You know, I like Jon Stewart. He’s a funny guy. And I don’t generally mind him poking fun at politicians and policies I support. What I do mind is when he breaks the illusion of somewhat legitimate comedy-news by repeating lies straight out of the talking points of the political left, letting himself be used as their late-night pointman, mainstreaming those lies into the public debate out of the mouths of the many people who get their only news from his show.
Last week, Stewart went on repeatedly about how General Electric reaped huge profits of $149 billion yet paid not a penny in taxes. It’s a great argument to make at a time when everyone is paying their own taxes and easy to drive to outrage over a huge corporation not paying their fair share. The problem is that it’s a lie. It takes advantage of the ignorance of too much of the public about what is meant by profits. Yes, GE’s corporate revenue was $149 billion in 2010. However, that is not the same as profit.
After subtracting all of the costs of operating their business, their actual Net Profit was less than $11 billion. That’s the money they had left over to actually spend after paying all of their bills. That’s a far cry from the huge profit number which anti-corporatists have been promoting. It’s actually a relatively low profit margin of only 7.4%. What’s more, it’s not really their profit, because every cent of it gets payed out to stockholders who also pay taxes on it.
There are also a couple of other problems in this criticism of GE. First, they actually did pay taxes. Not a huge amount, but their income statement clearly shows that they paid total taxes of $1.05 billion to the federal government. That’s just under 10% in taxes on their Net Profit. Second, there’s the issue of what they did with their profits. Those profits went to the people who own stock in the company, which actually included me up until fairly recently. Almost all of those profits were divided up and then individual stockholders also paid taxes on their share of profits, likely at the capital gains rate of 15%, so in actuality the profits were taxed twice, adding up to a total rate of about 24.5%.
There’s a simple way for the average taxpaying John Stewart watcher to relate to GE’s taxes. Just compare them to your own taxes. All the money you earn during a year is your Gross Income, the equivalent of GE’s $149 billion in corporate revenue. The standard exemptions and deductions which every taxpayer can take then reduce that amount and what’s left is your Adjusted Gross Income. Your deductions and exemptions are like the operating expenses which GE deducts from its income, so your Adjusted Gross Income is equivalent to their $11 billion Net Profit. For both of you that’s the actual amount which is taxed. If you have an average income you pay 15% on that while GE pays only 10% on theirs. So far they’re a little ahead. But unlike you they then have to give all that money away, and the stockholders they give it to then pay 15% on it again, so the total rate of tax paid on that money before anyone can spend it is 24.5% a higher rate of tax than you pay unless you earn over about $44,000 a year as a single taxpayer. If you earn between $45,000 and $95,000 you pay about the same rate as GE. Only if you earn more than $95,000 do you pay more in tax as a percentage than GE does. And for the record, the taxes GE payed in 2010 were estimated quarterly payments, rather like the withholding taken out of your paycheck, not their final tax bill.
So the truth is that GE paid an entirely reasonable level of tax in 2010 and people like Jon Stewart, Michael Moore, ABC News, The New York Times and others who want to tear down our capitalist system are just lying to you and hoping you won’t check the facts. And remember this isn’t the only thing they lie about for partisan reasons. Guess who would really get hammered if we actually responded to their call to “repeal the Bush tax cuts.” One hint. It’s not the super-rich.