Taxes Blog

Finance Blogs » Taxes » Time for corporate tax reform

Time for corporate tax reform

By Kay Bell · Bankrate.com
Tuesday, March 29, 2011
Posted: 12 pm ET

Are you as stunned as I am that General Electric Co., which netted $14 billion in worldwide profits last year, paid no U.S. taxes on the earnings?

I've focused on taxes for almost 15 years. I lived in Washington, D.C., for two decades and saw how tax laws were made and then changed once folks (aka special interests) discovered how they really worked.

And I know that both individual and corporate taxpayers who can afford expensive and creative tax advisers are able to dramatically whittle down their Internal Revenue Service bills.

But the General Electric Co. situation still shocked me.

It's the largest corporation in the United States. It recorded worldwide profits in 2010 of $14.2 billion, with $5.1 billion of that from U.S. operations. It paid no U.S. tax bill. In fact, GE claimed a tax benefit of $3.2 billion.

Now it's easy to blast GE, but its executives just did what all of us wish we could do, beat the tax man at his own game.

So maybe it is time to change the game.

There's already talk of tax reform on Capitol Hill. And most agree that the starting point should be with the corporate tax system.

Before the GE no-tax revelation, businesses complaining about the United States' 35 percent minimum corporate tax rate being among the highest in the world looked like they might get some relief.

After all, Republicans are in control of the House and hold a good number of seats in the Senate. With the country still struggling to come out of the recession, the standard business argument that making things better tax-wise for companies will make them more willing to hire more people sounded pretty good.

Now, however, it looks like GE might have spoiled it for not only itself, but the rest of corporate America.

Just how many people did GE hire while it was raking in billions and not sending any back as tax payments to the U.S. Treasury? Well, the company sure added staff in its tax division. Company officials told The New York Times that GE's tax department had expanded over the last 20 years and now employs 975 tax specialists.

But since 2002, reports the Times, GE has eliminated a fifth of its work force in the United States while increasing overseas employment.

Taxpayers, known as voters on Capitol Hill, are furious at how easily big firms seem to pay much less taxes than Jane and John Q. Public. Calls are getting louder in the halls of Congress for the wealthiest Americans and most profitable corporations to do their tax share to reduce the country's growing deficit.

Now I know things aren't black or white or ever as simple as taxes paid compared to profits and jobs.

But I also know that as long as a lot of middle-income taxpayers face an individual alternative minimum tax designed to make sure they don't escape taxation, a similar safeguard must be put in place to ensure that the biggest corporate taxpayers also do their tax-paying part.

Make sure you get all the latest tax news and tips this filing season by subscribing to Bankrate's free Daily Tax Tip newsletter.

You also can follow me on Twitter @taxtweet.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
4 Comments
lana
March 31, 2011 at 6:19 pm

so wrong!!

Chris
March 31, 2011 at 9:33 am

It's always, the rich need to pay more. I want the companies I have stock in to reduce their expenses, a.k.a. increase profits as much as possible; to liberals, that's greed; I call it smart. Most people ask, how do I reduce my taxes? The G.E. story tells me that their tax people are smarter than most. The other companies are probably looking into how they, also, can be more PROFITABLE.
Look what is happening in N.Y. & N.J. since income tax rates have gone up. Those wealthiest individuals are moving their residencies to states that have lower rates.
First writer is correct.

hi
March 30, 2011 at 10:31 am

Good grief. You just don't get it. If you lower corporate taxes to entice companies to stay and even return to the US, we at least would be getting some of their taxes, plus all the additional employees would be paying taxes. Even if these corporations paid no taxes, at least we would be getting the taxes fromt the employees. Plus, those employees would create additional jobs, which would require additional employees who would also have to pay taxes. Snowball effect. The US has, by far, the highest corporate tax rate in the World.

Also, in speaking of fair share. I heard that the bottome 50% of taxpayers pay no taxers at all. How exactly is that fair? They have access to all the public facilities that the top 50% have access to, plus many of them probably get additional assistance (food stamps, etc.) that the top tax payers are subsidizing.