Jeffrey R. Immelt, CEO, General Electric.
Illustration by Tom Rogers
The New York Times recently ran an article about General Electric’s astoundingly low federal tax rate for the year of 2010. Jeffrey Immelt, head of GE, is also the chairman of President Obama’s Council on Jobs and Competitiveness — the administration’s effort to create jobs. Many are outraged to hear that as the country drowns in debt, with millions of Americans still unemployed, GE is able to get off scot-free. GE made a $14.2 billion profit in 2010, $5.1 billion of which came from business within the U.S. Besides having no corporate tax income, they claimed a tax benefit of $3.2 billion.
Besides GE’s heavy lending losses in the U.S. over the past year, GE was able to achieve this record low tax rate through the efforts of John Samuels, GE’s Vice President and Senior Counsel for Tax Policy, who was able to avoid heavy taxation by booking a large percentage of GE’s profits in low-tax countries and lobbying Congress for tax breaks and incentives. An example of this lobbying occurred when Samuels met with left-wing New York Representative, Charlie Rangel, to cash in on a favor. The Congressman was in figurative debt to GE for donating $30 million to NYC schools, and so, immediately after this meeting, approved a tax break he was previously against. This strategy, one used by many large corporations, is pretty simple: Buy off the lawmakers, then make the laws, then follow those laws that they themselves made.
GE’s twitter account, created to blast the NYT for “misleading” everyone, did not aid their case, seeing as they avoided answering direct questions, sounding inconsistent and overly defensive. Finally, GE spokeswoman, Anne Eisele, admitted, “GE did not pay U.S. federal taxes last year because we did not owe any.” However, now that it’s been recalculated, GE apparently does owe a small sum.
While the media is outraged with GE, GE did, indeed, abide by the U.S. Tax Code. Yes, they sought out every available loophole, but this should honestly be expected of any company or individual. GE employs many people, providing them with a good living wage to support their families (which is something McDonalds does not do — 55,000 new McD’s jobs next month, eh? All at minimum wage with no benefits. It’s something, but not much). All of those individual people pay their income tax, social security, Medicaid and unemployment insurance, including Mr. Big CEO himself.
If you have a problem with what GE did, then your real beef is with the system, not one specific corporation. Laws, including the tax code, are made by people for people and must be influenced by people. How people organize that influence is varied, including unions, PACs, corporations and various other organizations. GE has been referred to as “sneaky” by the media, but a lot of what Congress does could also be labeled “sneaky.” It’s very difficult to find complete information on the influences of laws. It’s too huge a system to seem not “sneaky” by someone’s standard. It may not even be intentional. There is an overwhelming amount of variables determining laws that can’t necessarily be pinned on one influence.
While I back up GE for being legal in their tax matters, legality does not always equate with ethicality. We have a lot of freedom in this country, and what many people forget is that personal responsibility goes along with that freedom. Too many eschew the responsibility half of that equation. Many individuals (and corporations) do take advantage of laws for unethical purposes. So, my question to you is, did that happen in the case with GE? How do you make the distinction of ethics in something like this? Did they pay a fair share on the money they made, and if not, is what they did ethical?