March 28, 2011--Putting Imagination to Work

Republicans claim that the reason jobs are not being created by corporations is because their tax rate on profits, 35 percent, is about the highest in the world. It is so high, they say, that it drives companies to Mexico and overseas in search of cheaper labor and, most important, lower taxes.

Thus, cut taxes, cut taxes, cut taxes is the GOP mantra. It is the ultimate expression of their trickle-down economic gospel. I use this word advisedly because it has the force of religious belief. A belief that has been disproven over and over again when followed by tax-cutting presidents from Ronald Reagan to George W. Bush. Both of whom, as a result, saw the national deficit double and triple during the years of their presidencies.

Yet, we continue to hear it from Republican members of Congress and it is the single strategy being touted by all aspiring GOP candidates for the presidency, from Michele Bachmann to Mitt Romney to Sarah Palin to Donald Trump.

But while it is true that the corporate tax rate tops out at 35 percent, the effective rate, the amount corporations actually pay is much lower than that. In fact, if you're a really smart CEO, it can be zero percent. Your company can make billions in profit and not pay one dime to the I.R.S.

It can be even better than that--if you hire the best tax accountants and lobbyists money can buy, your business can manage to pay less than zero percent. You can even manipulate the loopholes your lobbyists got included in the tax code so that you firm can make billions in profits, pay nothing in taxes, and put a claim in to the I.R.S. so that they (I mean taxpayers) owe you more billions.

Case in point--America's largest comapny, G.E., which last year had world-wide profits of $14.2 billion, paid no U.S. taxes whatsoever, and had the audacity to put in for a tax benefit (a version of a credit) of $3.2 billion. (See linked New York Times article.)

The GOP and their flacks who write editorials for Rupert Murdoch's Wall Street Journal and the chatterers on the financial news channels, CNBC and Fox News, say that G.E. and most of the other Fortune 500 companies have figured out how to pay no taxes because the 35 percent rate has driven them overseas where tax rates are lower.

Some of this is true, but part of the truth is not the whole truth. Of GE's $14.2 billion in profit, $5.1 billion came from its U.S. operations. Along the way, incidentally, G.E. laid off 5,000 U.S workers. So we have a complicated picture, not the black-and-white snapshot that goes for thought in Republican circles.

We should also recall, that as a gesture to business and as evidence that he is not a socialist, after the Democrat's drubbing at the polls in November, President Obama appointed G.E. CEO Jeffrey Immelt to head his Council on Jobs and Competitiveness.

I assume Immelt's message to businesses about how to be competitive is to move as many jobs as possible overseas and for any residual profits from U.S.-based ventures, hire the same accounting firm G.E. uses and put together a team of lobbyists General Electric style--from among the senior staff of all the Senate and House financial committees--so that your company can shift the tax burden to the rest of us.

To paraphrase G.E.'s new slogan--that's putting imagination to work.