US tax avoidance explained

Posted by Christie Malry on September 19, 2012 at 9:42 pm

Sigh. Here we go again:

One problem with the Republican theory is that many big corporations actually pay little, if any, federal income tax. For example, The New York Times has reported that General Electric, the sixth-largest corporation in the United States, earned $14.2 billion in 2010, but disclosed in federal filings that it had no federal tax liability.

Well, that's your problem right there. The federal tax liability is based on its taxable profits, not its reported consolidated profits. In addition, the US tax system provides for a complete deferral of tax for as long as foreign-source profits remain overseas. So, while General Electric keeps its subsidiaries' profits overseas, it won't pay tax on them.

You can jump up and down for as long as you like, but tax is only levied when those profits are repatriated. Not before.

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