General Electric again finds itself the focus of a politically-charged battle over corporate taxes.
A new analysis of the mega-corporation's tax filings shows that 1.8 percent of GE's pre-tax profits have gone to the federal government since 2002. That bears repeating: GE has paid an average tax rate of just 1.8 percent over the past decade, according to an analysis by the non-profit advocacy group Citizens for Tax Justice.
If you'll think back to your high school math classes, you'll recall that 1.8 percent is less than 35 percent. That means GE is paying well below the top marginal corporate tax rate of 35 percent -- the same tax rate that business leaders, politicians and conservative commentators have repeatedly deplored as high enough to impede economic growth.
The analysis adds ups GE's profit in the years since 2002, which come to more than $81 billion, and sets it against the company's tax history over the same period.
In some years, GE paid taxes. In other years, not so much. For 2002, 2008, 2009 and 2010, according to the report, GE didn't pay a cent in federal income taxes, and indeed got substantial tax refunds back from the government. GE paid taxes at a rate of 11.3 percent in 2011. Never since 2002 did GE pay taxes at the official 35 percent rate.
GE strongly disputed the study's findings. In an email to The Huffington Post, Andrew Williams, a company spokesman, said Citizens for Tax Justice is "an interest group with a clear agenda and the reports they file are biased and inaccurate." GE actually paid a 25 percent tax rate in 2011 in the U.S. and a "global rate" of 29 percent -- up from 7 percent in 2010, according to Williams.
"The rate is below 35 percent because of lower tax rates on foreign earnings, and tax credits and deductions for investments that support U.S. economic growth and jobs," Williams said.
Robert McIntyre, director of Citizens for Tax Justice, told HuffPost that GE's figures for 2011 -- the 25 percent U.S. tax rate and 29 percent global rate -- don't reflect what the company actually paid that year. Rather, McIntyre said those figures include deferred taxes that GE can continue to kick down the road indefinitely.
"They want to count taxes that they didn't pay," said McIntyre. "I don't blame them."
McIntyre said that "everything we have in the report comes from General Electric's annual reports," which he said were "filed with the SEC every year under oath."
This isn't the first time General Electric has faced public scrutiny for its tax practices -- and it's not the first time GE has pushed back. A widely-read New York Times story last year, which asserted that GE paid no taxes in 2010, provoked a lengthy response from the company.
General Electric is not the only firm reaping enormous profits while paying far less than 35 percent to the government. Twenty-nine other major corporations joined GE in paying no taxes between 2008 and 2010, among them Wells Fargo, Verizon, Boeing and DuPont, according to a separate Citizens for Tax Justice report. They were part of a larger group of 280 corporations that, due to a variety of legal loopholes, reportedly paid an average tax rate of just 18.5 percent during that time, the report said.
There are any number of accounting tricks available to a company looking to minimize its tax burden.
A company can take advantage of government subsidies. It can claim deductions on the stock option packages it gives to employees. And it can employ a tax exemption that puts income from its overseas lending activities beyond the reach of the U.S. government -- a trick that GE uses, and has, in the past, deployed lobbyists to defend.
Even though paying taxes at a rate of 35 percent is now more of an exception than rule, some politicians on both sides of the aisle continue to call a reduction. Last week, in the face of mounting pressure to cut federal spending, President Barack Obama proposed cutting the corporate tax rate to 28 percent, in exchange for eliminating a number of major tax breaks.
EDITOR'S NOTE: The Citizens for Tax Justice has since amended its analysis and now says that GE paid an average tax rate of 1.8 percent between 2002 and 2011, not 2.3 percent as originally reported. "The earlier version inadvertently used GE’s restated 2009 and 2010 figures from GE’s 2011 annual report," the left-leaning think tank said in a statement. "Those restated figures excluded the half of NBC that GE sold to Comcast in 2011, and did not reflect GE’s actual results for those two years."
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