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This blogger is, as usual, arguing that the corporate tax code is somehow too complex. Rather what is happening is that GE is intentionally gaming the system.

This blogger is, as usual, arguing that the corporate tax code is somehow too complex. Rather what is happening is that GE is intentionally gaming the system. Most of those 57,000 pages are self-inflicted. If GE refrained from tax-dodging activity and only undertook regular business activity, their tax return would be much, much thinner. http://money.cnn.com/2010/04/16/news/companies/ge_7000_tax_returns/ http://money.cnn.com/2010/04/16/news/companies/ge_7000_tax_r... A few lines of patching to the tax code to require that income earned in the U.S. be taxed in the U.S. would fix the majority of the problem. Literally a couple of sentences.

Anderkent 15y ago
Or, you know, make the tax code simpler so that there is less room to game the system?
- Vivtek 15y ago
  With the result being that GE would have to pay billions in taxes and thus have less money to bribe Congressmen.
- three14 15y ago
  Although there are clear problems with the tax code, people forget that some of the complexity is there because that's what most people actually want. People want a tax deduction for charity. People want to tax corporate profits, not revenues - so you need to figure out how much is actually profit. Is R&D a real expense? Can we just sink all our profits into R&D and say we have no profits? But you can't just tax all R&D as if it was profit that the company is hiding or software companies would go out of business. What about when you have some complicated schedule of when a client pays you - do you record the revenue when you earn the money or when you get it? Many people want a tax deduction for a mortgage (whether or not this makes any sense). Like software, complexity gives room for hacks. You can't hack into a hammer, but you can hack into a computer. If you want a complex tax code, you don't simply declare "Simplify!" It's like "I'm going back to my typewriter to avoid viruses." There are more realistic ways to deal with the problem, and like computer security, it takes real time and effort.
cynicalkane 15y ago
First, the definition of 'corporate income' is soft and fuzzy, and it's very hard to translate into a technical definition useful for making tax policies. Second, the US has tax incentives and the idea behind them is that you're supposed to take them. The system is designed to be gamed, it wants to be gamed, except when certain corporations game it in a certain way then suddenly there's lots of outrage without anyone really asking why the tax system was intentionally set up to work that way. Instead the outrage usually ends with pitting on the blame on the congress/corporate lobbying system (which is real but overrated, and just an amplifier of the problem not a source), or the assertion that all corporations should be demanded to follow some ill-defined moral code that would arbitrarily please the speaker.
three14 15y ago
The tax code already requires that income tax earned in the U.S. be taxed in the U.S. My father's job essentially involves making up the numbers. Why do I say make up numbers? Often, corporations are multinational. Some part of the corporation makes a sale, but parts in two countries did the work. The rule is that the sale is allocated between the two parts as if they were two companies, and each part pays where it's located. But how much would the part that made the sale pay the other part if they really were two companies? Who knows? So they hire people to make up convincing numbers; they find other transactions between companies that actually are separate to compare to. As you might imagine, this leaves tons of wiggle room. In short, in this case, the reasonable thing is actually the law, but it gives companies plenty of room to take advantage.
yummyfajitas 15y ago
If GE refrained from tax-dodging activity... GE should stop giving employees health insurance (untaxed compensation) and producing green energy (which nets it various tax subsidies). Is that what you had in mind?
- jellicle 15y ago
  Those aren't 1/1000th of GE's tax dodging and you know it.
  - yummyfajitas 15y ago
    They have 287,000 employees. At $10k/employee/year, that's $2.87 Billion, on which they should have paid roughly 15% in taxes (about $400M). Throw in the $490M GE gets directly for it's wind projects, and ignore the value of it's loan guarantees, and we are up to nearly $900M. http://www.nationalreview.com/articles/279802/america-s-worst-wind-energy-project-robert-bryce http://www.nationalreview.com/articles/279802/america-s-wors... Do you seriously believe GE has dodged more than $900 billion in taxes?
    - prakashk 15y ago
      > They have 287,000 employees. That's their employee count worldwide. Shouldn't only the US-based numbers be relevant in the current context?
      - yummyfajitas 15y ago
        My mistake (I just took the 1 minute google answer), it's only 133k in the US. http://www.sec.gov/Archives/edgar/data/40545/000119312511047479/d10k.htm#tx37537_11 http://www.sec.gov/Archives/edgar/data/40545/000119312511047... This cuts the estimate of their tax subsidies by a bit over $200M, so 1000x the remainder would be about $700B. Is it your contention that GE dodged taxes equal to roughly the cost of the US military?
    - ppereira 15y ago
      This may be an interesting piece of rhetoric, but does little to advance the argument. I know that GE employs some of the most sophisticated international tax planners on the planet (as they should). I have no idea how much tax they have avoided, and I doubt they evaded any. How much tax do you think they should have paid? How much should Johnson & Johnson have paid? Due to a quirk of the laws of Wisconsin, it is comparatively easy to find out how much money their corporations actually paid to the government, which is not necessarily close to the amount on their filings.

Anderkent 15y ago

Or, you know, make the tax code simpler so that there is less room to game the system?

Vivtek 15y ago
With the result being that GE would have to pay billions in taxes and thus have less money to bribe Congressmen.
three14 15y ago
Although there are clear problems with the tax code, people forget that some of the complexity is there because that's what most people actually want. People want a tax deduction for charity. People want to tax corporate profits, not revenues - so you need to figure out how much is actually profit. Is R&D a real expense? Can we just sink all our profits into R&D and say we have no profits? But you can't just tax all R&D as if it was profit that the company is hiding or software companies would go out of business. What about when you have some complicated schedule of when a client pays you - do you record the revenue when you earn the money or when you get it? Many people want a tax deduction for a mortgage (whether or not this makes any sense). Like software, complexity gives room for hacks. You can't hack into a hammer, but you can hack into a computer. If you want a complex tax code, you don't simply declare "Simplify!" It's like "I'm going back to my typewriter to avoid viruses." There are more realistic ways to deal with the problem, and like computer security, it takes real time and effort.

cynicalkane 15y ago

First, the definition of 'corporate income' is soft and fuzzy, and it's very hard to translate into a technical definition useful for making tax policies. Second, the US has tax incentives and the idea behind them is that you're supposed to take them. The system is designed to be gamed, it wants to be gamed, except when certain corporations game it in a certain way then suddenly there's lots of outrage without anyone really asking why the tax system was intentionally set up to work that way. Instead the outrage usually ends with pitting on the blame on the congress/corporate lobbying system (which is real but overrated, and just an amplifier of the problem not a source), or the assertion that all corporations should be demanded to follow some ill-defined moral code that would arbitrarily please the speaker.

three14 15y ago

The tax code already requires that income tax earned in the U.S. be taxed in the U.S. My father's job essentially involves making up the numbers. Why do I say make up numbers? Often, corporations are multinational. Some part of the corporation makes a sale, but parts in two countries did the work. The rule is that the sale is allocated between the two parts as if they were two companies, and each part pays where it's located. But how much would the part that made the sale pay the other part if they really were two companies? Who knows? So they hire people to make up convincing numbers; they find other transactions between companies that actually are separate to compare to. As you might imagine, this leaves tons of wiggle room. In short, in this case, the reasonable thing is actually the law, but it gives companies plenty of room to take advantage.

yummyfajitas 15y ago

If GE refrained from tax-dodging activity... GE should stop giving employees health insurance (untaxed compensation) and producing green energy (which nets it various tax subsidies). Is that what you had in mind?

jellicle 15y ago
Those aren't 1/1000th of GE's tax dodging and you know it.
- yummyfajitas 15y ago
  They have 287,000 employees. At $10k/employee/year, that's $2.87 Billion, on which they should have paid roughly 15% in taxes (about $400M). Throw in the $490M GE gets directly for it's wind projects, and ignore the value of it's loan guarantees, and we are up to nearly $900M. http://www.nationalreview.com/articles/279802/america-s-worst-wind-energy-project-robert-bryce http://www.nationalreview.com/articles/279802/america-s-wors... Do you seriously believe GE has dodged more than $900 billion in taxes?
  - prakashk 15y ago
    > They have 287,000 employees. That's their employee count worldwide. Shouldn't only the US-based numbers be relevant in the current context?
    - yummyfajitas 15y ago
      My mistake (I just took the 1 minute google answer), it's only 133k in the US. http://www.sec.gov/Archives/edgar/data/40545/000119312511047479/d10k.htm#tx37537_11 http://www.sec.gov/Archives/edgar/data/40545/000119312511047... This cuts the estimate of their tax subsidies by a bit over $200M, so 1000x the remainder would be about $700B. Is it your contention that GE dodged taxes equal to roughly the cost of the US military?
  - ppereira 15y ago
    This may be an interesting piece of rhetoric, but does little to advance the argument. I know that GE employs some of the most sophisticated international tax planners on the planet (as they should). I have no idea how much tax they have avoided, and I doubt they evaded any. How much tax do you think they should have paid? How much should Johnson & Johnson have paid? Due to a quirk of the laws of Wisconsin, it is comparatively easy to find out how much money their corporations actually paid to the government, which is not necessarily close to the amount on their filings.