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Posts: 391
Join Date: Nov 2009
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Yeah, the thing is, most of these situations where a corporation pays no or negative taxes isn't quite correct.
What this relates to is corporations shifting their tax burden year to year, so what happens is they take their profits in year one, and shift them to year three, so they do pay taxes on it, they just move their money around so as to get the maximum benefit from the tax code. You can do this too, ti's just that your income year to year doesn't fluxuate enough to really warrent you doing this, but for GE, it makes sense for them to shift their big profits year to the same year as their big expenses, so that their net taxible income winds up being 0 or less than 0.
Since companies do have big fluxuations in their incom. A company starts a major project in year A which will not show income unitl year C, but all the tax credits designed to get the company to invest in big projects would be applied to year A if they followed a standard single year tax return policy, so the government allows them to shift that expense to year C since they may not have made the investment (arguably) without the tax incentive.
Because every project is created at a major company to minimize cost and maximize profit, they factor tax policy into their project costs. (hence the republican argument that companies don't want to invest in an uncertain tax climate, not 100% true but it is a factor as much as green energy credits).
With this in mind what you want to look at is not any individual tax return, but their average tax burden over a period of time. If I am understanding this report correctly, these companies are average about half their anticipated tax rate based solely on income earned. This is actually consistant with our general tax policy, once you factor in all the deductions you get you pay far less than your standard anticipated burden.
Now you can say we shouldn't have all these deductions in our tax code, but then again, they are arguably more beneficial for the small business and earner than for the large business or earner. At least that's the argument, I'm not a tax policy expert, so I can't say exactly what th e usage is, however given the sensationalistic nature of these reports, it's easily assumed that the authors had a particular reaction they were trying to ellicit, and GE paid no taxes in 2011, makes a bigger head line than GE paid average taxes of 17.5% in years 2009, 2010 and 2011.
It is still probably less than they should or could afford, but then again there is always the question of double taxation with regard corporate profits. That is profits earned are taxed, and then dividends drawn from the company by stock holders are likewise taxed as income (possibly as capital gains so again I don't know how that effects the overall tax burden) however that is perhaps something to consider when discussing taxation, as to how much corporations and their owners wind up paying each year.
Anyway, the bottom line is what we are discussing here isn't a case of tax evasion but one of use of the tax code exactly as it is intended. That is to provide benefits for investment by a company. It certainly boils the blood but I'm certainly of the opinion that passion and finances generally speaking don't mix and one should really calm down before talking tax policy.
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