While the eyes of Congress and the public were focused on the $700 billion Wall Street bailout in September, the Bush administration slipped through a tax break for banks that could cost the federal treasury $140 billion – and cost the state of Oregon a bundle too.
As succinctly explained by Citizens for Tax Justice: “Generally, corporations that report tax losses in a given year are allowed to apply these losses against profits in future years. But this ability to ‘carry over’ losses from one year to reduce taxes in future years has limits. For example, when one company buys another company that has tax losses, the law prevents the acquiring company from using the purchased company’s tax losses. There’s a very sensible reason for this rule: to ensure that companies don’t purchase other companies simply as a tax dodge.
“But a little-noticed September IRS administrative ruling creates a specific, temporary exemption from this rule for banks acquiring other banks whose tax losses are attributable to bad loans. The rule is apparently retroactive.”
The biggest winner under the rule change will be Wells Fargo, “which by one estimate will see a federal tax cut of $19 billion from its purchase of Wachovia.”
Why will this hurt Oregon and other states where Wells Fargo does business?
“Because states with corporate income taxes almost universally base their corporate taxes on federal rules, federal tax cuts for corporations generally result in state tax cuts as well,” Citizens for Tax Justice explains. “When affected states have rules making it difficult to enact tax increases … state governments find themselves practically unable to avoid costly corporate tax cuts they never wanted.”
How much Oregon stands to lose hasn’t been worked out yet.
Tip of the hat to Chuck Sheketoff on the BlueOregon blog for pointing this angle out.
This article appears in Nov 6-12, 2008.
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When has increasing taxes EVER helped an economy?
“When has increasing taxes EVER helped an economy?”
Gee, you shouldn’t make it so easy for me.
One answer is during the Clinton years. I well remember Limbaugh and other right-wing oracles predicting in 1993 that Clinton’s tax increase would usher in the second Great Depression. There would be bread lines. Grass would grow in the streets.
What actually happened? It ushered in the biggest economic expansion in America’s post-war history. Even Alan Greenspan, hardly a “socialist,” said the Clinton tax increase was necessary and appropriate to get the federal deficit under control.
And what have those wonderful Bush tax cuts gotten us? The second Great Depression.
There are times when tax cuts are appropriate and times when tax increases are appropriate. Ronald Reagan even recognized this. But today’s conservatives believe it’s ALWAYS time to cut taxes and NEVER time to raise taxes.
We are seeing the results today. But the right-wingers continue to deny reality even when it’s staring them in the face and keep croaking “CUT TAXES! CUT TAXES” like demented parrots.
(BTW, nobody is talking about giving Wells a tax INCREASE — the point of the post is that they are getting a huge tax DECREASE.)