The Goose That Laid the Golden Egg
Last year in Fairfield,
Connecticut protestors denounced
corporate giant GE for its failure to pay corporate federal tax . GE’s corporate headquarters are in
Fairfield, and the protests drew much attention from newspaper cartoons and
stories. I can see why it was hard for GE to defend itself against these
charges that put it in such a bad light. It has already been stigmatized as a
big bad heartless selfish business giant.
I am not an employee or
representative of GE, and the company does not need me to defend it, but I
would like to put the issue in a different light. In my opinion, this GE flap
was a classic case of trying to kill the goose that laid the golden egg.
GE is perhaps the largest
landowner in the town of Fairfield and as such pays a huge amount of real
estate taxes to the town. It is also one of the largest employers in the state
of Connecticut. Its employees all pay their share of real estate tax on their
own homes. Even if they are renters, part of their rent goes to pay their
landlord’s real estate taxes.
In addition to real estate taxes,
all GE employees from CEO Geoffrey Immelt on down pay their share of Federal
and State Income tax. For example, most GE employees will pay between 30 and 40
percent of their income in federal and state income tax.
The company and its employees must
also pay about 13 percent of salary into Social Security. That tax is sent to
Washington where instead of going into the proverbial “lock box” it must
immediately be lent to the debt-ridden government in order to pay its current
expenses.
It is not hard to calculate that
more than 50% of the income of each GE employee goes to pay federal, state, and
local taxes. On top of that, consider that all these employees pay sales tax on
practically every item they purchase. Although hidden from view, our state
gasoline tax must add about a dollar to the purchase of every gallon of gas.
Despite all these taxes,
demonstrators still protest about the failure of GE to pay corporate taxes.
Don’t they know that a corporate income tax is really a tax on consumers?
Corporations merely act as tax collectors for the government. The buyers or
consumers of their goods and services are the ones who actually pay the tax.
For example, whenever the State of Connecticut raises the tax on cigarettes,
the price of a pack goes up accordingly. The tax is always passed on to the
consumer. If GE hadn’t found a way to avoid the corporate tax, the price of
every light bulb, refrigerator, and auto loan would have been that much higher.
I must admit that I own 500 shares
of GE stock in my retirement plan. The value of the shares has rebounded since
the market hit bottom in 2008, but the current price of about $18 a share is
far below its $50 value of 10 years ago. It pays a small dividend of about 2%
that is also taxed by both the Federal and State governments.
I guess that it was mainly the
enormous losses that GE’s credit arm suffered in the recent financial meltdown
that offset the company’s current gains and allowed it to avoid the corporate
tax. I would also suspect that the company wisely took advantage of government
tax credits designed to stimulate the search for alternative energy sources. I
believe that GE is a very big player in the solar energy field. As a
stockholder and a citizen I would rather see GE invest in energy for the
future, and bonus employees who contribute to the effort, than send the money
to Washington.
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