Tags: Liz MacDonald | GM | bailout | tax

Liz MacDonald: Where's Debate Over GM's Crony Capitalist Handouts?

Liz MacDonald: Where's Debate Over GM's Crony Capitalist Handouts?

By    |   Friday, 01 April 2016 10:50 AM

General Motors Co., the U.S. carmaker that got a $51 billion bailout from taxpayers, has escaped scrutiny in this year’s presidential election for being a corporate welfare basket case, says Liz MacDonald, stocks editor at Fox Business.

“While the carmaker makes nearly all of its profits in the U.S., it pays virtually no U.S. federal, state or local taxes,” she writes in a blog post. “The carmaker paid just $5 million in federal taxes last year, its SEC filings show.”

GM paid $908 million in taxes to China’s communist government on profits made with joint venture partners in 2015, MacDonald says.

The carmaker responded to her column with the following statement: “GM adheres to all applicable federal, state and local tax laws and regulations. Since 2009, we have also made significant investments in the U.S. – totaling approximately $17.8 billion – which have created approximately 6,250 new jobs and secured another 20,700 positions.”

Republican presidential frontrunner Donald Trump singled out Ford Motor Co. a year ago when the carmaker announced a $2.5 billion expansion of operations in Mexico.

At that time, Trump said he would call Ford Chief Executive Mark Fields and say: “Let me give you the bad news. Every car, and every truck and every part manufactured in this plant that comes across the border, we’re going to charge you a 35 percent tax. Okay?”

Fields said he wrote a letter to Trump defending his company, and elaborated in an interview with CNBC: “Ford Motor Co. is here to stay in the United States. It's presidential politics and we are just going stay focused on facts.”

Bailout Politics

Fox's MacDonald attributes GM’s paltry tax bill to “a big fat tax break in the bailout.”

The carmaker filed for bankruptcy protection in 2009 as the global economy suffered its biggest contraction since the Great Depression. The federal government spent $51 billion on a bailout program that was partly converted to a 61 percent equity interest in the carmaker. The U.S. Treasury sold off the stock from 2010 to 2013, taking a $10.3 billion capital loss.

The Obama Administration let GM deduct $45.4 billion in costs going forward, against current year taxes, even though it discharged those sums in bankruptcy, MacDonald says.

"The goal of Treasury's investment in GM was never to make a profit, but to help save the American auto industry, and by any measure that effort was successful," Treasury Department spokesman Adam Hodge said, according to a 2014 report by Reuters.

“The bailout was an ‘investment,’ President Barack Obama insisted at the time, adding that it would cost taxpayers ‘not a dime,’” MacDonald writes. “The White House also held up the GM bailout as an example of how to battle China’s ascendancy in manufacturing.”

Meanwhile, GM plans to export Chinese-made sport utility vehicles to the U.S. this year, according to The Wall Street Journal.

GM’s tax deductions “included things like its losses in the years before GM entered bankruptcy, costs for its pensions and post-retirement benefits, as well as costs for its equipment and factories,” MacDonald says. “That means the actual cost of GM’s bailout to taxpayers is much higher, likely on the order of nearly $75 billion, tax experts note.”

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General Motors Co., the U.S. carmaker that got a $51 billion bailout from taxpayers, has escaped scrutiny in this year's presidential election for being a corporate welfare basket case, says Liz MacDonald, stocks editor at Fox Business.
Liz MacDonald, GM, bailout, tax
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2016-50-01
Friday, 01 April 2016 10:50 AM
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