Electric Slide: G.E.'s Amazing, Shrinking Corporate Tax Liability
Here is a trivia question for all of you math-inclined readers out there. The top corporate tax rate in the United States is 35 percent--the highest among the OECD countries in 2010. Corporate taxes are applied to a company's net profits in much the same way that the personal income tax is applied to an individual's net earnings. If G.E.'s profits last year totaled $14.2 billion, what was its 2010 corporate tax liability?
If you guessed $4.97 billion you are wrong! According to the New York Times, G.E., by aggressively lobbying for tax breaks and by concentrating its assets overseas in order to take advantage of longstanding offshore tax loopholes, reduced its 2010 tax liability to zero. In fact, the IRS actually owes G.E. a tax benefit of $3.2 billion. Over the past five years, G.E. has reaped $26 billion in profits, while receiving a net tax benefit from the IRS of $4.1 billion.
G.E. isn't alone and is, in fact, indicative of a broader trend of corporations securing greater benefits from the government while giving back less in return. In 2009, corporate taxes accounted for only 6.6 percent of all revenue brought in by the federal government compared to 30 percent in 1954.
The precipitous drop in revenue contributed by corporations has serious consequences for programs that protect the disadvantaged. H.R. 1, the stopgap spending measure supported by the House leadership to fund the government for the rest of 2011, cuts $89 billion in non-defense discretionary spending (which funds non-entitlement social safety net programs) without raising any additional revenue in order to reign in deficit spending. According to the Center on Budget and Policy Priorities, H.R. 1 would cut Head Start, which funds early education programming for low-income children, by $1.5 billion. It would cut Pell grants, which fund college education for low-income students, by $5.7 billion. The bill also features over $2 billion in cuts to job training programs, $750 million in cuts to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and elimination of the Low-Income Home Energy Assistance Program (LIHEAP).
If corporate income taxes merely brought in a proportional amount to what they did in 1954, the federal government in 2010 would have an additional $498 billion in revenue, which would reduce the deficit by more than a third, and that is during a very stagnant economic recovery.
The federal budget is a moral document. It reflects our country's values and priorities. When companies are able to exploit loopholes and handouts to avoid tax liability while poor students are seeing scholarships taken away, infants are missing more meals, and homes are left without heat, surely, we are approaching moral bankruptcy as a nation. We must remind our elected officials that the moral impact of a budget is measured by its effect on the most needy person, not on the largest corporation.