General Electric was once a household name. Now it’s synonymous with mastering the tax-avoidance game.
If one thinks that the price of membership in the world’s greatest democracy requires corporations to pay their fair share of taxes, then General Electric (GE) is morally shameful beyond measure.
It enjoys all the benefits of American citizenship – military protection, transportation infrastructure, medical research, clean air and water, political and economic stability, a representative government, all kinds of freedoms – without paying for any it.
GE lets taxpayers foot the bill while it rakes in profits and avoids taxes.
What’s the story about GE?
GE had “worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States,” reported the New York Times on March 24. “Its American tax bill? None. In fact, GE claimed a tax benefit of $3.2 billion.”
How is this possible?
“Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore,” reported the Times.
Corporations and anti-tax ideologues whine about the “high” corporate tax rate in the United States. But the Times noted that companies have tax shelters, tax credits and subsidies to avoid paying high taxes.
The news story reported that the share of federal revenue in tax receipts paid by corporations has dropped from 30 percent in the mid-1950s to 6.6 percent in 2009.
Enter a Democratic U.S. senator from Illinois named Barack Obama who, in 2007, introduced a bill to stop offshore tax dodges – “The Stop Tax Haven Abuse Act.”
“This is a basic issue of fairness and integrity,” said Obama, quoted in a press release from the office of Sen. Carl Levin (D-Mich.). “We need to crack down on individuals and businesses that abuse our tax laws so that those who work hard and play by the rules aren’t disadvantaged.”
President Obama said in May 2009 that most Americans understood that paying taxes was “an obligation of citizenship” while others were “shirking” their responsibilities to pay their taxes.
Those “shirking” their duties were “aided and abetted by a broken tax system, written by well-connected lobbyists on behalf of well-heeled interests and individuals,” he said.
“It’s a tax code full of corporate loopholes that makes it perfectly legal for companies to avoid paying their fair share. It’s a tax code that makes it all too easy for a number – a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all.”
Enter Jeffrey Immelt, GE’s chief executive.
Obama named him – the head of a corporation that paid no taxes – as his liaison with business.
“He understands what it takes for America to compete in the global economy,” said Obama in January 2011 when he appointed Immelt to be chair of his Council on Jobs and Competiveness.
GE officials have said that in order to compete in the global market it needed to use the tax system to its advantage.
To do that, GE has 975 employees in its tax department, looking for ways to avoid paying taxes, and has spent more than $200 million lobbying Congress to get favorable treatment.
One recent congressional effort to remove a corporate tax break failed in the House Ways and Means Committee then chaired by Rep. Charles Rangel (D-N.Y.). It failed after Immelt called the congressman to say that a GE foundation “was giving money to schools in his district,” according to the Times.
The GE foundation made a $30 million gift to schools in New York City.
Of course, both Rangel and GE denied any connection between the donation and favorable tax treatment.
This story is one of the reasons why many Americans loathe politics and detest tax payments. They rightly see political mendacity. They rightly know that the system favors corporate power and benefits politicians.
What’s the antidote to corporate tax evasion?
Frankly, there is not much we can do against corporations that own everything in sight.
But we can do a few things.
One remedy is memory. Remember that GE is not a household name but a master of the tax-avoidance game. Make that a mantra in your public conversations. Make GE the poster child for corporate tax evasion: GE=TE (tax evasion).
Another remedy is to get “just taxation” on the agenda of the faith community. People of faith need to see taxes as a moral issue, rather than think that faith has nothing to say about taxation.
The nation’s greatest reform movements – the abolitionist and civil rights movements being two examples – were rooted in a moral community, a moral argument.
Isn’t it time for the faith community to push for a moral tax system based in part on the idea of shared sacrifice?
Robert Parham is executive editor of EthicsDaily.com and executive director of its parent organization, the Baptist Center for Ethics.
Click here to learn more about EthicsDaily.com’s documentary on faith and taxes, “Sacred Texts, Social Duty.”