I disagree. The NYT’s “American tax bill” language is clearly referring to federal taxes, not state and local ones. The Times would have been better to have said “American income tax bill,” but that’s a minor point; a technicality at best. The story was very clearly about GE’s U.S. federal corporate-income taxes. I doubt anyone misunderstood that. And even if you accept that GE’s $1 billion-plus in payroll, state, and local taxes should count as “American taxes” there, that still leaves the company net negative. As the Times says, GE claimed a net U.S. tax benefit of $3.2 billion for 2010 in its securities filings.
But Blodget deserves applause for dogging this story and trying to get to the bottom of it. I particularly like that he published his email back and forth with GE (see the relevant ones of mine below).
As for GE, the bottom line is that its efforts to contain the damage from the Times story ended up making the company look deceptive. That’s given this story a bit more life than it would have had otherwise.
Hey, silver lining.
— Here’s my latest email to GE and its reply:
Anne, et al—I’ve still not heard from anyone on this. I’m going to run a post out in the morning regardless of whether I hear back, and as it stands now it’s not going to be favorable for you guys.
Questions again + 1 more:
— Was the Times wrong in reporting that you paid/will pay no net U.S. corporate income tax in 2010? You told the AFP that you paid none and owed none, after all. If that’s wrong, why?
— You use effective tax rates, but your real rates are actually lower because of deferred taxes on profits left overseas, right?
— And those tax rates you use are global tax rates, not just what you paid in the U.S., right?
— You guys repeatedly pointed out that GE paid $2.7 billion in cash taxes last year. On Twitter you said specifically at one point that that $2.7B went to the U.S. But that number is a total global figure for the company, right? And if that’s right, what’s the point of using the global number when the story was about U.S. taxes?
I think these are straightforward questions that could be answered via a 2-3 minute email. I’d be glad to see that in my inbox when I get up in the morning. But if you need to call, please do so after 10:00 EDT—I’m in Seattle.
GE’s Andrew S. Williams:
Ryan, thanks for your patience — here is our response:
GE is fully compliant with all tax laws. There are no exceptions.
We will file our 2010 tax returns by September. We expect to have a small federal income tax liability. In 2010, GE paid significant federal income taxes for prior years. We also paid about $1 billion in 2010 in other state, local and federal taxes in the U.S.
The main reason why our tax rate was so low in 2010, was that we lost billions of dollars in GE Capital, our financial arm, as a result of the global financial crisis. Similarly, in 2009 GE Capital’s losses were so large that the total company lost money on its U.S. operations. GE’s tax rate will be much higher in 2011 as GE Capital recovers.
The U.S. tax system is old, complex and uncompetitive. The purpose of the tax code should be that everyone pays their fair share, including GE. But it should also help to promote jobs and competitiveness. It does the opposite today.
GE favors closing loopholes, a lower corporate rate, and a tax system where overseas income is only subject to tax in the country where it’s earned. This would put us in line with every other developed country in the world.
Under any system, GE will comply and pay what it owes.