Actually, GE is paying taxes for 2010

posted at 12:35 pm on April 4, 2011 by Ed Morrissey

Last week, the New York Times looked through General Electric’s disclosure statements and reported that the multinational conglomerate would pay no US taxes on a global profit of over $14 billion, including domestic profit of over $5 billion.  In fact, the Times reported that GE would get $3.2 billion from taxpayers, thanks to tax credits for which it lobbies Congress on an ongoing basis.  The report provoked outrage across the political spectrum, got plenty of blogospheric coverage (including here), and resulted in demands for Barack Obama to kick GE chief Jeffrey Immelt off of a presidential advisory committee on the economy.

There was only one problem with the Times’ coverage — it wasn’t true.  ProPublica and Fortune report that GE will in fact pay taxes, and that the Times needs to do a better job of understanding financial statements:

Unfortunately, for all its good work, the Times story has created at least one major misperception — that GE paid no U.S. income taxes last year and is actually getting a $3.2 billion refund from the Treasury.

The Times’ own headline writers got that impression too. “GE Turns the Tax Man Away Empty-Handed,” read the headline on early editions, including the Times’ Washington edition, the version that politicians and the DC-based news media and commentariat see. “GE’s Strategies Let It Avoid Taxes Altogether,” was the original head on nytimes.com, the version the blogosphere reads.

Those headlines are based on the story’s third paragraph, which discusses GE’s 2010 financial results. “Its American tax bill? None. In fact, GE claimed a tax benefit of $3.2 billion.” That seems to say that GE is getting a tax refund for 2010 — but the words “tax benefit” are so ambiguous that it’s not clear what they mean, and the article never explains them, or mentions them again.

Later in the day, the Times changed its headline to “At GE on Tax Day, Billions of Reasons to Smile,” but the meme had already been set.  In fact, GE did not get a $3.2 billion refund.  They also paid estimated taxes during the course of the year, as all companies do, and they’re pretty sure they’re not getting a refund, either.  They will probably end up with a “small tax liability” for 2010, which means they have to write a check to the IRS on the 15th, like many Americans will do.

So how did the Times get the story so wrong?  Well, thanks to a ludicrous American tax code, it’s extremely complicated to analyze any company’s tax liabilities even from the inside, let alone from the outside.  The Times apparently got confused by a report showing a $3.2 billion “tax benefit” in 2010, which they mistook for an after-profit credit.  The term actually refers to estimated pre-profit deductions and credits, which lower the eventual taxable income number on which GE gets billed by the IRS.  It’s roughly analogous to mistaking personal itemized deductions on a tax return for a refund figure.

That doesn’t mean that the issue of actually getting $3.2 billion in deductions and credits in a single year isn’t an important topic, and the lack of clarity on GE’s tax situation — even at GE, which Fortune and ProPublica describe in some detail — once again show the need for a flat, simple, and reasonable tax code that allows businesses to compete evenly without Congress picking winners and losers through hidden subsidies and penalties enforced at the IRS.  But the Times’ reporting gave a completely false impression of GE’s actual status, and should be corrected.

Be sure to read the lengthy analysis of GE’s actual tax strategies at Fortune and ProPublica as well, which speak directly to the real issues of corporate tax reform.


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That doesn’t mean that the issue of actually getting $3.2 billion in deductions and credits in a single year isn’t an important topic, and the lack of clarity on GE’s tax situation — even at GE, which Fortune and ProPublica describe in some detail — once again show the need for a flat, simple, and reasonable tax code that allows businesses to compete evenly without Congress picking winners and losers through hidden subsidies and penalties enforced at the IRS.

Why don’t we be novel and just toss the corporate profit tax entirely, and make dividends part of normal income again?

Count to 10 on April 4, 2011 at 12:40 PM

If someone at the NYT could read a financial statement they would not be in the position they are in.

Aviator on April 4, 2011 at 12:43 PM

ruh roh, someone better tell rush, he’s hammering GE right now.

ted c on April 4, 2011 at 12:45 PM

The New York Times LIES!!!

(Sorry, had to do it.)

Ryan Anthony on April 4, 2011 at 12:46 PM

Krugman, call your bosses. This is a great example of how voters become uninformed. I’m sure you are working feverishly right at this moment to get to the real story of how this misinformation made it to the pages of the Paper of Record.

Mord on April 4, 2011 at 12:47 PM

I wish only 40% of my income was taxable, just like GE.

Mord on April 4, 2011 at 12:52 PM

Actually, GE is paying taxes for 2010

Yeah, but that doesn’t mean GE is not doing its darn best (with all their corporate accountants and lawyers) to avoid paying ‘their fair share’.

Just think of an individual like you and me making similar kind of profits, how much would I have to cough up using TurboTax? Or is it tiny tim’s version of TurboTax?

Sir Napsalot on April 4, 2011 at 12:52 PM

I don’t blame GE, I blame Congress. Only an idiot would pay more taxes than they owe. Everybody, individuals and businesses in particular have a duty to themselves or their shareholders to reduce the tax liability. Congress needs to have more restraint instead of looking for political payback.

The other often forgotten fact is that GE distributes most of their profits to shareholders and they pay taxes on those dividends. Truth be told, most corporations profits are double taxed.

cat-scratch on April 4, 2011 at 12:52 PM

You mean the same GE that received $36,607,818 out of the newly-discovered $2 billion “bailout” just uncovered in Obamacare?

ziggyville on April 4, 2011 at 12:53 PM

Actually the Times used a tax amount from GE’s financial reports which has nothing to do with their tax return to the IRS for the year.

I love it, though, when the cult liberals get off meme, and upset the cult leaders.

faraway on April 4, 2011 at 12:53 PM

ruh roh, someone better tell rush, he’s hammering GE right now.

ted c on April 4, 2011 at 12:45 PM

No worries, GE deserves to be hammered. They’re still benefiting massively from being friends with Obama, not paying nearly as much in taxes as other companies would with that much profit.

itsnotaboutme on April 4, 2011 at 12:54 PM

The problem has never been GE’s tax burden (I’d like to see a corporate tax rate around 1%), but what they choose to do to get any tax breaks at all.

The government gives GE an incentive (and an out) to ignore the market and spend its time on fairly useless endeavors (wind turbines, etc.).

mankai on April 4, 2011 at 12:54 PM

So GE paid taxes over the year and it will not pay anything additional on April 15th. And from this, the NY Times concluded GE pays $0 taxes?

I’m not surprised really. I don’t know how many times I’ve heard people say that because they get a tax refund, it means they pay no taxes.

Americans – including NY Times writers and editors – have no clue about taxes or spending or any of it.

angryed on April 4, 2011 at 12:56 PM

I don’t remember any push-back from GE. Maybe this is a surprise to them too.

SlaveDog on April 4, 2011 at 12:56 PM

LOL

Midas on April 4, 2011 at 12:56 PM

Maybe Katie Couric will cover this on the news tonight.

faraway on April 4, 2011 at 12:59 PM

Ed, why should I bother to give GE (Obama’s best buddies) any benefit of the doubt?

There has been quite a number of erroneous articles published in the New York Times about conservatives and even the military – has it been corrected yet? Trying to educate your readers (including me) about the pitfalls in properly assessing corporate tax records is noble on your part, but I am in no mood to be equally charitable to Obama and his cronies.

I will stick with the meme that GE skipped taxes, and one more question – why is Fortune and ProPublica defending GE? Didn’t GE hire enough PR personnel to handle this on their own?

TheRightMan on April 4, 2011 at 12:59 PM

I will stick with the meme that GE skipped taxes, and one more question – why is Fortune and ProPublica defending GE? Didn’t GE hire enough PR personnel to handle this on their own?

TheRightMan on April 4, 2011 at 12:59 PM

Because at the end of the day GE, Fortune, WSJ, etc are all part of the same club. Doesn’t matter if they’re Dems or Reps. They all look out for each other. Crony capitalism knows now political parties.

angryed on April 4, 2011 at 1:06 PM

Income taxes on financial statements are those taxes attributable to economic activities of the current year, whether or not they’ll end up on that year’s tax return.

cthulhu on April 4, 2011 at 1:12 PM

one of the MasterWorks of NYT take down was Megan McCardle’s series of post’s on the NYT “economics” journo who turned out to be someone who couldn’t run his household finances.

The guy at that point was living in his house not paying his mortgage waiting for foreclosure and plumping a book about his experience with the housing crisis.

The whole thing was hilarious….but a good lesson to remember. Journos are journos. They are not good at math, or science or history…they are good at writing and story telling.

r keller on April 4, 2011 at 1:13 PM

None of which absolves GE–or Immelt–of guilt for leading the pack when it comes to suckling at the Corporatist arse.

Blacklake on April 4, 2011 at 1:21 PM

Obama mission accomplished!

Nearly Nobody on April 4, 2011 at 1:22 PM

… the lack of clarity on GE’s tax situation … once again show the need for a flat, simple, and reasonable tax code that allows businesses to compete evenly without Congress picking winners and losers through hidden subsidies and penalties enforced at the IRS.

Uh…I disagree. While the tax code may, indeed, need flattening and simplifying, this story certainly does not “show the need”. All this story shows is that, just like on all gun-related issues, the average NY Times reporter knows nothing about business or finance.

The ignorance of nitwit liberal newspaper reporters does not speak to any wider issue than their ignorance, and the chutzpah of newspapers for printing their drivel as authoritative news.

Jaibones on April 4, 2011 at 1:26 PM

You mean the same GE that received $36,607,818 out of the newly-discovered $2 billion “bailout” just uncovered in Obamacare?

ziggyville on April 4, 2011 at 12:53 PM

I’d like to know how GE is treating that for federal income-tax purposes. Unless there was some specific exclusion provided for in the Obamacare legislation, I can’t see out the amount isn’t taxable as income to GE.

Beyond that, I find it hilarious that the NYT insists on leveling such a charge against GE without having someone who knows how to read financial statements confirm its conclusion. Yeah, rely on the assessment of some liberal-arts journolism-school grad.

BuckeyeSam on April 4, 2011 at 1:26 PM

Jaibones on April 4, 2011 at 1:26 PM

Well said.

BuckeyeSam on April 4, 2011 at 1:27 PM

I’m not surprised really. I don’t know how many times I’ve heard people say that because they get a tax refund, it means they pay no taxes.

Americans – including NY Times writers and editors – have no clue about taxes or spending or any of it.

angryed on April 4, 2011 at 12:56 PM

Completely agree!
Dave Ramsey took a call from a woman this week who wanted to know what they did wrong in 2010 because their tax refund was in the hundreds rather than in the thousands as it had been in previous years. She honestly thought that the refund/bill due on April 15th was her total tax liability. For the year. And most folks who listen to Dave are a little savvy about their finances because they are forced to confront them.

mdenis39 on April 4, 2011 at 1:30 PM

Good to know other news sources at least try to do some fact checking. It just goes to show that the bigger problem isn’t whether the NY Times is guilty of shoddy reporting but that our tax code is far too difficult and complicated.

Yakko77 on April 4, 2011 at 1:31 PM

I do my daughter’s taxes. She made almost $20,000 in income and got a $5000 “refund” due to child care credits, earned income credit, and ‘make work pay’ credit.

Vince on April 4, 2011 at 1:32 PM

The whole thing was hilarious….but a good lesson to remember. Journos are journos. They are not good at math, or science or history…they are good at writing and story telling.

r keller on April 4, 2011 at 1:13 PM

And lying. Very good at that.

angryed on April 4, 2011 at 1:35 PM

Completely agree!
Dave Ramsey took a call from a woman this week who wanted to know what they did wrong in 2010 because their tax refund was in the hundreds rather than in the thousands as it had been in previous years. She honestly thought that the refund/bill due on April 15th was her total tax liability. For the year. And most folks who listen to Dave are a little savvy about their finances because they are forced to confront them.

mdenis39 on April 4, 2011 at 1:30 PM

Well I don’t know about the Dave Ramsey crowd. I listen to his show every now and then. But more for a chuckle than for financial advice. Sometimes I think no way these people are real, Ramsey must be paying them as actors. Nobody can be that clueless.

But as far as taxes go, yeah 90% of the public thinks like that. An ex-colleague of mine – really smart guy about everything else – told me how psyched he was at a $7K tax refund. I told him, dude WTF, why did you give the govt a $7K interest free loan for a year? He looked at me as if I had just told him I was from Mars. He was convinced that he had hit some kind of lottery and the govt was sending him $7K as some type of gift.

And this is by design IMO by the media and govt. Get enough people who get a refund to think they’re not paying any taxes and when Obama/Dems want to raise taxes, those people will think fine go ahead, raise taxes, I get a refund every year, won’t hurt me. Or in the other case when conservatives talk about paying too much tax, those same people will also think, what are they talking about? I don’t pay any taxes. I get a refund every year.

angryed on April 4, 2011 at 1:43 PM

Hey, let’s build a national high speed rail network and give the work to GE.

petefrt on April 4, 2011 at 1:44 PM

Oh let the libs eat their complicit corporate benefactors in peace.

Speakup on April 4, 2011 at 2:00 PM

Krugman, call your bosses. This is a great example of how voters become uninformeddisinformed. I’m sure you are working feverishly right at this moment to get to the real story of how this misinformation made it to the pages of the Paper of Record.

Mord on April 4, 2011 at 12:47 PM

FIFY.

That doesn’t mean that the issue of actually getting $3.2 billion in deductions and credits in a single year isn’t an important topic, and the lack of clarity on GE’s tax situation — even at GE, which Fortune and ProPublica describe in some detail — once again show the need for a flat, simple, and reasonable tax code that allows businesses to compete evenly without Congress picking winners and losers through hidden subsidies and penalties enforced at the IRS.

How to make the economy boom, bring back jobs from foreign countries, and increase Government revenue:

1. Calculate total revenue of corporation for year.

2. Subtract out total business expenses for year.

3. Pay 15% of what’s left to the Government.

What’s so hard about that? It’s the way they do it in Eastern Europe.

Meanwhile, GE is playing reruns of ads from when Ronald Reagan was their spokesman, while Ronaldus Maximus must be cringing in his grave.

Steve Z on April 4, 2011 at 2:09 PM

Based on the Obama and Left standard if they’re not paying 35% they are not paying their “fair” share and thus NO Taxes!

Caper29 on April 4, 2011 at 2:13 PM

they have to write a check to the IRS on the 15th, like many Americans will do.

This year’s deadline is the 18th.

bgoldman on April 4, 2011 at 2:31 PM

GE can still go to he*l.

Your taxes will now pay, in another gov’t bail out, for early retirements at GE. Fools rule the land. Fools vote for their ‘representatives’ who allow such.

Schadenfreude on April 4, 2011 at 2:49 PM

Should I point out the NYT is also the same newspaper that said the law of conservation of momentum wasn’t true and physcists didn’t know what they were talking about? (Guess their fact checkers missed that one but it’s so hard. I mean it’s only one of the most important points to physics 101.)

Dave_d on April 4, 2011 at 6:16 PM

BTW, GE’s tax bill is due in September.

Dave_d on April 4, 2011 at 6:25 PM

Let’s put it this way: they are a corporation.
They make profits, but get subsidies from the govt to do certain things, make certain things, not make certain things.
They got this stuff, whether it’s a ‘tax break’ or a ‘deduction’ or even a formal straight forward payment, bcs they spent money on LOBBYISTS.
Either way you slice this thing, it’s still corporate welfare & it needs to STOP.

Badger40 on April 4, 2011 at 6:43 PM

Ok. But now there is no way any one will believe GE paid their fair share of taxes…..hahaha couldn’t have happened to a better leftists company…remember what they did to Haliburton? karrrrrmmmmaaaa

tinkerthinker on April 5, 2011 at 9:14 AM