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    Will Barack Obama Work For GE?

    By Michael Maiello on Tue, 06/21/2011 - 11:47am | Politics

    Update: after considering Genghis' comments, I edited the headline here and I want to add one thing, for those of you who have already read the post.  Even according to the Times story I linked to, Obama and Geithner are right now skeptical about the idea of a repatriation tax holiday.  It also looks as if the lobbying effort for this dates back to 2010.  So, yes, I probably did get ahead of myself.

    That said, Immelt is an Obama adviser and GE does keep funds offshore to avoid US taxes, by its own admission.  So I'll leave the rest of this unaltered and await future events.  I don't want to be too dogmatic, though, about some hasty conclusions.

    The Original Post, Unaltered. (Discuss!)

    One of the reasons that GE paid no federal income taxes in 2010 is that the company has massive tax loss carry-forwards generated by billions in losses when Jeff Immelt and his team let GE Capital grow out of control in the years leading up to the financial crisis.

    Another reason that GE paid no U.S. income taxes is that it keeps billions of dollar outside of the United States, in an effort to avoid taxation.  This is not speculation, GE will proudly tell you this in its financial statements.  Now this is speculation, but I hope you won't think I'm going too far.  Immelt is an adviser to President Obama.  Immelt is, in fact, chair of the Obama's Jobs creation task force and I think he's trying to engineer a massive tax break for his company.

    Obama made an interesting choice with Immelt.  GE is a notorious outsourcer.  Immelt's mentor at GE, Jack Welch, pioneered the mass layoff.  The guy was known as "Neutron Jack" back in the day.  Immelt has a warmer and fuzzier image but he isn't actually warmer and fuzzier.

    Well, it seems to me that if you ask a guy like Immelt, who has made a career chasing tax havens and low wage markets, how to create jobs, he's going to ask for tax and wage cuts.  The big idea now being floated by powerful Democrats like Chuck Schumer is a temporary tax holiday on fund's repatriated from overseas. Basically Chuck's idea, which I bet is really Immelt's idea, is to cut the taxes from 33% to 5% as a way to induce these corporations to bring the money back. 

    Why would these guys be willing to part with 5% when they can just keep it abroad and pay nothing?  Well, they'd only do that if they were convinced that they will never get such a cheap repatriation opportunity ever again.  But that would be a silly thing for them to think because we just did this in 2005.  My bet is that going back to this well twice won't even work and that a lot of companies are fine paying nothing, leaving the money abroad to fund overseas operations and waiting for the next window.

    Unless, of course, they have a need to move the money here.  There are a few needs I can think of: One is that they want the money here in order to buy competitors.  That's a net loser for job creation as mergers lead to redundancies and layoffs. The second is that they want to pay down debt, buy back shares or pay a dividend, all of which will boost stock prices and the net worth of a company's executive team and all of which is neutral or only slightly positive for job creation. This, by the way, is what happened in 2005. Lot's of corporate activity, but not so much jobs.

    If you combine this with the previous idea of cutting the employer contribution to Social Security you basically have two slightly stimulative measures that don't really measure up to the problem.  Add another round of quantitative easing from the Fed and we'll have a whole bunch of things going that don't really measure up to what's ailing us.

    But it will all, oddly enough, make Jeff Immelt richer.  I guess that's good for America.

    Topics: 
    Politics

    Comments

    The methods used by GE taxes is complex as you said. The head of GE's tax division argues that GE should have a tax situation in the US that allows it to compete with foreign multi-nationals. One journalistic review finds that while GE will probably pay some taxes for 2010, it will pale in comparison to what some foreign companies pay. Mitsubishi, Siemens and Phillips had effective tax rates for earnings purposes last year of 40%, 31% and 26% respectively, compared with 7% for GE. (GE says its tax rate's been artificially low the past few years, and will soon rise.)

    http://features.blogs.fortune.cnn.com/2011/04/04/the-truth-about-ges-tax...

    I need GE's people to do my taxes.


    by rmrd0000 on Tue, 06/21/2011 - 12:25pm

    Careful... GE will not pay federal income taxes in 2010.  They might well pay other state taxes, excise taxes and the like, but its effective income tax rate will be 0%.  This is important because, for PR reasons, GE has tried to lump all other manner of expenses into its "tax bill" to fight off the notion that it got off tax free.  But, of course, if I paid nothing to the Feds next year but complained to you about what I paid to the city and state you'd rightly tell me not to compare apples and oranges.


    by Michael Maiello on Tue, 06/21/2011 - 12:28pm

    Reading through the article on the GE tax dodges, it wasn't clear to me if the rates for the foreign companies were US based taxes, or taxes in their respective countries. Either way, GE can't agu that it is suffering an outrageous tax burden.


    by rmrd0000 on Tue, 06/21/2011 - 2:28pm

    Are you saying they paid less tax in Japan, Germany, and Holland respectively? Or in the US?


    by Peter Schwartz on Tue, 06/21/2011 - 12:32pm

    I think he means that the effective US income tax rate for Siemens is higher than GE's.  All the US government should care about is the effective US rate.  Who cares what Japan charges?


    by Michael Maiello on Tue, 06/21/2011 - 12:48pm

    Well, except that the argument often runs that the US has the highest corporate rates. So, if those were the rates in those countries...


    by Peter Schwartz on Tue, 06/21/2011 - 1:34pm

    The U.S. has a high statutory corporate tax rate, but nobody ever pays that.  Effective tax rates are higher elsewhere in the world.


    by Michael Maiello on Tue, 06/21/2011 - 1:44pm

    Yes, Obama works for GE. He claims to work for the federal government, but he refuses to show his long-form pay stub. Most damning of all, the decidedly non-warm-and-fuzzy Jeff Immelt used to work for "Neutron Jack" Welch. Connect the dots, people!  Plus, Immelt engineered massive losses for GE just to avoid taxes. What if everyone did that? We'd all be in deep shit!


    by Rootman on Tue, 06/21/2011 - 12:30pm

    He didn't engineer the massive losses, he mismanaged his company and this is the result.


    by Michael Maiello on Tue, 06/21/2011 - 12:42pm

    One of the arguments I hear from conservatives is that we need lower corporate taxes so that folks like GE will repatriate all this money.

    Well, what if we do and they do? Does that mean they will use this money to hire US workers? Not necessarily and the proof is they aren't using the money have here already to hire US workers.

    As an Obama supporter, I find the choice of Immelt VERY disheartening. Depressing, really.

    As Star is wont to say: We are screwed.


    by Peter Schwartz on Tue, 06/21/2011 - 12:35pm

    LOL!


    by we are stardust on Tue, 06/21/2011 - 12:58pm

    "Does Barack Obama work for GE?"

    Is the Pope Catholic?

    Yes, he not only works for GE, but all the other tax dodging unpatriotic corporations and their CEO's.  He definitely does not work for or on behalf of the millions upon millions of suckers who voted for and elected him President of the United States that's for sure!  Obama's entire Presidency is dedicated to servicing the needs of the rich and powerful so that whether he's a one or two termer they will take care of him once he leaves office. 

    Given his truly brazen lies and flip flops on every major issue facing the country I'm thinking more and more that Obama deserves to be a one term President. 

    For all intents and purposes this two faced Chicago politician has sold the common people who elected him down the river in order to serve to the very disgusting, corrupt speacial interests that wrecked the economy and are making our government ineffective.  He has governed, at best, as a timorous, moderate Republican afraid of his own shadow.  Despite what his apologists say, there is, in fact, virtually no difference (other than the label) between Obama and Bush in the lives of ordinary Americans.  What little Obama has accomplished that could be characterized as progressive or even Democratic are not major items at all but small items than any Democrat would have done as a matter of course.  One might be tempted to say DADT is something progressive he has done but the truth is the GLBT community and their laudable in your face refusal to accept getting screwed by him forced him to do what little he has done on DADT.  Had they not been relentless in their insistence that he do what he said he would do he would have screwed them over too. 

    Given this sad reality then is there any truly compelling reason to be at all concerned about the sole remaining argument for Obama's re-election which consists now entirely of "the Republicans are worse"?  A little, but not much of any reason to be concerned.  In all the most substantive ways anyone can think of this man has undermined every single progressive inititiative and agenda item the Democrats have had.  Why support an alleged Democrat who does the Republicans' dirty work for them?  At this point in time I can see no reason to cast a vote for this dishonest, lying politician.

    Does he work for GE?  Oh yeah!  And to hell with the ordinary schmucks out here in the once stable and prosperous America!   Fool me once...


    by oleeb on Tue, 06/21/2011 - 12:53pm

    Destor, I apologize for the bluntness, but this piece is deceptive.

    First, Obama is not Schumer. The Treasury Dept. has come against a tax holiday, noting that the last tax repatriation holiday resulted in job layoffs.

    Second, the proposal has plenty of publicly identified supporters. GE is not one of them. And Jeff Immelt has not publicly commented either way.

    In short, you've accused Immelt of orchestrating an Obama administration maneuver without any evidence that the administration supports the policy or that Immelt is any way involved and without even mentioning the administration's stated opposition to the policy.

    So yeah, I think that you've too far on this one.


    by Michael Wolraich on Tue, 06/21/2011 - 1:37pm

    For the record, I believe that American corporations should be incentivized to repatriate overseas profits but that it should not take the form of an arbitrary tax holiday and that 5.25 percent is an obscene giveaway.


    by Michael Wolraich on Tue, 06/21/2011 - 1:40pm

    Fair criticisms. Though we do know, for a fact, that GE purposefully keeps money off shore to avoid being taxed on it.  The company has said it bluntly (it's in the footnotes to the last 10K).

    But, hey, maybe Obama will oppose it effectively. We shall see.


    by Michael Maiello on Tue, 06/21/2011 - 1:48pm

    I imagine that GE supports the proposal, but it's a long way from there to your conclusions.

    Btw, before writing my comment, I tried to determine GE's interest the last time round. What I gathered was that GE lobbied for and benefited immensely from many of the provisions in the 2004 corporate tax cut grab-bag but did not ultimately repatriate much capital during the tax holiday: "Although GE has $14 billion in eligible foreign earnings, it will bring little of money home -- instead, the company will invest in fast-growing markets abroad." That's not conclusive though.


    by Michael Wolraich on Tue, 06/21/2011 - 2:04pm

    That also doesn't surprise me.  If you have robust foreign operations, you actually need to keep some money abroad.  If you bring it back to the U.S. to take advantage of a temporary tax benefit, you might just end of losing money later on if one of the countries where you'd like to do business decides to tax you when you move money from the U.S. and onto their shores.


    by Michael Maiello on Tue, 06/21/2011 - 2:06pm

    On further thought, I've updated this post.


    by Michael Maiello on Tue, 06/21/2011 - 2:04pm

    Cool. Thanks for considering my criticisms.


    by Michael Wolraich on Tue, 06/21/2011 - 2:05pm

    OTOH. The Treasury Dept. also came out against extending the top-end Bush tax cuts. So, by that token Obama is not The Treasury Department either.

    Jeff Immelt, of course, would never comment publicly either way. Not asserting I have any idea what he has or has not advised Obama, but a lack of public statements as criteria is somewhat absurd.


    by kgb999 on Wed, 06/22/2011 - 3:09pm

    Updates are fine with me, Destor; I figured he'll work for Goldman Sachs anyway.  ;o)


    by we are stardust on Tue, 06/21/2011 - 2:42pm

    Don't we all?

    My other option, of course, would be to claim that Obama and GE had planned this all along and then, if it didn't come to pass, that they chanegd their minds after reading my angry blog.


    by Michael Maiello on Tue, 06/21/2011 - 3:17pm

    Well, I would go with those claims; we know of the Power of the Belt. 

    I was up early, fell asleep after some soup.  In my dream, I was brushing my teeth, and a clothed woman in the tub was discussing your blog, and led the discusssion that Genghis's point about GE not being on the Win list was beside the point, as in: Why the hell would they give anyone the ammunition? ...la la la...

    Anyhoo, the crowd in the bathroom (beats me; I ain't in charge of my dreams) decided to adjourn to the beach park across the road to discuss it all further.  It turned into a sort of fraternity-prankishness venture, and some folks turned you sidewise and carried you to the beach while we all sang this HMS Pinafore-ish ditty:

                  

    Anyway; he has stuffed his White House with far too many like Imelt, Sperling, Geithner, la la la.


    by we are stardust on Tue, 06/21/2011 - 5:14pm

    I don't trust these people either.  Which is why I'm often led by my skepticism.  The mere fact that this, of all things, is a topic for reasonable consideration while there's still unspent TARP money that could end the foreclosure crisis, is sickening.


    by Michael Maiello on Tue, 06/21/2011 - 5:26pm

    I really thought the Dems or the White House had already traded the remaining TARP funds for some part of a deal, maybe unemployment compensaation a few months ago, and it went back into the general fund to help offset it, but I couldn't find a link the other day when I tried (in a hurry as usual).

    The nations Mayors are livid (why wouldn't they be?), and the debt ceiling talks are looking hideous for us.  As of today, polls show a majority of Americans want us out of Afghanistan as soon as possible; Obama's about to announce cuts higher than Gates and Petraeus want, but leave out the pre-surge surge of 30,000 troops which will make it all look more like 'he fought the Generals and kicked some ass, boy, howdy'.  Feh. 

    Wonder how fast they could put together an Infrastructure Bank if they wanted to?  Do some things to help out!


    by we are stardust on Tue, 06/21/2011 - 5:43pm

    They could set up an infrastructure bank, outside of the control or even consent of Congress tomorrow if they treated it like any banking institution: let the Federal Reserve make a zero interest, non-recourse loan of $50 billion to any group of people Obama chooses and... presto.


    by Michael Maiello on Tue, 06/21/2011 - 11:31pm

    It's just ONE of the things Obama/Treasury could do to help.  When I was hunting for the remaining HAMP and TARP money residues, I found so many hard stories; this from La Raza damned near broke my heart.


    by we are stardust on Tue, 06/21/2011 - 11:41pm

    What reason(s) do they give for not deploying this money?


    by Peter Schwartz on Tue, 06/21/2011 - 5:46pm

    I remember Ezra Klein asking a Treasury official about this and getting the answer that they just didn't know which homeowners to help and who to let sink.


    by Michael Maiello on Tue, 06/21/2011 - 11:33pm

    Destor, it seems there's some news concerning the Repatriation Tax Holiday.  Now Shumer is for it, as are Apple, Pfizer, Duke Energy are reviving the idea, saying that the revenue (5%? of the trillion) could be used to fund an infrastructure bank.

    Okay.  But this news about the small business lending fund ($30 billion) hasn't lent out a dime in the nine months since its birth.  It was to be channeled through the banks, and the numbers make it look like not just small banks, and that 'small businesses' may even be the faux small businesses that folks like the Koch Bros. qualify as.  Hard to say.

    But I worry that eve now that Obama is up for the idea, and the SEIU, strangely enough, according to Stern.  What worries me is if the same Treasury Dept. will be in charge, and money again gets funneled through big banks to big concerns that have already been given tons of the stim money for say...highway paving again.  I mean there are loads of smaller projects, and more efficient ones, that would constitute as 'infrastructure'  and put Americans to work with minimal new skills to learn.  Unless it's just another way to thrust money up the economic ladder.

     


    by we are stardust on Thu, 06/23/2011 - 10:24am

    Yeah, I'm all for an infrastructure bank, but it has to be independently run and accountable to the public, not run by the same bankers running the finance industry!


    by Michael Maiello on Thu, 06/23/2011 - 10:46am

    Wish you could run it, Destor.  You'd whip that puppy into line!


    by we are stardust on Thu, 06/23/2011 - 11:31am