Monday, March 12, 2012

Are special tax breaks OK for bailed-out GM but not AIG?

By James Pethokoukis

From Ben White over at Politico:
A group of four former members of the Congressional Oversight Panel for TARP – Elizabeth Warren, Damon Silvers, Mark McWatters, and Kenneth Troske – today will condemn what they say is an estimated $17.7 billion in special tax breaks given to bailed out insurer AIG: “Congress should not allow … AIG to avoid paying taxes for years into the future in addition to the $182 billion bailout the company has already received … When a company changes ownership, long-standing tax laws limit the extent to which it can offset future taxes with past losses. “Beginning in late 2008, however, the Treasury Department quietly issued a series of notices that exempted AIG from those limits. … ‘AIG gambled recklessly on mortgage-backed securities and lost,’ said Warren, former chair of the Panel. ‘When the government bailed out AIG, it should not have allowed the failed insurance giant to duck taxes for years to come.”

Oh, Warren & Co. are against special tax breaks for bailed-out companies. Interesting. I am curious what this group, particularly Warren—who is running for U.S. Senate in Massachusetts—think about the $13 billion tax break Uncle Sam is giving General Motors. According to bankruptcy expert David Skeel, Treasury Department estimates of the cost of the bailout “omit the cost of the previously accumulated tax losses GM can apply against future profits, thanks to a special post-bailout government gift. The ordinary rule is that these losses can only be preserved after bankruptcy if the company is restructured—not if it’s sold. By waiving this rule, the government saved GM at least $12 to $13 billion in future taxes, a large chunk of which (not all, because taxpayers also own GM stock) came straight out of taxpayers’ pockets.”

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