One interesting side show in connection with Congress's consideration of an economic stimulus package concerns the Treasury's own private "stealth bailout"--the announcement, in Notice 2008-83, that it would not enforce the law in I.R.C. section 382(h) against money-making banks that acquire loser banks. When questioned on the source of authority for their invalid notice, Treasury officials hemmed and hawed and basically claimed that it resided in the TARP legislation. That, of course, echoes too completely the general approach of the Bush administration that it is above the law--whatever it does is legal (even torture in violation of the Geneva Conventions) and whatever it doesn't wanna do, it doesn't have to bother doing (even enforcing the tax laws fairly and nondiscriminatorily as to all taxpayers).
Several big banks took advantage of the invalid notice--they'll presumably be able to write off considerably more losses than otherwise would have been possible, thus paying even less in taxes to the federal government. Banks already pay very very low taxes. They've been extraordinarily successful at lobbying Congress, perhaps because they also contribute even handedly to Dems and Republicans?
Rep. Lloyd Doggett of Texas, one who has consistently supported laws requiring corporate accountability and closing loopholes, proposed legislation that would make Notice 2008-83 null and void ab initio. It might even stand a chance of passing, as Congress is finding it harder these days to disregard the public clamor over rotten bailouts, unaccountability, executive bonuses paid out of taxpayer monies, and similar effects of the crony bailout that is the "troubled asset relief program" administered by Goldman alumn Hank Paulson.
So the Dems have pulled a provision relating to Notice 2008-83 into the economic stimulus bill's tax provisions. Here's the Ways & Means Summary of the "Tax Relief Included in the American Recovery and Reinvestment Act". And, if you haven't seen it yet, here is the full text of HR 598, the American Recovery and Reinvestment Act.
Section 1431 of the bill repeals the notice. Trouble is, it only makes the notice void prospectively. As a result, it lets those banks who ate up loser banks and got bigger (like Wells Fargo buying Wachovia) enjoy the benefit anyway.
Doggett, I suspect, may stay on the track on this one. Here's what his office had to say (as provided by his press secretary, Wyeth Ruthven) .
I am pleased that the provision to close Treasury’s secret Section 382 loophole, which I introduced in separate legislation and have raised at every opportunity, will be included in the American Recovery and Reinvestment Act. While the provision changes the effective date, and slightly expands the definition of deals that still may take advantage of this loophole, we are a step closer to finally ending Paulson’s stealth bailout.
Go, Doggett. Get rid of the prospective application and at least one tax provision in the bill will be worth including. Most of the rest are simply a waste of money, except to the extent they provide any kind of relief to individuals in the lower 40% of the income distribution. I wager that the business tax breaks will neither stimulate growth nor buy enough Republican goodwill to get them to adopt the kinds of tax changes that must be adopted to get us out of the hole the Republican revenue cuts dug for us. (After all, Bush is using the last of his ink to try to stiffen the taxcutting, revenue-reducing spine of his GOP compatriots. The White House Council of Economic Advisers just issued his final "Economic Report of the President" urging more of the same wasteful and stupid tax cuts that got us into this mess, originally as a dividend from a budget surplus that existed a short 8 years ago and now as the "cure" for economic recession that the cut-taxes-and-binge-on-the-military mentality has gotten us into.) Buying GOP support with tax cuts is not a good way for this administration to begin to implement the "change" promised.
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