Consider it another sign of the times when GE chief executive officer and Obama jobs czar Jeffrey Immelt lets it be known that he is not in full agreement with what the president “stands for.” When asked by Fareed Zakaria in an interview on CNN whether Obama is an opponent of capitalism, Immelt responded in part: “Do I believe everything the president stands for?…Definitely no.” That is not the answer Zakaria was looking for. If the rats are not leaving a sinking ship, they are at least preserving their options.
And GE itself issued a release last week on the subject of crony capitalism. Tim Carney noted it here. GE briefly raises a few issues to which it chooses to respond. The release is mostly an exercise in avoidance.
For example, GE’s release avoids any mention of GE’s lobbying in support of efficiency standards requiring the replacement of the common incandescent light bulb with more expensive substitutes manufactured, coincidentally, by GE. (Carney covered the related closing of a GE factory here.)
GE addresses its nonpayment of corporate income taxes for the year 2010. The release states: “We’re also not the company who somehow escaped paying any taxes: We actually paid significant taxes in 2010 for previous years and $1 billion in state, local and other taxes. Our tax rate was low in 2010 because we lost $32 billion in our financial services business during the global financial crisis. This was not a tax avoidance strategy, it was a business loss.”
The tax issue has been raised in the GOP presidential candidates’ debate, but it goes back at least to this New York Times story dating from this past March. (The Times reporter who wrote the story commented further on it here.) In February Businessweek also published an illuminating story on GE’s tax lobbying operation.
GE doesn’t say in the current press release that it paid any federal corporate income tax for the year 2010, and I don’t think it did. GE has previously responded to the income tax issue with press releases including this one and, subsequently, this one. In the most recent of these press releases GE also highlights the role of GE Capital in minimizing its tax liability: “GE’s tax rate has been lower in recent years due to financial crisis losses at GE Capital. From 2008-2010, GE Capital suffered nearly $32 billion in losses as a result of the financial crisis.”
GE’s first response to the New York Times story includes a link to GE’s 2010 10-K, citing pages 31-34 of the 10-K. GE’s 2010 10-K is accessible here. At pages 31-34 I don’t find any specific discussion of the losses incurred by GE Capital. The 10-K discussion in any event has an entirely different emphasis than that in GE’s press releases:
Our consolidated income tax rate is lower than the U.S. [35 percent] 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. There is a benefit from global operations as non-U.S. income is subject to local country tax rates that are significantly below the 35% U.S. statutory rate. These non-U.S. earnings have been indefinitely reinvested outside the U.S. and are not subject to current U.S. income tax. The rate of tax on our indefinitely reinvested non-U.S. earnings is below the 35% U.S. statutory rate because we have significant business operations subject to tax in countries where the tax on that income is lower than the U.S. statutory rate and because GE funds the majority of its non-U.S. operations through foreign companies that are subject to low foreign taxes.
You have to wonder if Immelt has tried to explain the facts of business life to Obama.