General Motors’ worldwide tax rate may have gone up to as much as 13 percent, but the automaker’s U.S. income tax rate remains low. And by low, we mean zero dollars low. GM has not paid U.S. federal income tax since coming out of bankruptcy. Though it posts profits, GM’s actions are legal.
“We don’t avoid taxes,” GM spokesman Jim Cain told us, “We just don’t owe US income tax at this time.”
Since 2008, a series of Treasury Department rulings allows GM to use the $18 billion losses left behind in bankruptcy to counterbalance its profits, which includes more than $13 billion the automaker earned since 2009. While some criticize the U.S. Treasury for allowing GM to retain its losses and avoid paying taxes, Cain told The Detroit News that GM pays “significant” state income taxes.
This isn’t an entirely uncommon situation. In fact, another member of the Detroit Three also pays little to nothing when it comes to federal income taxes. Ford uses the $30 billion it lost between 2006 and 2008 to offset its profits and, as a result, pays relatively low worldwide income taxes.
Although protests have predictably started regarding the matter, it’s not out of the ordinary for companies to routinely use prior-year tax losses to avoid paying taxes in the years they’re profitable. “Ford also pays no income tax and had the decision gone the other way, we would have been at a competitive disadvantage,” Cain told us.
Source: The Detroit News, GM