GM Carry-Forwards Worth $45b Off Future Tax Bills
Perhaps one of the least-covered elements of the auto industry restructuring has been the numerous tax advantages GM has earned as a government-owned automaker. Unlike most bankruptcies, GM was allowed to hold onto some $16b of net operating loss credits (tax-loss carry-forwards), which can be used to offset future tax bills. Typically, companies that restructure in bankruptcy lose existing carry-forwards as the price of wiping out debt, but because the government is invested in GM, it decided to allow old tax losses to flow into the new company even as debt was left behind. In the latest update on this story, The Wall Street Journal notes that some $18.9b of GM’s carry-forwards were from the old company, and that the firm has a whopping $45.4b in future tax savings. And because carry-forwards can be banked up to 20 years before they are spent, GM will have to make massive profits before it starts actually paying taxes to the federal government. The government’s position:
the profit-shielding tax credit makes the bailed-out companies more attractive to investors, and that the value of the benefit is greater than the lost tax payments, especially since the tax payments would not exist if the companies fail
Which is all well and good, but the reality is also that this practically doubles the taxpayers’ cost of bailing out GM. As a policy this makes sense for the reasons given (assuming the bailout was a foregone conclusion), but it would be nice if this “hidden charge” were at least noted on the bill.
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By the way, I predicted this back in August. Back then I said, purchasers of the IPO would be paid off with tax breaks and I was right. http://www.thetruthaboutcars.com/2010/08/quotes-of-the-day-the-coming-ipo-edition/ So, $45 billion in tax breaks for the benefit of the unions, corporations and foreign investors. Do we file this under Hope or Change?
this is an idiot's argument. The tax payer loses nothing since $45b is in tax revenue they never would have gotten. The argument that other companies would have gobbled up the lost capacity is also an idiot's argument since you are forced to consider how many GM employee's would be out of work and NOT buying cars and NOT paying income tax and COLLECTING unemployment. when you deal with a huge company like GM, you deal with economics on a scale that affects more than peanuts numbers like $45b in tax revenue. The author should either stick to reporting about cars and keep his trap shut, or actually research a bit more and offer a balanced viewpoint. I didn't like the idea of Government Motors, either. but then the government fired Richard Wagonner and instantly proved itself more capable of running the company than current free-market would have us believe.
Anyone still think it was a real 'bankruptcy' GM went through? Corporate welfare at it's worst. I know, I know it's all about jobs. But just jobs with GM and Chrysler. All the other companies that went under during this time, well, screw them. They didn't donate enough to both parties to have a taxpayer funded bailout. Farm subsidies, bailouts, bridges to nowhere.... all part of Crony Capitali$m. There is no meaningful difference between these, as the taxpayer winds up picking up the tab. And by taxpayer, I mean the 50% of us that actually pay into the system.
JJ said: The $45bn is just an arbitrary number that someone put out there for whatever motive they might have. What would be the basis of that statement? Wishful thinking? $45 billion was the number that GM filed withg the SEC when registering for it's IPO. It's not an estimate or a guess. It is a figure that was derived from the bankruptcy court and the special welfare carveout for them that was hidden in their bailout. Try again. JJ said: Second, I don’t see how you can have a bigger problem with government spending than with taxes, cause ultimately the two are bound to end up the two pieces of the exact same coin. Very perspicacious. Taxes, spending, debt, whatever. It's all the same thing. lol Here, I'll try to spell it out for you and I promise to use small words: If the government spends less money, then it incurs less debt or steals less money from the job creating private sector. And finally, here's your coup de grace where you declare the American people too stupid to be allowed to be free: JJ said: tea party ... better off if there was a bigger welfare state rather than a smaller one. ...democracy can no longer exist... people haven’t got a clue what’s going on in the world. ... you can only let ‘the people’ run a country if ‘the people’ are capable of making at least somewhat informed decisions. Readers, do you see what elitists these people are? They call themselves "liberal" and then do everything in their power to crush liberty, to limit your choices, to deny you the fruits of your labor. Why? Because you are too stupid and they are so much smarter than you. Yes, they will try to co-opt you with welfare handouts and food stamps. But is that who you really are? Is that who we really are? Mind you, this is the genius who thinks the tax break that GM listed in their IPO registration is just a made up number. This is the guy who thinks taxes and spending are the same thing. And he thinks you are too stupid to make your own decisions. $20 billion, 45 billion, debt, taxes, spending, whatever. Do you see now why we are headed for bankruptcy as a nation?