The mega-corporation General Electric has advised the State of Massachusetts that it wants tax credits of $25 million, and if the State agrees, GE will maintain the 3,000 workers at a plant in Lynn for 6 years. Otherwise, it threatens to fire workers. It plans to use the millions to upgrade the equipment at the plant, which manufactures aircraft engines, largely for the Defense Department. The company says it will keep the plant no matter what, so the extent of the threat is unclear. It is at least enough to get Governor Deval Patrick to the negotiating table.
This fabulously wealthy company paid exactly $0 in US taxes last year, despite reporting $11.2 billion in net earnings on revenues of $156.8 billion. 2010 10-K p. 84. GE claimed to lose $498 million in the US. It claimed to make $10.8 billion overseas. Those foreign earnings required GE to pay taxes of $2.4 billion to foreign governments. (Note 14, p. 133), but the US losses meant that it owed no US taxes, and gets what it calls a “tax benefit” of $1.9 billion. Here is GE’s explanation:
Income taxes (benefit) on consolidated earnings from continuing operations were (10.5)% in 2009 compared with 5.3% in 2008 and 15.1% in 2007. Our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed global operations, including the use of global funding structures, and our 2009 and 2008 decisions to indefinitely reinvest prior-year earnings outside the U.S.
Our consolidated income tax rate decreased from 2008 to 2009 primarily because of a reduction during 2009 of income in higher-taxed jurisdictions. This increased the relative effect of our tax benefits from lower-taxed global operations, including the decision, discussed below, to indefinitely reinvest prior-year earnings outside the U.S. These effects were partially offset by a decrease from 2008 to 2009 in the benefit from lower-taxed earnings from global operations.
What this means is that the income came from foreign operations, where taxes are lower. Among these foreign jurisdictions are noted tax havens such as Luxembourg and Bermuda. GE does not identify the nations it uses for its “global funding structures,” which I bet are tax havens.
It also says that GE has decided to keep it’s overseas “profits” out of the US, no doubt waiting for another of those foolish and destructive amnesties that Congress grants, allowing them to repatriate their profits at a nominal tax rate.
But that kind of greed isn’t enough. Now, despite its cash holdings of $78.392 billion, it wants Massachusetts taxpayers to pay to refurbish a plant. If taxpayers don’t pony up, GE is threatening to fire people.
Heaven forbid that Corporate Persons should buy equipment themselves, or pay taxes. That’s for the little human people, who should be so grateful for their crumbs, if any are left.