Thursday, March 31, 2011

G.E.'s tax-free year and the news that wasn't on NBC: Hmmmmm on two fronts . . .

In January, President Obama named Jeffrey R. Immelt, General Electric’s chief executive, to head the President’s Council on Jobs and Competitiveness. “He understands what it takes for America to compete in the global economy,” Mr. Obama said.

Late last week, The New York Times broke the news this way:
G.E.’s Strategies Let It Avoid Taxes Altogether 
General Electric, the nation’s largest corporation, had a very good year in 2010. 
The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States. 
Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.
The Times goes on to explain that G.E.'s ...
Mr. Samuels
...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. 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. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.
As to what G.E.'s non-payment of Federal taxes means, both to shareholders and the rest of us, the Times writes as part of its very long article on big businesses' small tax bills:
The assortment of tax breaks G.E. has won in Washington has provided a significant short-term gain for the company’s executives and shareholders. While the financial crisis led G.E. to post a loss in the United States in 2009, regulatory filings show that in the last five years, G.E. has accumulated $26 billion in American profits, and received a net tax benefit from the I.R.S. of $4.1 billion. 
But critics say the use of so many shelters amounts to corporate welfare, allowing G.E. not just to avoid taxes on profitable overseas lending but also to amass tax credits and write-offs that can be used to reduce taxes on billions of dollars of profit from domestic manufacturing. They say that the assertive tax avoidance of multinationals like G.E. not only shortchanges the Treasury, but also harms the economy by discouraging investment and hiring in the United States. 
The hoopla resulting from this announcement was fairly predictable. An opinion piece in Waterbury, Connecticut's Republican American  says that "some people are up in arms over the New York Times' fact-challenged report that General Electric paid no taxes on its $14.2 billion profit in 2010." After a swipe at the Obama administration, the paper editorializes, in part:

Absent from the Times' piece were some inconvenient facts. GE is among the best-run corporations in the world. Its stock price rose 20.9 percent in 2010 vs. 12.9 percent for the S&P 500. At last report, it had 10.6 billion shares outstanding, so last year's run-up in its stock price plus the dividend totaled almost $40 billion in new wealth. Governments shared in GE's sterling performance through taxes on capital gains and dividends that weren't held in tax-deferred accounts; Connecticut took its cut through its income tax. GE's stock is up a further 8 percent this year because investors big and small, including managers of government pension funds, remain confident in its continued profitability. ... 
Interestingly, GE was able to reduce its federal tax liability to $0 with help from renewable-energy tax credits, which the Times adores because they helped "jump-start hundreds of projects — mostly wind and solar — and created thousands of new jobs" while combating global warming and other environmental scourges. But for this narrative, the credits morphed into "loopholes." GE also got $3.2 billion in credits for federal taxes it overpaid in other years.
ABC news, however, offered this opinion:
"Two things are disconcerting. One is, there's a disproportionate amount of profits being reported offshore. And then, even for the profits that are reported onshore, they're paying less than 35 percent," said Martin Sullivan, a contributing editor for Tax Analysts. and Progressives United sent sent out an e-mail calling for CEO Jeffrey Immelt to step down as Chair of the President's Council on Jobs and Competitiveness, pointing out that, “One of the chief ways GE avoids paying taxes is by shifting a large portion of its profits overseas, and jobs follow. Now GE’s CEO is the person charged with helping the President create jobs here in America. That’s just perverse."

Google "GE and taxes" and you'll find that the story garnered widespread coverage-- and also galvanized a great many economic opinionators into action. People everywhere have been in a flap -- everywhere, that is, except on NBC News, where, since the story broke, Brian Williams et al. have maintained a thundering silence on the subject.

The National Review, among many news organizations, took note of the network's choice not to cover the GE story, by writing that:
During its Friday broadcast, “NBC Nightly News With Brian Williams” had no time to mention that America’s largest corporation had essentially avoided paying federal taxes in 2010. Or its Saturday, Sunday or Monday broadcasts, either. 
Brian Williams
Did NBC’s silence have anything to do with the fact that one of its parent companies is General Electric? 
NBC News representatives say that it didn’t. “This was a straightforward editorial decision, the kind we make daily around here,” said Lauren Kapp, spokeswoman for NBC News. Kapp declined to discuss how NBC decides what’s news or, in this case, what isn’t. 
So, are we to understand from Ms. Kapp's comment that NBC has decided that the fact that the largest US corporation isn't paying any 2010 taxes isn't news?

All I can say is what I said in today's post's title: Hmmmmmmm ... 

How about you?

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