It’s almost tax time, when millions of Americans pore over their earnings and decide how much they owe Uncle Sam for all of the roads and policemen and such. Do we like doing it? No, but we understand that we need to do it (at least on some level) to maintain a functional society. That’s why it’s so upsetting when we hear stories like this one from the NY Times, who reported that G.E., despite making $14.2 billion, paid absolutely nothing in taxes last year. Zero. Nada. Zilch. In fact, the company claimed a tax benefit of $3.2 billion.
How’d they do it? No, they didn’t make a $14.2 billion donation to the Red Cross. Instead, they employed one Mr. John Samuels, a former treasury official whose tax firm’s motto is, appropriately enough, “Imagination at Work.” What are these imaginative solutions? One is intense lobbying; the Times describes a particularly suspect incident in which Samuels gets down on one knee in front of disgraced congressman Charlie Rangel, then chairman of the Ways and Means committee, before he lead the vote on whether or not to extend a vital tax shelter for G.E. The shelter was extended and (surprise, surprise!) G.E. donated $11 million to benefit schools in Rangel’s district.
The company also excels at inventively concentrating its profits, even if they’re made here, offshore. While the particular case of G.E. is disturbing, the Times points out that this is something of a trend: “Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.” Apparently cutting the deficit doesn’t mean making corporations pay their taxes–something activist groups like UK and U.S. Uncut are trying desperately to fight . Companies spend heavily on lobbying Washington for tax breaks; over the last decade, G.E. alone has spent $200 million.
So, what do the American taxpayers get in exchange for G.E. paying $0 in taxes? Well, since 2002, the company has cut 1/5th of its U.S. workforce while increasing employment overseas. You’re welcome, America! You know the problem is bad when people are invoking the name of Ronald Reagan as a voice for more government regulation when it comes to corporate tax dodgers. The Gipper actually closed many tax loopholes that G.E. was using, raising their tax rate to 32.5 percent back in the ’80s.
“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.”
When unions are getting decimated and austerity measures are hurting ordinary Americans, is it too outrageous to ask corporations to simply pay their fair share in taxes? If the deficit is such a big issue, why aren’t we going after corporate tax dodgers as well as cutting government spending? Middle-class families can’t afford big, expensive tax law firms, yet they’re the ones who have to suffer when government services are cut, while G.E. CEO Jeffrey Immelt, who pulled in $15.2 million in executive compensation in 2010, probably won’t notice when low-income families lose their subsidies for heating their homes. A robust democracy requires that everybody plays by the rules; when corporations game the system, it means that all of us, from kids who have to learn in more crowded classrooms to future generations saddled by a huge national debt, lose.