Sen. Johnson’s reaction to General Electric paying no taxes: Cut the corporate tax rate

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"Sen. Johnson’s reaction to General Electric paying no taxes: Cut the corporate tax rate"

Let’s file this ThinkProgress repost (with video) under ‘notes from a plutocracy’.

The New York Times reported Friday that General Electric’s effective tax rate in 2010 was zero. Despite making $14.2 billion in profits, the company received $3.2 billion in tax benefits. GE is able to drive down its effective tax rate via “an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”

The fact that hugely profitable companies receive billions in benefits from taxpayers clearly makes the case for ending giveaways in the corporate tax code and cracking down on companies that use tax havens to shelter income overseas. However, Sen. Ron Johnson (R-WI), when asked about GE’s zero percent tax rate today on CNBC, replied that the real problem is the U.S. corporate tax rate is too high:

We have to be concerned about what the business environment is in the U.S. here. We can’t afford to have the highest tax rate in the world”¦Those are individual companies. I think overall, we really can’t be looking at a corporate tax rate much higher than 25 percent because that’s the world average. So we’re sitting up there at 35 percent, that’s just the wrong signal.

Watch it:

Needless to say, reducing the corporate tax rate to 25 percent without cutting down on loopholes, giveaways, and tax avoidance wouldn’t change much for companies that already pay nothing. And GE is hardly alone in this regard: Boeing, Bank of America, and ExxonMobil have all paid no taxes into the U.S. Treasury in recent years.

But Republicans had much the same reaction when Bloomberg blew the lid off of Google’s elaborate scheme to lower its tax rate all the way down to 2.4 percent. “I don’t know the individual facts of the Google situation. What I do know is that, second only to Japan, we have the highest corporate income tax rate of any industrialized nation of the world,” said Rep. Jeb Hensarling (R-TX).

U.S. corporate tax revenue has plunged to a historical low and corporate tax receipts here are less than they are in other developed countries. Particularly with the U.S. facing a long-term problem with its structural deficit, corporate tax reform should involve clearing the corporate tax code of its myriad loopholes and giveaways and raising additional revenue, so that the tax burden is not shifted onto small businesses and the middle-class.

– Pat Garofalo, in a TP repost.

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13 Responses to Sen. Johnson’s reaction to General Electric paying no taxes: Cut the corporate tax rate

  1. Morocco Bama says:

    The U.S. tax code is ridiculously complex, and Corporations higher small battalions to navigate it in order to pay an effective tax rate of zero. The tax code has to significantly simplified, thus reducing the IRS to a handful of people and putting the scummy and traitorous tax attorneys out of work. I’ve worked for many mid-sized to large Corporations as a CPA, and the majority pay little to no tax. Claiming the U.S. Stated Corporate Tax Rates are too high is a canard…..a piece of raw chicken to the delusional Republican base to make them drool and defecate all over one another whilst the wool remains firmly in place over their eyes.

    Fat chance of changing the tax code, though. The institution of politics in Washington is so uber-corrupt, there’s no hope for reform. This thing’s going to crash and burn, and every effort should be made at that point, by the survivors, to prevent the Phoenix of Rome from rising from the ashes yet again.

  2. BBHY says:

    “We have to be concerned about what the business environment is in the U.S.”

    When I hear statements like that I like ask: “What is the central purpose of our country? Is it to support the welfare of corporations or the welfare of the people?”

    I have yet to hear a good answer.

  3. Sir Cuitous says:

    The tax code is simple for the corporations that can afford to lobby for lower taxes and loopholes. More money is spent in Washington lobbying for advantageous tax code changes than any other lobbying interest. Is the state of the American corporation so dire that they need this help? Is their business model so poor that they will fail without these major tax giveaways? It seems that the electorate is so disinterested that anything can come out of the mouths of Republican politicians without scrutiny of recrimination. This is called fascism.

  4. Villabolo says:

    @1 Morocco Bama says:
    March 27, 2011 at 9:14 am

    “This thing’s going to crash and burn, and every effort should be made at that point, by the survivors, to prevent the Phoenix of Rome from rising from the ashes yet again.”

    Morocco, those would be survivors should not only prevent the Phoenix’s resurrection, but actually hasten its plunge into the flames.

  5. Morocco Bama says:

    No, it is not simple, even for the bloodthirsty, greedy corporations. Most CEOs, if not all of them, have no understanding of it, so they hire armies of technocrats to navigate it, and yes lobby for the loopholes (which become a permanent part of the already complex tax code), in order to minimize the tax they pay.

    Simplifying the tax code so as to eliminate the loopholes and circumventions is one way to solve this. Of course, doing away with corporate status as legal persons should be done concomitantly, as well as public financing of campaigns versus private and term limits.

    All of that is a tall order and considering the endemic corruption and lack of intellectual capacity of the populace to grasp the overall, general picture, it is highly improbable any positive change will come about.

  6. Ollie says:

    I have a good idea. Let’s lower the tax rate to 25% AND cut out all the loopholes. Instead of a fictitious 35% rate on the books and an effective rate of 0% in practice, we can both lower taxes and generate more revenue.

  7. Lore says:

    There is the rub! They are all for lowering the tax rate to 25%, but not ending the tax loopholes. You can’t get Congress to kill even one corporate subsidy.

  8. Steve Metzler says:

    Shorter article: the man on the street is toast.

  9. Jeff R. says:

    Hold on a minute. There is substance behind the point that Sen. Ron Johnson [was told to] articulate[d] (and that he apparently does not understand). The organizational model we have chosen (over which we have fought wars) for the allocation of capital requires managers to maximize returns to shareholders, not to maximize taxes paid to national governments. (There are ways other than free market capitalism to allocate resources but we should expect the powerful winners of capitalism to continue to back the program with greater success than its opponents until we have a game-changing disruption.) So let’s not cry foul when they behave in accordance with the rules. Multinational corporations have the ability, and their managers arguably have the legal duty, to structure their businesses such that income is realized in jurisdictions with lower tax rates, so as to maximize returns to shareholders. Today, investments are structured through entities incorporated in the Netherlands, the Cayman Islands, etc. where the tax rates are lower and companies pay taxes there (but to which the business often has no significant connection). It’s legal and its inevitable unless managers are told they will be measured by the amount of taxes they pay to their national governments (begging the question for some of the biggies like GE, which is their national government).

    If the US had a lower corporate tax rate (say 25.5%, which I believe is the minimum amount the IRS will recognize as a legitimate corporate rate before disallowing as a tax haven), US businesses would stop structuring their investments through lower tax jurisdictions, and the net US corporate tax revenue would be much larger than it is today.

  10. CTG says:

    So the IRS has to hire more people in order to implement the Republicans’ convoluted tax policies?

    In other words, Republicans == Big Government.

  11. Morocco Bama says:

    If the US had a lower corporate tax rate (say 25.5%, which I believe is the minimum amount the IRS will recognize as a legitimate corporate rate before disallowing as a tax haven), US businesses would stop structuring their investments through lower tax jurisdictions, and the net US corporate tax revenue would be much larger than it is tod

    I disagree. You contradict this in your lead up to this final point. As you say yourself, and we know to be fact, Corporations exist to maximize shareholder wealth, so they will always strive to reduce taxes paid to zero, using all means, legal and quasi-legal, to achieve this. Therefore, it matters not that the rate is 35% or 25%, they want it 0%. This is why I said that the legal status of Corporations has to be eliminated. They must be beholden to the citizens of the countries in which they not only reside, but the citizens of countries in which they do business.

    As it exists right now, they are blackmailers and are beholden to no Nation-State….at least the ones originally emanating from the West. The Oriental Corporations are tied to the state, and therefore are more beholden, especially South Korea and China.

  12. Mulga Mumblebrain says:

    When the Big Crook owns the Little Crook, the Little Crook knows that serving his master requires ecstasies of ‘brown-nosing’ and uncritical and blemishless obsequiousness. A single ‘Thought Crime’ and some other supplicant will take his place. It is a perfectly and inescapably morally corrupt and suicidally destructive situation. The Chinese dynasties allowed merchants great freedom to make money and trade, but they ensured that they never had any political power.

  13. Flin says:

    That’s what has become of the American Dream: The dishwasher pays the millionaire. So that the millionaire stays a millionaire and the dishwasher stays a dishwasher.