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Tuesday, December 23, 2008

More stuffing of cash into the pockets of banks by the Bush Administration
Posted by Jill | 5:53 AM
There used to be a game show called "Supermarket Sweep", in which contestants had a certain amount of time to stuff as many groceries as possible into a shopping cart and whoever had the most value in their cart at the end was the winner. The Bush Administration reminds me right now of the hosts of that game show, with the banks and the financial industry being the people tearing around with shopping carts -- all trying to stuff as much as possible of the United States Treasury into their pockets before getting outta Dodge:
The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.

But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.

The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin.

[snip]

The change to Section 382 of the tax code -- a provision that limited a kind of tax shelter arising in corporate mergers -- came after a two-decade effort by conservative economists and Republican administration officials to eliminate or overhaul the law, which is so little-known that even influential tax experts sometimes draw a blank at its mention. Until the financial meltdown, its opponents thought it would be nearly impossible to revamp the section because this would look like a corporate giveaway, according to lobbyists.

Andrew C. DeSouza, a Treasury spokesman, said the administration had the legal authority to issue the notice as part of its power to interpret the tax code and provide legal guidance to companies. He described the Sept. 30 notice, which allows some banks to keep more money by lowering their taxes, as a way to help financial institutions during a time of economic crisis. "This is part of our overall effort to provide relief," he said.

The Treasury itself did not estimate how much the tax change would cost, DeSouza said.

[snip]

Section 382 of the tax code was created by Congress in 1986 to end what it considered an abuse of the tax system: companies sheltering their profits from taxation by acquiring shell companies whose only real value was the losses on their books. The firms would then use the acquired company's losses to offset their gains and avoid paying taxes.

Lawmakers decried the tax shelters as a scam and created a formula to strictly limit the use of those purchased losses for tax purposes.

But from the beginning, some conservative economists and Republican administration officials criticized the new law as unwieldy and unnecessary meddling by the government in the business world.

[snip]

The opposition to Section 382 is part of a broader ideological battle over how the tax code deals with a company's losses. Some conservative economists argue that not only should a firm be able to use losses to offset gains, but that in a year when a company only loses money, it should be entitled to a cash refund from the government.


Remember the outrage over the notion that people whose incomes are so low that after exemptions and the standard deduction, they don't pay income tax, receiving a stimulus check? Where is the similar outrage over the idea that when a company suffers losses, whether due to business conditions or simple mismanagement, that the government should refund their taxes?

Once again we are seeing what I've called the "tipping point of evil" being played out by the Bush Administration on its way out the door; the rule that if an administration is heinous enough to reach that tipping point, the public will be simply beyond outrage and will have little stomach for accountability. Remember, however, after we are ALL scrambling for the scraps tossed us by those who caused this mess, just who it was that brought us there. And remind your conservative friends, too. Because I suspect they will be thinking Sarah Palin is the answer to all their problems.

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2 Comments:
Blogger The Minstrel Boy said...
my only slightly snarky suggestion with the "stimulus" checks was to point out that if folks took their check to wal-mart they would be enriching china, to the grocer's they would be enriching mexico and the west coast of south america, there is really fuck all being produced in america any more.

if you want to buy american you can go with martain guitars, marijuana, several types of booze, and hookers.

that's the way to be patriotic with your funds. do it for the flag yo.
12/23/08, 11:47 AM  
Anonymous Anonymous said...
LOL. Wow, what a way to describe the bush adminstration. But, I have to agree, of course he is going to tear up the office before he leaves. There has been stories of presidents literally doing this, because they are jealous their time is up.
12/23/08, 1:38 PM  
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