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The Big Lie About GE’s Huge Untaxed Profits

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You know, I like Jon Stewart. He’s a funny guy. And I don’t generally mind him poking fun at politicians and policies I support. What I do mind is when he breaks the illusion of somewhat legitimate comedy-news by repeating lies straight out of the talking points of the political left, letting himself be used as their late-night pointman, mainstreaming those lies into the public debate out of the mouths of the many people who get their only news from his show.

Last week, Stewart went on repeatedly about how General Electric reaped huge profits of $149 billion yet paid not a penny in taxes. It’s a great argument to make at a time when everyone is paying their own taxes and easy to drive to outrage over a huge corporation not paying their fair share. The problem is that it’s a lie. It takes advantage of the ignorance of too much of the public about what is meant by profits. Yes, GE’s corporate revenue was $149 billion in 2010. However, that is not the same as profit.

After subtracting all of the costs of operating their business, their actual Net Profit was less than $11 billion. That’s the money they had left over to actually spend after paying all of their bills. That’s a far cry from the huge profit number which anti-corporatists have been promoting. It’s actually a relatively low profit margin of only 7.4%. What’s more, it’s not really their profit, because every cent of it gets payed out to stockholders who also pay taxes on it.

There are also a couple of other problems in this criticism of GE. First, they actually did pay taxes. Not a huge amount, but their income statement clearly shows that they paid total taxes of $1.05 billion to the federal government. That’s just under 10% in taxes on their Net Profit. Second, there’s the issue of what they did with their profits. Those profits went to the people who own stock in the company, which actually included me up until fairly recently. Almost all of those profits were divided up and then individual stockholders also paid taxes on their share of profits, likely at the capital gains rate of 15%, so in actuality the profits were taxed twice, adding up to a total rate of about 24.5%.

There’s a simple way for the average taxpaying John Stewart watcher to relate to GE’s taxes. Just compare them to your own taxes. All the money you earn during a year is your Gross Income, the equivalent of GE’s $149 billion in corporate revenue. The standard exemptions and deductions which every taxpayer can take then reduce that amount and what’s left is your Adjusted Gross Income. Your deductions and exemptions are like the operating expenses which GE deducts from its income, so your Adjusted Gross Income is equivalent to their $11 billion Net Profit. For both of you that’s the actual amount which is taxed. If you have an average income you pay 15% on that while GE pays only 10% on theirs. So far they’re a little ahead. But unlike you they then have to give all that money away, and the stockholders they give it to then pay 15% on it again, so the total rate of tax paid on that money before anyone can spend it is 24.5% a higher rate of tax than you pay unless you earn over about $44,000 a year as a single taxpayer. If you earn between $45,000 and $95,000 you pay about the same rate as GE. Only if you earn more than $95,000 do you pay more in tax as a percentage than GE does. And for the record, the taxes GE payed in 2010 were estimated quarterly payments, rather like the withholding taken out of your paycheck, not their final tax bill.

So the truth is that GE paid an entirely reasonable level of tax in 2010 and people like Jon Stewart, Michael Moore, ABC News, The New York Times and others who want to tear down our capitalist system are just lying to you and hoping you won’t check the facts. And remember this isn’t the only thing they lie about for partisan reasons. Guess who would really get hammered if we actually responded to their call to “repeal the Bush tax cuts.” One hint. It’s not the super-rich.

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About Dave Nalle

  • http://www.somethingelsereviews.com Mark Saleski

    go ahead people….go ahead and watch the stewart show. in fact, he referred to the fact that taxes were not paid on over 14 billion dollars in profits. to go further, g.e. actually received a tax benefit of over 3 billion for 2010 (widely reported elsewhere)

    the politics section of blogcritics could not get more embarrassing.

  • Costello

    Saw O’Reilly deal with this issue so this idea that it’s just the left trumpeting this story is inaccurate

  • Troll 2

    GE doesn’t pay 100% of their profits in dividends, dividends are not always taxed at 15%, the tax rate of someone making 44K is not 15% … Painful to read!

  • http://handyfilm.blogspot.com handyguy

    And the way GE reduced their taxable income from $149 billion to $11 billion is part of what is at issue. Nothing illegal, but the current tax system allows them to shelter much of their profit overseas. There is plenty of legitimate room to criticize the fairness of this.

    Dave complains that Stewart’s material about GE is ideological. Every syllable of this article is informed by an utterly closed and inflexible ideology, just like at least 90% of Nalle’s articles and comments.

    The existence and possible virtues of other points of view are rarely if ever acknowledged. If the pejorative “far left agenda” can be applied [accurately or no] to any part of any discussion, the case is closed as far as Dave is concerned. He doesn’t even have to listen. And so he does not.

  • http://www.republicofdave.com Dave Nalle

    Troll, good point. The dividends are taxed at a HIGHER rate than capital gains. 15% is the least they would be taxed at. So GE actually pays more taxes than I estimated. Indeed, your attempts at spin are painful to read.

    Handy, the only thing this article is informed by is the facts. I took a claim repeated over and over in the media, looked up the data and pointed out the inconsistencies. Why is that a problem for you?

    Dave

  • http://www.republicofdave.com Dave Nalle

    go ahead people….go ahead and watch the stewart show. in fact, he referred to the fact that taxes were not paid on over 14 billion dollars in profits.

    Stewart repeadedly said that GE “Made $149 billion” which was not taxed. That misrepresents their actual profits and is also untrue, since they did pay an estimated tax of $1.05 billion.

    to go further, g.e. actually received a tax benefit of over 3 billion for 2010 (widely reported elsewhere)

    That supposed tax benefit comes from having parts of their businesses located outside the US and paying lower tax rates to local countries than they pay in the US. The deception here is defining it as some sort of tax credit. It may be a way of avoiding US taxes, but this is a multinational corporation and it has the right to pay taxes where its operations are located.

    Dave

  • http://handyfilm.blogspot.com handyguy

    I realize that you have conflated ‘facts’ and propaganda for so long that you may indeed not be able to tell the difference.

    A multinational corporation that pays in $1 billion and gets back from the government $3 billion in ‘credits’ has a net tax bill of minus two billion. It’s all one big company, as you point out.

    Most people presented just with the numbers in the case have had a visceral reaction that this is shockingly unfair, and, irresistibly to Stewart, also wryly hilarious.

    You often make the argument that there should be no corporate taxes…Troll suggested the outline of a counter-argument above. A discussion worth having, if you would put your damn propaganda sound bites to rest. Yet if we are to have corporate taxes, then a highly profitable company ought to pay some.

    Our convoluted tax laws are a mess, and left and right should be able to agree on that.

  • http://handyfilm.blogspot.com handyguy

    Here’s a NY Times article on the GE taxes story, a bit heavier on the, um, facts than Nalle’s polemic about Big Lies [a subject on which he has undisputed expertise, having composed quite a few himself].

    Dave implies that the difference between GE’s profits and its taxable income is just “the cost of doing business.” But it’s much more complicated – and less innocent – than that. GE has a huge tax department and lobbying organization designed to win and take advantage of tax breaks and loopholes.

    Among the article’s fascinating tidbits: Former GE employee Ronald Reagan was shocked as president to learn that GE payed no income taxes. He saw to it that many of those loopholes were closed, and GE paid taxes again in the 80s and 90s, but lately they have gone back to their aggressive tax reduction policies.

    “…. the most lucrative of these measures allows G.E. to operate a vast leasing and lending business abroad with profits that face little foreign taxes and no American taxes as long as the money remains overseas.

    Because its lending division, GE Capital, has provided more than half of the company’s profit in some recent years, many Wall Street analysts view G.E. not as a manufacturer but as an unregulated lender that also makes dishwashers.”

  • Boeke

    As I understand it, Immelt is doubling his salary this year and preparing to layoff 15,000 workers.

  • http://www.somethingelsereviews.com Mark Saleski

    here is the daily show segment.

    not only does Stewart not confuse revenue with profit…he does not even mention the revenue.

  • Clavos

    …Immelt is doubling his salary this year and preparing to layoff 15,000 workers.

    Filthy capitalist pig.

  • http://www.republicofdave.com Dave Nalle

    I realize that you have conflated ‘facts’ and propaganda for so long that you may indeed not be able to tell the difference.

    No, I know the difference. The facts are the facts and the propaganda is how I interpret them.

    A multinational corporation that pays in $1 billion and gets back from the government $3 billion in ‘credits’ has a net tax bill of minus two billion. It’s all one big company, as you point out.

    Except that those credits are in exchange for things which GE did to earn them which had real costs associated with them, and they are not an offset for the taxes they paid but entirely separate. Properly they are counted as part of their revenue.

    Most people presented just with the numbers in the case have had a visceral reaction that this is shockingly unfair, and, irresistibly to Stewart, also wryly hilarious.

    Not me. As noted in the article, I see them paying about the same amount of tax as the rest of us.

    Yet if we are to have corporate taxes, then a highly profitable company ought to pay some.

    This just shows the absurdity of corporate taxes. A responsible company will do everything it can not to pay those taxes and if it does pay some it will pass the cost on to consumers. So the corporate taxes are meaningless, so why have them at all? It’s an example of bad law, and bad law is tyranny.

    Dave

  • zingzing

    “It’s an example of bad law, and bad law is tyranny.”

    taxing corporations is now tyranny. ok.

    you know, i was thinking earlier, on a very large scale, and i wonder if you came across someone from some place that was really under tyranny… just what would they think of you. yelling for freedom and liberty and all that wonderful stuff. but you’ve got to admit you’ve got it pretty good. you were born and have grown up in and have lived in a relatively free society. yet you still bitch.

    you want to turn our supposed lack of freedom into some crusade, a revolution of some sort. but what is this to you, really?

    it’s a hobby, isn’t it? some other men build model train sets or get a classic car and work on them during the weekends. some get divorced or take up with a mistress.

    but you… oh, you’ve gone political. you have become the freedom fighter. you are making a difference. the man won’t have you down, except when the man touches you right.

  • http://thingsalongtheway.blogspot.com/ Cindy

    Dave,

    Why do you support crony capitalism, Dave? Is that the new free market perspective?

  • http://thingsalongtheway.blogspot.com/ Cindy

    Dave,

    Remember when I tried to ask you why the people with the money are at some privileged position relative to the workers and you told me the workers were getting the benefit of being able to make a living (roughly)? Well, two things Dave. One, couldn’t I just turn that around and say the employer is getting the benefit of making a huge profit?

    And my second thing, Dave. I since have discovered that Abraham Lincoln felt the same way I do. Do you think it is because there may be something to that idea Dave or is Abraham Lincoln just as hopelessly incapable and easily dismissed as me?

    “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” — Abraham Lincoln

  • http://handyfilm.blogspot.com handyguy

    I guess Ronald Reagan was just swallowing leftist “Big Lies” too when he, startled to learn that GE was able to avoid taxes, made sure to close some of those loopholes. Just another shill for Big Gov Tyranny, that Ronnie.

  • Clavos

    “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” –

    To that I would say that Lincoln was not an economist.

    Certainly, capital needs labor, but the reverse is equally true; labor needs capital to provide the environment and tools in which to labor, not to mention the raw materials.

    It’s a symbiotic relationship.

  • Boeke

    What is “The Big Lie About GE’s Huge Untaxed Profits”. Looks like Stuart was right.

  • http://takeitorleaveit.typepad.com/an roger nowosielski

    Symbiotic relationship – perhaps in an ideal world. The chicken or the egg question, definitely not. Capital is one of the fruits of labor, not the other way around. It’s a matter of proper relationship, I suppose. The capitalist credo is that capital ought to rule labor; hence the basis of Marx’s concept of alienation (from labor), whereby a proprietary human quality – i.e., labor – is made subject to the vagaries of second-order derivatives (capital). To do away with alienation would require restoring the proper balance/relationship, whereby the human agency – via labor – is in control of all aspects of the production process, including the capital.

    What’s not to understand?

  • Clavos

    What’s not to understand???

    When and where did Marxian theory ever work (to the satisfaction of all) in the real world?

    You say:

    whereby the human agency – via labor – is in control of all aspects of the production process, including the capital.

    “In control?” Not of my capital (limited as it is), they aren’t.

  • troll

    …hence the continued alienation – it’s all your fault Clavos

  • Glenn Contrarian

    Clavos –

    Marxian theory works in the same place that Libertarian and ‘trickle-down’ theory works – only in the heads of those who’ve bought into such ideas.

  • zingzing

    glenn: “Marxian theory works in the same place that Libertarian and ‘trickle-down’ theory works – only in the heads of those who’ve bought into such ideas.”

    they also work at the top end of such systems.

  • Alina

    Clavos, your comment that “Lincoln was not an economist” was obviously aimed to discredit his very wise perspective. You treat economy like a science when it is NOT. Why? Well, it’s because there’s no certainty in the great waste of time called economics(as it stands today). The results can’t be reproduced with the same outcome every time. Economics is as reliable as the field of astrology..so please, no need to downgrade Lincoln with a sad collection of opinions. No labor literally means NO TOOLS, and NO CAPITAL. You may forget but people created tools, tools didn’t create people. Human capital is the most important one any country can have. You either invest in it, or you exploit it until something gives.