This is a joke, right?

I've let my fury over the tough-talking "China is a currency manipulator" theme in Washington die down, in large part because it's been replaced by fury over lying and posturing with regards to the debt ceiling. But just because I've stopped talking about those issues doesn't mean they've gone away. While we're all distracted by the debt ceiling theater, some fairly important developments have been sneaking under the radar (as they always seem to at times like these).

A few months ago, in response to our stubbornly high unemployment rate and the ongoing discussion regarding the role of China in our declining manufacturing industry, President Obama created a "Council on Jobs and Competitiveness", with General Electric CEO and Chairman Jeff Immelt installed as the head of the council. That appointment turned a few heads--including that of Senator Russ Feingold--among those who noted that GE had repeatedly and systematically gone out of its way to avoid paying federal income tax over the previous decade.

Nevertheless, Immelt has continued in his role, and according to him, he has worked tirelessly to keep jobs in America rather than shipping them overseas.

The chairman of President Barack Obama's jobs and competitiveness council said Wednesday there is no magic potion to jobs creation, but the panel is devising pragmatic plans to put people back to work.

General Electric Co. Chairman and CEO Jeffrey Immelt spoke Wednesday with employees and reporters during a visit to his company's gas turbine plant in Greenville, which employs 3,300 people including 1,700 engineers.

Immelt said his four months on the Obama advisory panel has taught him that even his company can be held accountable for where it creates jobs. He said the panel is working on devising a hundred different business plans for every sector of the economy, with practical steps to help create jobs.

Yes, Mr. Immelt has learned a lot--"even his company can be held accountable for where it creates jobs". Indeed. I'm glad to see him recognize that in trying to be part of the solution, he must first accept that he and GE have been a huge part of the problem.

Hopefully that can be a first step toward our nation reclaiming its lost manufacturing... wait a minute, what the fuck?

General Electric Co.’s health care unit, the world’s biggest maker of medical imaging machines, is moving the headquarters of its 115-year-old X-ray business to Beijing.

“A handful’’ of top managers will move to the Chinese capital and there won’t be any job cuts, said Anne LeGrand, general manager of X-ray for GE Healthcare. The headquarters will move from Wisconsin amid a broader plan to invest about $2 billion across China, including opening six “customer innovation’’ and development centers...

The X-ray business, whose financial results aren’t reported separately by GE, will hire 65 new engineers and support staff at a new Chengdu facility, the company said. GE has hired “a large number’’ of engineers who are in training, LeGrand said. GE, based in Fairfield, Conn., also has a global research center in Shanghai.

Sigh... look, it's great and all that "there won't be any job cuts"--at least not right now. But is GE so completely deaf to the message it's sending by doing this? When your CEO is the head of a Presidential council on jobs and competitiveness, moving ANY of your lines of business overseas and hiring new engineers in China instead of in the United States is the height of hypocrisy. Jeff, you JUST SAID that you're learning to be accountable for where you create jobs--apparently you lied. Shocking.

Let it be clear that, in isolation, I don't blame Immelt for moving his division's headquarters to China--it's in all likelihood a smart business decision, as is avoiding taxes when possible*. But to do so while also pretending to care deeply about jobs and American competitiveness--and chairing a council that is charged with doing just that--is just nauseating.

Jeff Immelt should immediately recuse himself from his role as head of the jobs council. If avoiding federal income tax for years wasn't enough, this latest move is just too bold and arrogant to ignore. Way to sneak this one under the radar when other events are dominating the news flow, Jeff... too bad you couldn't sneak it by everyone.

[Economic Times]
[Boston Globe]

* I am on record here saying that the reason we have lost our manufacturing base to China is not "greedy business owners" but "terrible monetary policy that debased our dollar and destroyed the competitiveness of American labor". That and a whole host of other factors that, in sum, have consistently weakened our nation.

Taibbi on point again

I've written about America's corporations and their aggressive avoidance of paying U.S. taxes before, and I've certainly excerpted the work of Rolling Stone's Matt Taibbi plenty of times as well. Today, those two items came together in a beautiful way, as Taibbi tore apart a potentially overlooked consequence of the so-called "Gang of Six" debt-reduction plan that's been bandied about this week.

At issue is a proposed "corporate tax holiday", a temporary repeal of a tax on repatriated cash from multinational corporations' overseas operations. Under current rules, multinational corporations are exempt from paying U.S. tax on cash that is held by overseas subsidiaries, but they must pay that tax if they attempt to bring the cash back stateside.

Lobbying efforts, however, have insisted that the corporations' inability to bring that cash home has hampered their ability to begin hiring American workers. Similar reasoning led to Congressional passage of a "one-time" tax holiday back in 2004--reasoning that, as Taibbi points out, turned out to be utter bullshit.

For those who don’t know about it, tax repatriation is one of the all-time long cons and also one of the most supremely evil achievements of the Washington lobbying community, which has perhaps told more shameless lies about this one topic than about any other in modern history – which is saying a lot, considering the many absurd things that are said and done by lobbyists in our nation’s capital.

Here’s how it works: the tax laws say that companies can avoid paying taxes as long as they keep their profits overseas. Whenever that money comes back to the U.S., the companies have to pay taxes on it...

Only there’s a catch. In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a “one-time” tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent.

Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash. [Note: many of them also used the cash to increase dividends, simply returning the tax-free cash to shareholders.] Some of those companies promising waves of new hires have already committed to massive layoffs.

It was bad enough when lobbyists managed to pull this trick off once, in 2004. But in one of the worst-kept secrets in Washington, companies immediately started to systematically “offshore” their profits right after the 2004 holiday with the expectation that somewhere down the road, and probably sooner rather than later, they would get another holiday...

I’m shocked there isn’t more of an uproar about this. Could you imagine what the Tea Party would be saying right now if there was a law on the books that allowed immigrants to indefinitely avoid taxes on income sent back to family members in the old country, in Mexico and Venezuela and India?...

As it is, leading members of the Senate are seriously considering giving the most profitable companies in the world a total tax holiday as a reward for their last seven years of systematic tax avoidance.  Hundreds of billions of potential tax dollars would disappear from the Treasury. And there isn’t a peep from anyone, anywhere, on this issue.

We’re seriously talking about defaulting on our debt, and cutting Medicare and Social Security, so that Google can keep paying its current 2.4 percent effective tax rate and GE, a company that received a $140 billion bailout en route to worldwide 2010 profits of $14 billion, can not only keep paying no taxes at all , but receive a $3.2 billion tax credit from the federal government. And nobody appears to give a shit. What the hell is wrong with people? Have we all lost our minds?

I don't usually excerpt at such great length, but Taibbi is almost always worth it. Indeed, he's dead right. There's any number of reasons behind our current budgetary crisis--a couple of long and expensive wars, unwarranted tax cuts to high-net-worth individuals, Medicare Plan D, demographical shifts that have left us with fewer taxpayers and more tax recipients, and the list goes on--but one of the most overlooked items is the ever-declining share of tax revenue paid by our corporations.

Along those lines, Barry Ritholtz passes along a couple of incredibly insightful charts showing the steady decline in corporate taxes paid over the last several decades:

 

The argument, of course, is that lower corporate tax rates help stimulate the overall economy, fueling job growth at home as our largest corporations open up their hiring doors. But with unemployment remaining stubbornly high and large-firm CEO pay soaring to record highs, I think it should be fairly clear where, exactly, this lost tax revenue is ultimately ending up. If you don't tax the corporations, it's just giving another tax cut to the richest Americans, plain and simple.

Trickle-down economics is a scam. Continuing to make cuts to middle-class benefits (like Social Security and Medicare) without addressing such a significant core revenue problem as this is fraudulent. If a corporate tax holiday is indeed passed this summer, shame on the "Gang of Six"--they'd be nothing more than common thieves.

[Rolling Stone]
[The Big Picture]

Revisiting old themes as always

Old issues never really go away, they just sort of hide for a while, then crop up at surprising (and sometimes inopportune) times. That's the case when it comes to corporate taxation, which I first attempted to tackle five months ago with respect to Google. At the time I said:

Bloomberg estimates that the total impact of Google's unpaid taxes has boosted its stock price by nearly $100 per share--about a 20% increase over what it would be absent preferential tax treatment. That increase is subsidized by U.S. taxpayers, and also disproportionately benefits the rich who own GOOG stock over the poor who don't. We need to crack down on this, and we need to do it now."

Well, um... strike one.

The Daily Show - I Give Up - Pay Anything...
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That's right, GE somehow paid no federal taxes whatsoever (in fact, they actually got a tax CREDIT) in 2010 despite reporting a $14 billion (yeah, that's right, $14 billion) profit to its shareholders. So, you know... yeah. I'm speechless. Anyone else wanna take a turn at ranting? I'm kinda tired of it.

[Rolling Stone]
(h/t reader Andrew)