GE's lower tax rate confuses Wall St. -- should it?

General Electric Co.'s (NYSE:GE) tax rate will be lower than the company said at the beginning of the year. It will also be better than 2005.

The Wall Street Journal says that tax breaks added $200 million to GE's net income for the first three quarters of 2006. Total net income for the period was $14.1 billion. The tax rate for the period was 17.2% compared to 18.7% for the first nine months of last year.

Some of the folks on Wall St. are worried that a wind-fall of tax benefits could mask weaknesses in GE's earnings as well as weaknesses at operations like the company's big plastics division. The issue is a tempest in a teapot.

If Wall St. analysts, who make a couple of million a year, cannot model GE's figures with any accuracy, it is hard to say why they are paid such a kingly sum. Blaming the company is always a good way to get off the hook, despite a number of industry reports that would indicate how divisions like plastics are doing. Often, a company like GE may not be the best source for information on its own divisions.

Also, GE's problems are much deeper than tax rates. At $35, the stock has not risen this year and is well down from Jack Welch's days. Analysts and investors alike are concerned that the company is too complex and that tracking all of its divisions is too difficult. Many argue that dog divisions like NBC Universal should be spun-out to shareholders so they can watch the stock in the new unit fall.

Of course, the market is often the best gauge of whether issues like the tax rate matter. GE's stock is up 0.25% on lower than usual volume, so you can be the judge.

Douglas A. McIntyre is a partner at 24/7 Wall St.