Opinion and Economic Analysis

HICKS: Is the Occupy Indianapolis crowd on to something?

October 15, 2011

I spent a recent weekend at an economic research conference in Indianapolis hosted by Ball State, IU and Purdue. The conference showed our state in great light. We economists had much to discuss. Among the topics was the small “Occupy Indianapolis” protest that greeted us on our opening day.

The crowd looked orderly and unremarkable. I mean this as a compliment, for much of the coverage these protests have received exposes an honest kookiness to the movement that started on Wall Street.

As an example, among the protesters’ early demands was that tariffs should be introduced to prevent the free movement of goods across borders, but workers should be allowed back and forth without interruption. One need not be too clever to understand that preventing rice from crossing borders, but letting hungry people do so is a recipe for worldwide hardship and disaster. But to be fair, focusing on the crazy elements of any political movement is cheap theater.

I think there’s something in the Occupy Indianapolis protest for most of us to appreciate. Among these is the real and persistent influence from both corporations and unions that distorts our tax system. The reality is astonishing.

General Electric makes good products, hires good workers and makes a tidy profit. In 2010, the company paid a dividend, which is good of course because it reflects returns on investment. However, GE paid no federal taxes in 2010.

So last year, an American company—one we should all like and respect, whose market value was north of $170 billion with $14 billion in profits—paid no federal corporate income taxes. But already this year, the same company has spent more than $15 million lobbying Congress, according to the Center for Responsive Politics, and has 174 lobbyists working on tax and regulatory issues. GE spends tens of millions more on lawyers and accountants figuring out how to exploit or change the tax system to avoid taxes.

This is a waste of talent and a symptom of the failure of our politics.

In 2010, every public university in Indiana paid more in federal income tax than General Electric did. In Bloomington, West Lafayette and Muncie, campus administrators fill vacant dorms throughout the summer with conferences hosting musicians, Methodists, mathematicians and the like. The fees help cover expenses, but, according to the Internal Revenue Service, they are considered “unrelated business income” and therefore taxable.

A highly profitable GE pays no taxes, but state universities do. Is this not dumbfounding and morally questionable? The federal tax system is simply and plainly broken. If the Occupy Indianapolis folks want to help fix it, they can count on me, but to do so they are going to have to lose some of the crazies. Moreover, they are going to have to make sure they are not infiltrated by unions, which do the same unprintable thing to taxpayers as does GE.•

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Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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