General Electric, America's largest corporation, earned $14.2 billion in profits last year. Its chief executive made $15.2 million. And GE paid no federal taxes. To the contrary, the company got a $3.2 billion tax credit. GE's slogan, "Imagination at Work," suggests its creative approach to taxes.
Americans can accept the notion that U.S. firms should not have to pay taxes that are so high they cannot compete with foreign companies. There is also logic to the idea that if their taxes are lower, they will have more money to create jobs in America. In that way, they can attack the largest problem facing the economy: an official jobless rate of nearly 10 percent and a real rate closer to 16 percent.
But GE doesn't work that way and the federal tax code is complicit in its approach. Since 2004, GE has steadily reduced its U.S. work force and shifted jobs overseas, partly for tax reasons.
The distribution of its profits between the United States and foreign countries reflects this shift. Of GE's total profits last year, $5.1 billion came from U.S. operations; $9.1 billion came from overseas holdings. GE pays U.S. taxes on its overseas activities only when, if ever, it transfers the profits to the United States.
The official U.S. corporate tax rate is 35 percent. But tax breaks approved by the White House and Congress enabled U.S. companies to pay only 6.6 percent of total U.S. taxes in 2009.
GE knows the value of this corporate-friendly tax code, given its willingness to devote an average of $20 million a year over the past decade to lobbying.
GE's CEO, Jeffrey Immelt, had a compensation package last year that rose nearly $6 million from 2009. President Obama named Mr. Immelt head of his Council on Jobs and Competitiveness in January -- a choice that was almost a bad joke, given the company's export of jobs.
The nation needs corporate tax reform. GE offers an egregious example of a company gaming the system, but all U.S. firms must pay their fair share of taxes and stop getting incentives to ship American jobs overseas. The President can start by firing Mr. Immelt.