26th March 2011, 10:03 PM
GE pays no taxes, thanks Obama
White House defends embrace of G.E. CEO despite report company didn't owe taxes in 2010
In January, President Obama named General Electric CEO Jeffrey Immelt to head the President's Council on Jobs and Competitiveness, an economic advisory board focused on job creation.
In his State of the Union address that same month, meanwhile, he called for the closure of corporate tax loopholes in conjunction with a lowering of the corporate tax rate, which stands at 35 percent.
"Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries," he said. "Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense. It has to change."
Mr. Obama's choice of Immelt came under scrutiny Friday in the wake of a front-page story in the New York Times reporting that despite $14.2 billion in worldwide profits - including more than $5 billion from U.S. operations - GE did not owe taxes in 2010.
In fact, the story said, G.E. claimed a tax benefit of $3.2 billion.
GE CEO Jeffrey Immelt applauds at right during President Barack Obama's visit to the birthplace of the General Electric Co., to showcase a new GE deal with India and to announce a restructured presidential advisor, Friday, Jan. 21, 2011, in Schenectady, N.Y.
G.E. subsequently pointed out what it says is a significant flaw in the story: That the Times did not take into account the impact of its GE Capital losses in the financial crisis. G.E. said that if you exclude GE Capital its tax rate has been about 21 percent.
At his press briefing Friday afternoon, White House press secretary Jay Carney was asked to square Mr. Obama's call for corporate tax reform with his embrace of Immelt. Asked if the story bothered the president, Carney responded that "he is bothered by what I think you're getting at, which is that Americans, I'm sure, who read that story or heard about it are wondering, you know -- you know, how this could be."
Carney went on to make the case for corporate tax reform, noting that companies pay "armies of tax lawyers to understand how it works and to take advantage of the various loopholes that exist."
He stressed, however, that he was "not addressing this specific company because I don't know independently about that." (According to the Times, "G.E.'s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world's best tax law firm.")
Carney was asked why, if the president wants corporate tax reform, he appointed "to the head of the Competitiveness and Jobs Council a person who is now the poster child for abusing the system to get out of paying taxes."
"The jobs and competitiveness council is designed for just that," Carney responded. "And he has brought together a lot of voices on that. And he wants to hear the opinions of every member of that council. And we have said, with regard to questions about other members who have been appointed, that the president obviously doesn't want a council of people who agree with him on every issue; he wants to hear diversity of opinion."
"In the end, the decisions that are made about which policy to pursue on corporate tax reform will be the president's decision and his policy," he added.
Carney said later that Mr. Obama continues to have faith in Immelt to run the council.
Overall, the Times notes, the share of U.S. taxes paid by corporations has fallen from 30 percent of federal revenue in the 1950s to 6.6 percent in 2009.
Tell me again how business has it so bad in America.
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26th March 2011, 10:06 PM
Re: GE pays no taxes, thanks Obama
NEW YORK (TheStreet) -- General Electric(GE_) Chairman and CEO Jeff Immelt and Rep. Charles Rangel (D., N.Y.) might seem like an odd pairing.
GE CEO Jeff Immelt got a big tax break from U.S. Rep. Charles Rangel (D., N.Y.), then gave $11 million to schools in Rangel's district. Immelt is a Republican who leads a giant corporation based in Fairfield, Conn. -- a town named as one of the preppiest places to live in the U.S. in the 1980 bestseller The Preppy Handbook.
Rangel has represented the decidedly unpreppy neighborhood of Harlem in the U.S. House of Representatives for 40 years.
What the men have -- or at least had -- in common were two things: immense power and a keen interest in tax policy.
Last year, Rangel was censured by his fellow House members and stripped of his chairmanship of the Ways and Means Committee, which oversees tax policy. He isn't even allowed to vote on subcommittees.
His censure came as the result of ethics violations, including the underreporting of assets, failure to pay taxes and using government stationery to solicit donations from companies that had business before him.
General Electric is not thought to be among the companies that received these solicitations on government stationery, but a front-page article in Friday's The New York Times raises some troubling questions about the relationship between Rangel and Immelt, and, by extension, about corporate lobbying and U.S. tax policy.
In May 2008, while Rangel still held his chairmanship, he met with GE tax chief and former U.S. Treasury official John Samuels. Samuels dropped to one knee and begged Rangel to extend a tax break that is especially important to GE, according to the report, which notes that a GE spokeswoman said Samuels was joking.
Rangel was presumably not joking, however, when he changed his position on the issue, known as "active financing," the same day. The chairman's reversal allowed GE and other companies, including Caterpillar(CAT_), JPMorgan Chase (JPM_), Ford(F_) and IBM(IBM_) to save an estimated $4 billion annually in taxes.
A month later, Rangel and Immelt were together in Harlem announcing a $30 million donation to benefit New York City schools, $11 million of which would go to institutions in Rangel's district.
Rangel and GE told the Times there was no connection between GE's donation and the tax break, though the article points to what appear to be conflicting statements by Rangel about whether he discussed the donation with GE or Immelt.
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