What's Good for GE ...

... isn't necessarily good for the U.S. Treasury.

President Obama named General Electric CEO Jeffrey Immelt the chair of his new Council on Jobs and Competitiveness, which is expected to suggest changes to the corporate tax code. Immelt should be an expert. GE is not only one of the largest companies in the United States, but also it pays one of the lowest effective corporate tax rates. Why?

Two reasons. First, GE is doing much more business overseas, where tax rates are significantly lower. Second, it's keeping much more of its earnings overseas, out of the reach of the U.S. corporate tax code, which skims off a percentage of "repatriated" profits and sends it to the government.

The pictures tell a powerful story themselves. Martin Sullivan of Tax Notes brings the graphs:

Fact: #1 GE's effective tax rate reported to shareholders has dropped precipitously from the 30s in the 1990s to extremely low levels.
.

Fact #2: The decline in GE's effective tax rate has little to do with domestic tax breaks but is almost entirely due to low-tax foreign profits.

Fact #3: More and more of GE's business and employment is outside of the United State. Still, profits booked outside of the United States have grown even faster, suggesting GE is taking advantage of lax U.S. transfer pricing rules that make it easy to shift profits into tax havens.

Fact: #4. The rapid increase in profits booked abroad has resulted in a massive accumulation of earnings "permanently invested" outside the United States.


Read the full story at Tax.com.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Google Street View, Transformed Into a Tiny Planet

A 360-degree tour of our world, made entirely from Google's panoramas

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

Google Street View, Transformed Into a Tiny Planet

A 360-degree tour of our world, made entirely from Google's panoramas

Video

The 86-Year-Old Farmer Who Won't Quit

A filmmaker returns to his hometown to profile the patriarch of a family farm

Video

Riding Unicycles in a Cave

"If you fall down and break your leg, there's no way out."

Video

Carrot: A Pitch-Perfect Satire of Tech

"It's not just a vegetable. It's what a vegetable should be."

Video

The Benefits of Living Alone on a Mountain

"You really have to love solitary time by yourself."

More in Business

Just In