G.E.’s Strategies Let It Avoid Taxes Altogether

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The NYT tells us that cutting corporate taxes is:

"a way to address warnings by American business that corporate tax rates and the costs of complying with the tax code are cutting into their global competitiveness."

Corporate profits are equal to about 16 percent of the value of output in the corporate sector. Businesses pay roughly a third of their profits in taxes, which means that taxes are equal to about 5 percent of the value of output. If taxes were reduced by 20 percent, a very large tax cut, then this would reduce the cost of doing business in the United States by 1 percent relative to foreign countries.

Suppose the dollar falls by 10 percent against other currencies. This would reduce the price of goods produced in the United States by 10 percent relative to goods produced elsewhere in the world, or ten times as much as the boost to competitiveness that businesses would receive from even a very large reduction in tax rates.

Dox: we all know that everyone will pay as little taxes as they are legally responsible for. That is not at issue. The blame here lies with the laws that allow companies like GE to avoid paying their fair share. It also lies with the lobbyists who buy our politicians to ensure that the laws stay that way- note that Obama has effectively put Immelt in charge of corporate tax reform.

Dox: we all know that everyone will pay as little taxes as they are legally responsible for. That is not at issue. The blame here lies with the laws that allow companies like GE to avoid paying their fair share. It also lies with the lobbyists who buy our politicians to ensure that the laws stay that way- note that Obama has effectively put Immelt in charge of corporate tax reform.

You wouldn't get that from the tone of the OP article though, it really does seem indignant that GE would try and minimize their tax burden. It's also the latest in a series of apocalyptic toned op eds and articles posted here lately, and I felt that a counter-point was needed. I'm a free marketer, not a crony capitalist, so companies such as GE using the government to gain a competitive advantage is always going to be anathema to me.