I spent last weekend at an economic research conference in Indianapolis. It was hosted by Ball State University, Indiana University and Purdue University. The conference showed our state in great light. We continue to live in interesting times so we economists had much to discuss. Among the topics was the small ‘Occupy Indianapolis’ protest that greeted us on our opening day.  I can report that the crowd looked orderly and unremarkable. I mean this as a real compliment, for much of the coverage that these protests have received exposes an honest kookiness to their movement.  As an example, among the protesters’ early demands was that tariffs should be introduced to prevent the free movement of goods across borders, while workers should be permitted to move without interruption across those same borders.  One need not be too clever to understand that preventing rice from crossing borders, but letting hungry people do so is 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, they paid a dividend, which is good of course because it reflects returns on investment.  However, in 2010, GE paid no federal taxes.  So, last year, an American company—one whom we should all like and respect, whose capitalization was north of $170 billion with $14 billion in profits—paid no federal corporate income taxes.  However, according to the Center for Responsive Politics, so far in 2011 General Electric has spent more than $15 million lobbying Congress and has 174 lobbyists working on tax and regulatory issues.  They spend 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 did General Electric.  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 cut the cost of running a campus, but, according to the Internal Revenue Service, it is 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 broke.  If the Occupy Indianapolis folks want to help fix it, then 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 that they are not infiltrated by unions, who do the same unprintable thing to taxpayers as does GE.