GE Paid Nothing in Federal Taxes in 2010

The New York Times story about GE paying $0 in federal taxes for 2010 has been making the rounds, with reactions ranging from “eh” to apoplectic outrage.

One particularly interesting response was from Yahoo Finance blogger Henry Blodget who wrotethat we can’t blame GE. Instead, we should blame the complex tax code which results in rich people and companies hiring high priced accountants to find loopholes. The answer, he says, is to move to a consumption tax.

Um. No.

First, you should blame the law makers who wrote those loopholes (often knowingly) into the tax code. Second, you should want to re-write the tax code to close the loopholes, not dump it in favor of a severely regressive tax system that would even further punish the poor and middle class.

If the goal is to get entities (people or corporations) to pay what the intent of the current tax law says they should pay, then lets do that. Progressive tax systems are, by their nature, complex. Are flat taxes and consumption taxes easier to understand? Sure. Does that make them more likely to result in the ideal (from a progressive point of view) tax structure which maximizes overall GDP as well as revenue? No. Definitely not.

Of course, “easy to understand” one-liner tax policy has a good chance of winning in the long term – even if the people who vote for it are hurting themselves by doing so.