GE Bad? Probably, But it Misses the Point
by Winks
GE has once more been in the press alot lately, after the hysterical left-wing media discovered that they reported net profit of $14 billion, but, OMG, paid no Federal income taxes. Those evil, greedy corporations have screwed us yet again! We demand hearings! We demand justice! We demand.... We demand...
Okay, comrades, calm down now and read on.
Well, yes, it is certainly appalling to think that billions in profit can go untaxed, but that's our tax code and understanding it can put things in perspective (although it won't make you feel any better). This "perversity" as some call it in t...he code, is a favorite of the left because it provides great talking points for "greedy corporation" rhetoric. Problem is, the angst is badly misplaced.
The ability of corporations to avoid taxes through loss carry-forwards has been around for decades....and all companies, large and small can take advantage of it. It's not overly-complex to apply (you can do it with Turbo-Tax) and the concept is actually quite simple. What it says is that if a compnay loses money in one or more years (consecutively), it can carry those losses forward for purposes of deferring income tax liability in future profitable years. So, in 2008-09 GE Capital lost billions in its finance unit for the same reason all the other lenders did: Risky lending in housing. Fast forward to 2010 and GE is profitable again due to growth in its non-finance units, but guess what: the loss carry-forwards were sitting there waiting, and because of the enormity of the losses, were more than enough to offset taxes that would have been otherwise owed on the profits earned last year. In fact, it wouldn't surprise me if they have LCF this year as well.
Now, it's easy to demonize GE as "greedy" for this travesty, but this isn't driven by corporate greed. I happen to think GE is corrupt in many other ways, but in this instance it is only using the code to its advantage, same as all American corporations do when they incur heavy losses. Did greed play a role in fashioning the code? Could very well have, but that's not the argument. It does help make the case though that reforming the tax code must be a key element in getting control of our finances....and I'm not talking about raising taxes. I'm talking about lowering the rate and ending the deductions and exemptions...which are simply mechanisms for picking winners and losers and rewarding Congressmen with lifetime tenure in office. THIS we MUST correct if we are ever going to fix the mess we're in.
GE has once more been in the press alot lately, after the hysterical left-wing media discovered that they reported net profit of $14 billion, but, OMG, paid no Federal income taxes. Those evil, greedy corporations have screwed us yet again! We demand hearings! We demand justice! We demand.... We demand...
Okay, comrades, calm down now and read on.
Well, yes, it is certainly appalling to think that billions in profit can go untaxed, but that's our tax code and understanding it can put things in perspective (although it won't make you feel any better). This "perversity" as some call it in t...he code, is a favorite of the left because it provides great talking points for "greedy corporation" rhetoric. Problem is, the angst is badly misplaced.
The ability of corporations to avoid taxes through loss carry-forwards has been around for decades....and all companies, large and small can take advantage of it. It's not overly-complex to apply (you can do it with Turbo-Tax) and the concept is actually quite simple. What it says is that if a compnay loses money in one or more years (consecutively), it can carry those losses forward for purposes of deferring income tax liability in future profitable years. So, in 2008-09 GE Capital lost billions in its finance unit for the same reason all the other lenders did: Risky lending in housing. Fast forward to 2010 and GE is profitable again due to growth in its non-finance units, but guess what: the loss carry-forwards were sitting there waiting, and because of the enormity of the losses, were more than enough to offset taxes that would have been otherwise owed on the profits earned last year. In fact, it wouldn't surprise me if they have LCF this year as well.
Now, it's easy to demonize GE as "greedy" for this travesty, but this isn't driven by corporate greed. I happen to think GE is corrupt in many other ways, but in this instance it is only using the code to its advantage, same as all American corporations do when they incur heavy losses. Did greed play a role in fashioning the code? Could very well have, but that's not the argument. It does help make the case though that reforming the tax code must be a key element in getting control of our finances....and I'm not talking about raising taxes. I'm talking about lowering the rate and ending the deductions and exemptions...which are simply mechanisms for picking winners and losers and rewarding Congressmen with lifetime tenure in office. THIS we MUST correct if we are ever going to fix the mess we're in.
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