Tuesday, November 22, 2011


The 57,000 page tax return.

GE paid no tax on their 14 bil in profits last year.

GE’s tax bill illustrates both why our corporate tax rate is too high and too low. The nominal rate is too high which encourages a real rate which is too low.

Consider the resources that GE spends to lowers its tax bill, not just the many millions spent on clever accounting and accountants and the many millions spent on lobbying but also the many inefficient ways that GE structures its businesses just to avoid paying taxes and the many millions it invests in socially wasteful projects just in order to produce privately valuable tax credits. Now add to that the allocational inefficiencies of taxing some firms at different rates than others and you have a corporate tax system which wastes a lot of resources and raises relatively little revenue. Indeed, a corporate tax system with a tax rate of zero could well be preferable as it would waste fewer resources and raise not much less revenue.

Sometimes it feels like America is full of the smartest idiots on the planet. And by the way...this doesn't just apply to the corporate tax bill...it applies to our entire tax system. With stories like this, how do you expect a family of four with an income of 80,000 to fork over 20% of their money to the Federal Government. Jeez.

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