That’s another big problem with the ProPublica/Fortune piece: It doesn’t attempt to tell us what GE actually does pay in taxes. And when Sloan and Gerth do give us a hint, what do they use? GE’s GAAP financial statements:
Last year, GE’s tax rate, for earnings-reporting purposes, was 7.4 percent.
The problem there is, the Times already explained why that 7.4 percent figure is no good:
G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.
In the end, Sloan and Gerth haven’t set the record straight on anything here with the Times story.
But they use their conclusions to give us some very weak logic:
Why should you care about this? Because we all have a stake in how this plays out. Thanks to the uproar over GE, we now risk ending up with legislation that targets GE but produces all sorts of unintended consequences. Public rage can make for bad law. For example, the Alternative Minimum Tax was adopted in 1969 amid an uproar generated by a Treasury report that said 155 wealthy families had paid no income tax. But the bill, badly designed and badly amended, has morphed into a mess that affects millions of middle- and upper-middle-class families, but not the really-high-income tax-minimizing families. They’re not affected because the AMT fades out of the picture for families with income of $600,000 and up.
Don’t get mad about GE paying no taxes or we might pass laws with unintended consequences like that thing forty-plus years ago. Instead we’ll pass good laws based on General Electric’s word. Presumably those will have no unintended consequences. Sloan and Gerth apparently don’t pause to wonder if public outrage is necessary to pass good laws that effect real change.
This is all too bad, because their accompanying piece on “5 Ways GE Plays the Tax Game”—the one they’d been working on for months—is really good, if similar to what the Times reported a few days earlier. It’s almost as if Sloan and Gerth had to come with a news peg for their story since the Times beat them to it. The rushed post is not very good, but the piece they took some time on is. Maybe there’s a lesson in this.
In fact, there’s no shame in getting beat by a few days on a story like this. That’s an Old Journalism way of thinking. All reporters working on projects are filled with dread that somebody else will get the story out first. All reporters have had that sick feeling in their stomach when they’ve woken up in the morning and seen it happen to them.
But the fact that Sloan and Gerth independently came to many of the same conclusions about GE’s tax avoidance, while filling in other pieces of the picture, makes both their piece and the Times’s that much stronger.
(UPDATE: I neglected to point out Felix Salmon’s post for us on Sloan and Gerth’s story. See that for a somewhat different take.)