 PM on 04/05/2011

Liar, liar, pants on fire!

[Jim8]

01:02 PM on 04/05/2011

You just know the lights burned late in the PR offices at GE.

[dontblowit]

09:20 AM on 04/05/2011

the single most awful article i've ever read from Huffington Post. This unintelligible blather is complete embarrassment. Oh, so the writers were working on an article and didn't get it out before the NY Times got their far more accurate and researched one printed now this is their sour grapes response, which actually seems like a bad regurgitation of GE's corporate PR .

Remind me to skip anything from the Huffington Post business section in the future. If I want propaganda I go straight to the wall street journal , at least their writers don't write gibberish.

[ChasG]

12:39 PM on 04/05/2011

The NYT, and the original Forbes articles are factually incorrect.  The ProPublica article is factually correct, but does not adequately describe those facts, nor does it provide adequate links to those facts.
 
First, go to http://www.ge.com/investors/financial_reporting/index.html and open or download the PDF document of GE's form 10-K, including independently audited financial statements, filed with SEC and in the public domain (this same report can be accessed at the SEC site, but not in downloadable PDF format).
 
The NYT and the original Forbes articles authors were looking at the wrong financial statements, and they were looking at 2009, not 2010, and they got the pre-tax income number wrong somenow (not an important error, but shows how incompetent the authors are with financial information).
 
The correct information can be found in the statement of cash flows, showing GE paid income taxes of $2.7 billion in 2010, $2.5 billion in 2009, and $3.2 billion in 2008, and did not receive a refund.  You can confirm this information yourself in the Form 10-K on page 95, the last row on the page, income taxes (paid).  Income taxes are also discussed on pages 31 - 34, and the $2.7 billion in taxes paid in 2010 is described in the fifth paragraph on page 32.
 
Not only did Forbes get the facts wrong, I believe it was intentional because Forbes is a business magazine, and they know how to correctly read financial statements, but the authors of the article either do not know how to read financial statements, or they deliberately misled the public.
 
 

[abbienormal]

05:43 PM on 04/05/2011

Actually the link to Outslays' analysis provided in the article is quite informative. It is easier than reading the whole 10-K and covers several years.

[abbienormal]

10:57 PM on 04/05/2011

Gotta say though, I just looked at the cash flow statement on the 2010 financial statements and it shows a cash inflow from taxes of $1,046b, not a cash payment.

[crease]

09:15 AM on 04/05/2011

Samuels said at a tax forum in February that GE needs a tax system that will let it compete effectively with giant, foreign-based multinationals like Mitsubishi, Siemens, and Phillips. However, their effective tax rates for earnings purposes last year were 40 percent, 31 percent and 26 percent respectively, compared with 7 percent for GE. (GE says its tax rate's been artificially low the past few years, and will soon rise.) I'm sure all of these multinational giants also pay more taxes than what GE pays so if GE wants to pay those rate that's fine with me,the higher the better......

[bola47]

09:03 AM on 04/05/2011

ge = cheap stuff from china. stop buying these inferior products from an anti-american company.

[dennis1943]

08:54 AM on 04/05/2011

The story would not have gained ANY traction had it not been SO believable...................

[ChasG]

12:42 PM on 04/05/2011

It's a pity that the original story is being believed, because it is factually erroneous.  Please see my reply above to dontblowit.

[abbienormal]

10:49 PM on 04/05/2011

It is a pity.

[BCinVA]

08:49 AM on 04/05/2011

I kept looking around the boarders of this artilcle to see if I could find the words Paid Advertisement.

[ChasG]

01:38 PM on 04/05/2011

The article is factually correct, and the facts are in the public domain.  For details, see my reply above to dontblowit.

[abbienormal]

10:49 PM on 04/05/2011

Agreed.

[dkloke]

08:10 AM on 04/05/2011

This article was all beginning, no middle, and a little scrape of an ending.

Apparently the authors, and their editors, thought there was something said here. I wonder what it was.

[ChasG]

12:44 PM on 04/05/2011

The article was poorly written, but factually correct.  They simply left out the important facts, which are in the public domain.  Please see my reply above to dontblowit.