Thursday, April 21, 2011

Did GE Pay Federal Income Tax in 2010?

It seems like a straightforward question, and the New York Times claimed they had found the answer: "[GE] American Tax Bill? None."

Then Business Insider started poking around a bit and found a much more complicated story, with plenty of spin. In fact the spin is continuing. When the room stopped spinning, it appears the facts are:

  1. GE did pay plenty of taxes in 2010. Payroll taxes, state taxes, property taxes, etc.

  2. GE probably will pay astonishing little federal income tax in 2010; perhaps no income tax after all the tax breaks are claimed.

  3. GE stands by its claim that it paid taxes in 2010.

  4. The New York Times stands by the accuracy of its story.

  5. Americans get infuriated at GE for gaming the tax code, and the NYT for obfuscation.

We have nobody to blame but ourselves. We all want our deductible goodies (interest on mortgage, Making Work Pay, Green Car Tax Credits, etc.) and then we become infuriated that a large company hires enough lawyers to ferret out all of the tax breaks and null out their federal income tax liability. We know what remedy should be applied: abolish most deductions and lower rates. Simplifying the tax code would devastate the Lobbying Corps, though not completely eliminate them. But it would help restore the concept of making business decisions based on markets and products, rather than tax advantages.

The top 5% of AGI earners theoretically pay at least a rate of 28% , but with tax breaks pays more like 20% , and the top 1%, who should be on the hook for 35% pays more like 23%. How about about a tax code where the top 1% are taxed at 23% and actually pay 23%?