Jack Welch: U.S. does not have a rational tax policy

“The U.S. does not have a tax policy that makes sense, former General Electric chairman and CEO Jack Welch told CNBC on Tuesday,” Matthew J. Belvedere reports for CNBC. “Losing American corporations to overseas countries with lower corporate taxes would be a sin, he added.”

“‘We are giving away money … because we don’t have a rational tax policy,’ he said,” Belvedere reports. “‘I think we need to have a real national debate about our tax policy and what corporate taxes really mean. Who gets taxed when you tax a corporation? The consumer. The buyer,’ the former GE chief said. ‘Corporations sweat. They cry. They bleed. They do all these things,’ he continued. ‘The idea that [companies] are just bricks and mortar is nonsense.'”

“During Welch’s 20 years at the helm, GE’s market capitalization went from $14 billion to more than $410 billion,” Belvedere reports. “Asked whether he’d put himself on the CNBC 25 list [he’s #13], the plain-talking Welch said: ‘Of course, I would … are you kidding me!’ He also said he liked the top two picks — Apple’s Steve Jobs and Microsoft’s Bill Gates.”

Read more in the full article here.

MacDailyNews Take: The U.S. corporate tax rate is simply way too high.

Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth.Apple CEO Tim Cook, May 21, 2013

[Thanks to MacDailyNews Reader “Lynn Weiler” for the heads up.]

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65 Comments

  1. The scuttlebutt is that Walgreen’s bought a Swiss company. The taxes there are having them thinking about moving their corporate HQ to Switzerland. Can you imagine that. Switzerland cheaper to runs business in than the U.S. That is a shame.

    1. Yeah, but then the company staff would have to live there. What fun they’d have with the Cost Of Living in Switzerland NOT.

      But that is indeed the thought process these days. #MyStupidGovernment essentially CHASES companies OUT of the USA.

      And goodness knows I am NO fan of bad biznizz, as a sarcastically call them. They make a mockery of the term ‘capitalism’. Burn every bad biznizz to the ground IMHO.

      But here we have GREAT businesses, like Apple, being screwed over relentlessly by #MyStupidGovernment. No one sane can blame Apple for using every legal means available to stop the despoliation. <–Your Word Of The Day.

      Clue to achieve sanity: Make sense.

      1. Three things are needed immediately:

        1. Abolish corporate taxes. Corporations would pay zero taxes.
        2. Abolish capital gains tax rates and treat all investment income as ordinary income.
        3. Adjust tax rates for past inflation and install indexing to counter future inflation.

        That would go a long way towards straightening things out.

  2. Lemme see. Tax policy is driven by all the lower and middle class taxpayers who have hired high-priced lobbyists to write the tax code in their favor. Corporate giants, therefore, have a legitimate beef and a right to whine. Is that what you’re saying?

      1. Actually Cupertino looks like Hong Kong. 70% Asian population. And if Apple goes there is still Google, Facebook, Intel, HP, Cisco, and about 20 others. If they all go we will get our stuff cheaper, right? Or would there be import tariffs on the expat companies? Calif already has about the highest taxes in the country but Silicon Valley is booming. A 2000 sq ft tract home in Mtn View or Cupertino is 1.7 mil, even more in Palo Alto, Menlo Park. Taxes are not all there is to business or life.

          1. 2010 Population by Race for Cupertino, CA:

            White 22,468 43.33% 20,606,235 55.43% 221,809,059 71.91%
            Black or African American 434 0.84% 2,248,269 6.05% 37,036,996 12.01%
            American Indian and Alaska Native 146 0.28% 339,417 0.91% 3,026,418 0.98%
            Asian 26,132 50.39% 4,720,651 12.70% 13,906,406 4.51%
            Native Hawaiian and Other Pacific Islander 157 0.30% 197,993 0.53% 662,031 0.21%
            Other 2,519 4.86% 9,060,539 24.37% 32,014,224 10.38%

            you’re fulla crap.

      2. Many parts of Ireland _do_ look like Detroit, with about the same unemployment. By not collecting enough taxes to fund national development, Ireland lags the rest of the industrialized world in practically all objective economic measures. Just because you enjoy the look of sheep in the fields rather than auto factories does not make Ireland a relatively more economically vibrant place to be.

        The waves of immigrants leaving Ireland have only accelerated since the leaders deployed their plan to undercut the rest of the world’s corporate tax rates. On paper it looked good, but in reality it worked like this: taking in inadequate tax receipts forced Ireland to underfund national development, causing accelerated brain drain as the young generations fled. That leaves relatively fewer working people but an elderly population still requires services, which no amount of real estate hype and financial shenanigans can counteract. Dropping tax rates further only makes the budget deficit more acute. So as unscrupulous banks folded one by one and foreign corporations fired the people in their Dublin tax avoidance offices, Ireland was first in line for EU bailouts.

        Boy, Ireland sounds like such an ideal fiscal and budget policy to emulate.

        Why isn’t anyone looking to Germany as an economic model?????

        http://www.nationaldebtclocks.org
        Ireland debt / GDP: 108.3%
        USA debt/GDP: 104.7%
        Germany debt/GDP: 79.9%

          1. Well, nobody cares what the published rate is except you. What is the actual corporate rate in the USA? What is the actual corporate tax structure in Germany? Use higher thinking instead of parroting the corporate lobbyist line.

            1. I can’t! The Koch Brothers are so demanding, I must spend every minute of the day cleansing the world of whatever you think the Koch Brothers don’t like. It’s 24/7, 365, there is no rest!

            2. I fully understand your point ‘Mike’. 35% does NOT typically turn out to be the final tax rate for repatriating foreign made profits.

              BUT: That officially IS the tax rate, aka the FACE on the matter. I find it entirely appropriate to quote 35% until the cows come home. It is the specific figure of contention, the one that’s insane, the one that must be sanitized into something realistic if #MyStupidGovernment ever hopes to see tax revenue from foreign made profits.

              IOW: This is one case where I find the KISS Principle (Keep It Stupid, Simple) to be useful and appropriate. It provides that wonderful Jobsian value of focus.

  3. Yeah, right. The U.S. tax code isn’t messed up because of the runaway inequality that destabilizes the economy or because it’s so complex you need to hire private companies just to file them every year – It’s messed up because corporations are being charged too much. Poor corporations, I feel so sorry for you entities – It must really hurt to have to pay millions of dollars to the taxman when you only make tens of millions in revenue. It’s amazing these US corporations somehow remain so incredibly profitable year after year, given they have so little influence over Washington and how they write these damn tax laws. We, the people, should really get together, organize, and help these corporations out. /s

      1. I think if you’re organized and try, like really hard, perhaps you can run off every corporation that is based in the United States to foreign shores. Cuz’ we shore do like that unemployment here in ol’ Amuricuh. Maybe we can all become Amish! Can’t wait.

        1. I don’t see any US corporations running overseas. If you look at the earnings and profits they report every quarter, you’ll see why: they came out of the Great Recession on top, in sharp contrast to the average hard working American, who are still suffering from stagnant wages on massive unemployment. And yet despite coming out on top of the world, these corporations are greedy enough to ask for more, and ask the American people to foot the bill for their tax cuts! They even got shills like to tell everyone what a fucking awesome idea it is!

            1. Let me see if I got this straight:

              You’re saying we should change the law, to give US corporations more tax money, because if we don’t, they will move to Europe and we’ll all become Amish. So instead of worrying about all the reasons why the Great Recession actually happened and considering how to change tax laws to prevent the exact same thing from happening again, we should be more worried about this insane bullshit scenario about Amish and outhouses which apparently can only be stopped by giving corporations more money. Is that right?

      2. The taxes have to paid somehow, Mr. b. If you want to reform and simplify the tax structure, then fine. I fully support that effort as long as the new plan has tax revenues eventually equaling spending (i.e., zero deficits) except in the event of exigencies (e.g., war).

        The point being, the bills have to be paid at some point. The pain of actually paying the full price for government services just might provide an incentive to be more frugal before building bridges to nowhere.

        In the end, it all comes down to the individual. If you reduce corporate taxes, then individual taxes (income, VAT, personal property, toll fees in perpetuity, etc.) will increase or the deficit will rise. Before you reform/cut business taxes, how about planning for the other side of the equation, hotshot?

            1. Now that the DHS is the biggest budget item in the federal budget, it indeed seems time to cut back drastically on overseas wars. Problem is, it would take a generation to switch off the spending as you propose. The Pentagon has $70 billion with which to wage war every year, but when the wounded come home, the hidden costs continue in Veterans Affairs ($60 billion), not to mention a huge chunk of Health & Human Services ($249 billion), and so forth.

              It’s absolutely amazing how the deficit hawks can keep a straight face when they wrap themselves up in the flag and propose military solutions to world conflicts while doing NOTHING to pay down accrued debts directly incurred by past war-mongering. Tax rates CANNOT go down until the USA learns to cut wasteful spending. We owe veterans the benefits they were guaranteed, but we should stop making so many of them, as well as immediately axing any government agency ending with “… Security Administration”.

              http://www.usaspending.gov/explore

            2. Well, Mr. Confrontational, it seems we agree on something.

              All I wrote was that it takes a generation to shift from wartime budgets to peacetime budgets, but we should start now. You show a strange way of expressing agreement.

              Perhaps it’s because your frustrations comes out only on tech forums instead of in letters to your congressmen. Of course, if you are truly concerned about debt, then good luck getting in a conversation with your representative. No party truly cares about balancing budgets or reducing military spending because they enjoy the gravy that comes their way from … you guessed it … corporations that are awash in money and can afford to write every loophole they want into the tax code. The whole point of a corporation is weath redistribution: always toward the guys who are already rich enough to afford lobbyists and teams of financial & legal swindlers to screw over small business and consumers. Small business creates more jobs than corporations, but they are NOT heard in Congress.

              Funny how Welch’s sudden flash of supposed tax reform brilliance didn’t occur to him while he was busy lobbying Congress for 20 years to achieve unprecedented GE tax avoidance. Instead of proposing to lower the nominal rate for everyone, Welch instead lobbied for bills that gave GE relative tax advantage over its direct worldwide competition — partially by ensuring that smaller companies pay more in taxes EVERYWHERE. Welch is a self-serving hypocrite of the highest order.

  4. This is your soapbox and you’re certainly entitled to your opinion. Mine differs.

    A good corporate citizen pays its taxes and works to change laws it doesn’t agree with; it doesn’t hide its income offshore until the laws onshore are changed in its favor.

    Corporate shareholders are also citizens, all of whom benefit when their governments have the revenue necessary to maintain a level playing field through rational regulation and oversight of corporate conduct.

    1. Keep in mind that corporations are sometimes citizens of many countries; the income it earns in another country is taxed by that country, and the corporation – as a good corporate citizen of that country – pays its taxes there on that money.

      Simple justice would say that that money should now be free from taxation by other entities (such as countries in which the money was NOT earned), but for some irrational reason, the US Government believes that such money, when brought into the USA in order to be invested and create new jobs here, should be taxed AGAIN at the FULL CORPORATE RATE, even though there were no services provided by that government in relation to that money, and the money is being brought in to indirectly benefit that government.

      A corporation is in business to make a profit for its shareholders, and is therefore REQUIRED by US law to act in the best interests of its shareholders, not according to what some anonymous self-proclaimed expert defines as the attributes of a “good corporate citizen.” Officers of a corporation which unnecessarily repatriated money under the current circumstances would not only likely be removed by their board of directors, but could face criminal charges.

  5. Welch is a hoot.

    GE since 2002 has paid an effective tax rate of 1.8%.

    You want to know why the US has an insane corporate tax system? It is because the face tax rate has no real relation to the actual tax rate.

    Any meaningful corporate tax reform would mean cutting the sticker price tax rate by cutting deductions, etc., that corporations use to lower the rate the pay.

    The reason why there’s been no effort to do so is exactly because of companies like GE. Sure, we could lower the corporate tax rate from 35% to 20% by eliminating right offs, but GE has no interest in paying 20%.

    They would much rather keep the current tax system, pay 1.8%, and wait for a Congress dumb enough to offer another repatriation tax holiday, which they are a few senators away from having.

    That was recognized as the problem when GW had a repatriating holiday — everyone knew that the only result of the holiday would be that companies would park cash overseas waiting for another holiday, and any lobbying they would do would be for a holiday every few years instead of meaningfully eliminating write offs and correspondingly lower the corporate tax rate.

    Apple is one of the few companies willing to publicly advocate for lowering the corporate tax rate and cutting writeoffs.

    Most big companies, on the other hand, don’t care about the 35% stated rated, they care about the rate they actually pay, which is a lot closer to what GE pays.

    That’s why corporate tax reform doesn’t happen.

    1. OpJ:

      You nailed it. And I’ll add another layer to what you’ve said to effectively shut everyone up about this, including all the fanboys on this site that know everything about everything.

      If corporate tax rates are “unfair” and should go down, then should people’s income tax rates. The law is clear: a corporation is effectively a person legally and needs to pay taxes. What separates the two is a corporation enjoys many ways, with write offs, to reduce the total amount of taxable income in a given fiscal year. Individual people don’t have this luxury and gets taxed to hell.

      No, the tax rates shouldn’t change, people’s attitudes in business should.

      1. You two have nailed nothing.

        Tim Cook and Jack Welch have spoken the same line. I trust their business acumen and judgement over soak the rich jealous fanboys any day of the week.

        My old school grandmother, God rest her soul, worked in a textile mill most of her life until the company moved offshore in the 1960s.

        Look up how many corporations moved out of the U.S. since then because of higher taxes and many other higher costs to do business.

        The lion share of Apple’s products are made overseas. Why?

        Get a grip …

        And to the dim bulbs that parrot NYT or CNN that Apple does not pay its fair share of taxes — breaking news — Apple pays EVERY PENNY according to federal law.

        You’re either lying, stupid or both.

        1. The textile mills didn’t move offshore because of taxes! They moved offshore because the companies couldn’t afford to pay their workers middle-class salaries and compete with the near-slave labor of the Third World.

          And with Walmart pressuring every supplier to CUT prices on the exact same goods each year, many employers had no choice but to close their US factories just to stay in business, even if they didn’t want to. That’s why so many Walmart shoppers (and Walmart employees) rely on Federal aid — because Walmart exported their jobs.

          1. My grandmother MADE A MIDDLE CLASS WAGE!

            She bought me suits in high school and paid her own way after losing a husband.

            All you got is Dem talking points and Walmart hate?

            Pity.

            1. The point is that skilled workers demand middle-class wages. When the textile factories were in the US, they paid enough for your grandmother to live like a normal middle-class American. Now they just pay enough for the workers to live normal lives in Bangladesh, where the factories are. The American former textile workers are unemployed or working unskilled jobs that can’t sustain a middle-class life. That isn’t the fault of our tax system specifically, or of the government generally, but of the corporate drive for cheap labor. That is not to say that the tax system should not be improved, but only that tax policy is rarely the main factor in driving businesses overseas.

  6. US corporate taxes are intentionally keep too high. That allows our fine elected representatives to give out take breaks to those who bride them with truckloads of money.

    If tax rates were low, corporations would not need to bribe the politicians and the politicians would not get rich while in office.

    So you see, low corporate tax rates are not in the cards..

  7. Corporate tax, as a percentage of total federal revenues, has been on a downward spiral ever since WWII. Today, they’re at near historic lows (about 13.5 percent of revenues), while personal taxes are near historic highs (about 45 percent). There’s a great chart here, and it’s interesting to see how different administrations affect the percentages.

    There’s a HUGE dip in corporate taxes during Reagan’s years, and a rise in taxes since Obama’s been in office. But from this chart, at least, corporations have little to complain about. Certainly, record stock market levels don’t hurt, and I don’t see a lot of CEOs working for tips.

    Greedy bastards.

  8. I was walking down the street yesterday, when I saw a corporation walking who was innocently walking along, doing nothing wrong, whatsoever, get picked on by some bullies… The corporation was sweating bullets, but then it tried to run, and the bullies jumped it, and started to beat on it with their fists, and kicking the corporation in the ribs… It became clear that the corporation was bleeding heavily, then the two bullies ran off, and the poor corporation was just sitting there in a pool of its own sweat and blood, crying like a baby. It was really embarrassing.

    The very idea that corporations are people is such utter malarkey and bullshit. The vast majority of corporations are lousy citizens, and they use their vast billions in wealth to pull the marionette strings of congress, destroying the middle class this country, and their wealth was built upon.

  9. Let’s just clear the air on CNBC and Neutron Jack Welch:
    1- Until recently, GE was the owner of CNBC and it was founded under and at the direction of jack Welch.
    2- CNBC has perpetually pimped the Ayn Rand school of economic darwinism, no government regulation and unrestricted free markets. Jack Welch has also done the same.
    3- During Jack Welch’s era at GE their best customer was the United States Government.
    4- After Welch retired and the 2007-8 Market Crash (The Bush Depression) started, GE was essentially insolvent and had the rules bent to qualify it as a bank to get TARP money.
    5- Under CNBC’s, Jack Welch’s and Ayn Rand’s rules GE should have been allowed to go bankrupt and been liquidated.

    Note #5. LIbertarian fantasyland is always for the little people. The fat cats always get a place at the trough.

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