Third Party & Independents Archives

Fairness In A Flat Tax

In Sunday’s Washington Post (WP) we find an article that provides additional information re GE’s income tax. A New York Times article of 25 March alludes that GE paid no tax for 2010. The WP article relates that GE paid estimated taxes in 2010.

GE reported 5.1B in US profits for 2010 while claiming a tax benefit of $3.2B. The WP reports that GE did not receive a $3.2B tax refund, did pay estimated taxes for 2010 and made payments for previous years. “Think of it as your having paid with-holding taxes on your salary in 2010 and sending the IRS a chek on April 15,2010, covering your balance owed for 2009.

Will GE eventually pay taxes for 2010? GE says it hasn’t completed it’s 2010 return but says it does have some tax liability for 2010.

GE reported a $3.25B “current tax benefit” which, according to the WP’s investigation, has nothing to do with the actual taxes for any given year. This, on authority of the Deloitte/Michael Licata professor of accounting at Michigan State University’s business school. GE says they expect to have a small income tax liability for 2010 but declined to say how small.

The WP notes that corporate taxes are a pretty hot topic these days, noting that it has been 25 years since big tax reform legislation cut the tax rate from 46% to 34% and eliminated a number of deductions and tax breaks. But, over the last quarter-century heavy lobbying has produced lots more deductions and shelters and other tax-reducing tactics.

The head of GE’s tax department, John Samuels, said that GE needs a tax system that will let it compete effectively with such giant, foreign based multinationals as Mitsubishi, Siemens and Phillips. The WP notes that tax rates for those Corps last year were 40, 31 and 26%, respectively, compared with 7% for GE.

The article relates that 20 years ago GE had a tax department of some 20 people. Today, there are almost 1k. “GE, like other publicly traded companies, publicly reports one set of tax numbers to calculate its earnings but uses a different, confidential set to calculate what it owes the tax collector. The lower the taxes GE reports, the higher its publicly reported profit. And the higher its profit, presumably, the higher its stock price goes.”
The tax department can act like a profit center on its own and “perfectly legal”. For example “GE boosted its 2008 and 2009 reported profits by a total of about $1B just by changing its mind about how it treated some of its overseas business earnings.” GE, like many multinationals, keep some profits abroad. At the end of last year GE had $94B overseas. Simply by deciding how much of their profit stays abroad, with the intent to ‘indefinitely’ invest those profits outside the US, they remain untaxed. In 08-09 GE said that $3B of overseas profits would be indefinitely invested abroad leading to a bookkeeping provision to set aside about $1B for US taxes. GE doesn’t say when the previous accounting provision was taken but in 09-09, when needing higher profits they didn’t have to sell more products, just decide to hold more profit overseas.

Samuels said at a conference last year that the ability to defer taxes on overseas profit gives companies an incentive to shift them abroad. “It’s “a heads-I-win, tails-I-break-even situation,” Samuels said.”

So, the US taxpayer is paying for foreign advertising and the relocation of US companies overseas, with tax code provisions to defer taxes on overseas profits held abroad and 7% taxrates if you have a staff of 1000 or so to lobby and minimize.

Seems that would make all cry out for a flat, 15 percent income tax with no deductions and offering little room for gov’t (corpocracy) manipulation of tax codes. But, to realize such a tax system the money influence would have to be removed from politics/govt. That would require a 3rd party, such as the Republican Sentry Party, with an agenda to abolish corporate personhood and implement real campaign finance reform. Also, helpful to support Vote Out Incumbents Democracy (VOID) and work for Article V Convention.

Otherwise - - -

Posted by Roy Ellis at April 10, 2011 3:54 PM
Comments
Comment #321394

Roy,

A New York Times article of 25 March alludes that GE paid no tax for 2010. The WP article relates that GE paid estimated taxes in 2010.

It seems the WP article only serves to confuse the issue, which to me benefits GE. Here is a bit more information on the issue.

“We agree that for reporting to shareholders, GE shows no tax liability.”

http://www.hillmanfoundation.org/blog/fortune-and-propublica-attack-new-york-times-without-any-facts

So either shareholders were misinformed or GE paid no taxes. Some may call it “accounting” but it reeks of deception and lies.

So, the US taxpayer is paying for foreign advertising and the relocation of US companies overseas…

“It uses the American Jobs Creation Act of 2004 to save hundreds of millions of dollars in taxes every year by moving jobs to Ireland. And so on and so forth.”

http://blogs.reuters.com/felix-salmon/2011/04/04/ge-and-the-power-of-iterative-journalism/

At the end of last year GE had $94B overseas. Simply by deciding how much of their profit stays abroad, with the intent to ‘indefinitely’ invest those profits outside the US, they remain untaxed.

Were I still invested in GE I would be upset to find out this much money in profit has not been returned to shareholders. Such a small dividend they pay to those that invest in the company.

As far as a flat tax Roy I would think that earned income could be subject to a small flat tax past a certain level of income, along with the SS and Medicare taxes but unearned income such as investments should be taxed at a progressively higher rate IMHO. VAT’s on imported goods should be used to a greater extent as well.


Posted by: j2t2 at April 10, 2011 6:06 PM
Comment #321397

j2t2, I’m no doubt GE could pony up five or six ‘tax returns’ based on which audience they are pitching.

If I go up on a high hill and take a long look back I can find nothing in the constitution or Founder’s intent that over the next 200 years corporations will gradually take over the reins of gov’t and the people shall be quieted.

The money influence must be removed - corporate personhood must go.

Other than being more fair, a flat tax with no deductions would prevent the corpocracy from manipulating the tax code in making winners/losers. That’s a biggie, IMO.

I would have no problem with corporations being tax exempt AFTER corporate personhood law is abolished. I do advocate for a VAT for import/export which would greatly benefit a more balanced trade figure.

Posted by: Roy Ellis at April 10, 2011 6:43 PM
Comment #321448

Excellent piece, Roy.

And it serves to support the question of “We need to eliminate the 2000-page U.S. Tax Code and strip away every loophole, shelter, deferment, credit and “strategic process.”

There is no argument anywhere that can successfully explain - without presumptions, ifs and rhetoric - why the corporate tax structure and individual tax structure cannot be simply: “You will pay X-percent on any money made - regardless of source, type or intent.”

The abortion that is America’s tax code is a self-perpetuating and self-preserving beast that needs to be exterminated.

Posted by: Gary St. Lawrence at April 11, 2011 1:39 PM
Comment #321489
I would have no problem with corporations being tax exempt AFTER corporate personhood law is abolished. I do advocate for a VAT for import/export which would greatly benefit a more balanced trade figure.
Posted by: Roy Ellis at April 10, 2011 06:43 PM

I agree, 100%! No corporate tax to be passed on to the consumer. No corporate personhood for the individual to hide behind.

Posted by: Weary Willie at April 11, 2011 10:17 PM
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