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.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

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

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In