Tuesday, July 13, 2004

GE Re-Writes Tax Code--More Jobs Lost in US

By Jeffrey H. Birnbaum and Jonathan Weisman
Washington Post Staff Writers
Tuesday, July 13, 2004; Page A01

No company in the nation had more to lose than General Electric Co. when the World Trade Organization decreed in 2002 that U.S. tax laws violated international treaties. The multinational conglomerate was saving hundreds of millions of dollars a year in taxes from the export subsidies that the United States had to discard.

But in a two-year campaign, fueled as much by brains as political brawn, GE has shaped the legislation that would replace the old export-promotion law in ways that would allow it to save as much, if not more, in taxes, according to both GE lobbyists and congressional aides. In pursuing its financial interest, the company may also have turned the U.S. corporate tax code away from domestic manufacturing and toward expansion of operations abroad.

"The bill is truly amazing," said Michael J. McIntyre, a tax law professor at Wayne State University and an expert on international corporate tax issues. "We had an incentive for exports that was illegal and had to be repealed. Now Congress takes the money saved by the repeal and uses it to reduce taxes on the income earned by U.S. companies in foreign countries, thereby making foreign investment more attractive than U.S. investment."

Advocates and detractors alike say such concerns -- broadly shared -- make GE's lobbying feat more remarkable. House and Senate negotiators are expected to begin final talks on the corporate tax bill this week or next. GE's final push is about to begin.

GE was far from alone in trying to fashion what has become the most important corporate tax bill in nearly 20 years. Lobbyists for the nation's biggest companies have dusted off their favorite tax benefits and tried to sell them as part of the legislation. As a result, the measure, which began as a simple repeal of the $5-billion-a-year export subsidy, has swollen to include more than $140 billion in tax breaks over the next 10 years.

But GE's clout stands out. Of one provision eventually worth $2 billion a year, GE will reap an "overwhelming percentage," said John Buckley, chief tax counsel for the Democratic staff of the House Ways and Means Committee.

"They're getting a lot more out of this than they ever had" from the export subsidy, Buckley said.
No company spends more on lobbying than GE, according to PoliticalMoneyLine.com -- $7.54 million last year alone. Its political action committee, through which it donates to congressional candidates, ranks in total donations among the top 10 of all corporations this year.
A top target: the provision enacted in 1986 that created nine separate categories -- or baskets -- of overseas business activities. Companies earn credits for taxes they pay to foreign governments and can use them to offset U.S. taxes on overseas profits. But credits earned from one activity could not be used to reduce taxes owed from another business venture, nor could taxes paid in high-tax countries be used to reduce taxable income earned in tax havens abroad.

"The whole point of the baskets is to prevent that abuse," said McIntyre, the Wayne State professor.
There was one reason for GE's victories, said one lobbyist whose firm worked with the company on the legislation: diligence. General Electric realized more than two years ago that the need to repeal the export subsidy would snowball into a major corporate tax bill. The company's tax lawyers compiled a wish list and framed the firm's desires as simplification. The GE team also was among the first companies to sign on to Thomas's initial efforts to solve the foreign-treaty issue and stuck with him as other businesses and lawmakers fought him at every turn.
Between 1994 and 2001, the company's effective tax rate was above 30 percent in every year but one, according to Standard & Poor's. Last year, the firm's tax payments slid to 21.4 percent of profit even though the top corporate tax rate remained at 35 percent. If the new legislation is signed into law, GE's tax payments are likely to fall further, said Robert S. McIntyre of the liberal Citizens for Tax Justice.

"This is the definition of corporate welfare," McIntyre said. "To these guys, old tax breaks have become entitlements, even illegal ones." (emphasis mine)

This is a long article from which I've just taken snippets but the whole thing is worth plowing through. It describes in some detail exactly how and who and what tactics GE used to steal upwards of $$2BILLION$$ from the Treasury on the basis of bogus arguments and cooked numbers fabricated by friendly corporate think tanks.

The end result of this bill if GE gets its way--and it will--is a massive new shift in the tax code that will make it extremely cheap, even profitable, for corporations to expand overseas while punishing corporations that create jobs in the US. There is no possible excuse for it; even Republican Sen Chuck Grassley, Chairman of the Senate Finance Committee, thought it was over the line. But the money poured from GE's corporate coffers and GE got what it wanted. By the time it's finished, a few select American corporations with huge overseas interests are going to collect in the neighborhood of an extra $$140BILLION$$ in windfall tax relief, allowing them to evade almost entirely their responsibility to support the society that supports them.

That money, essentially embezzled from the Treasury, will have to be paid for by everyone else--from small domestic companies who will be forced to cut jobs, to middle-class taxpayers through eventual tax hikes, to the poor in the form of yet more drastically reduced programs. It is through this method of buying laws favorable to itself that Big Business undercuts democracy and burgles our shared resources.

You knew they were doing it. This articles tell you how they do it.