I just don't get it. When Congress approves gifts worth billions of
dollars to people who don't deserve a dime, why isn't it front page
news?
On Nov. 6, when President Obama signed the Worker, Home-ownership
and Business Assistance Act of 2009, he extended unemployment benefits
and renewed the first-time home-buyer tax credit for a while, but
hidden deep inside the law was a tax break for businesses that did well
in the boom years -- and the resulting refund-checks will be huge.
The tax break would help struggling businesses, Obama declared, but
the act actually affects big companies as well as small. Businesses are
allowed to offset losses incurred in the bad years of 2008 and 2009
against profits booked as far back as 2004. Those with the biggest boom
followed by the biggest bust are exactly the companies like to benefit
the most. Among them, you guessed it, home-builders, exactly the folks
who overbuilt and over-lent us into a mortgage and credit meltdown.
Companies like Pulte Homes will receive refunds exceeding $450
million -- but Pulte's hardly in need. The company has $1.5 billion in
cash and cash equivalents on its balance sheet. Standard Pacific, which
is poised to reap cash refunds of $80 million has $523 million,
according to the New York Times.
There's no requirement that companies claiming the tax refunds are
in need of course, or that they will create jobs with the cash.
Demanding no quid pro quo worked so well for banks that Congress is
trying a repeat with builders.
Will the builders nonetheless build with the bonanza? Not likely. In building, the problem's not supply, it's demand.
What the companies are likely to do is keep on lobbying. Gretchen Morgenson reports
that "Securing this tax break was a top priority for home builders. "
According to lobbying records, home builders paid $6 million to their
lobbyists through the end of October this year, "much of focused on
arguing for the tax loss carry-forward." Pulte Homes for example, spent
$210,000, -- for which it'll receive $450 million in refunds.
"The problem here is that this public policy decision was made with
little to no input from the public." Reports the excellent Morgenson in
her column, in the business section, Sunday.
But her own paper could help solve that problem. How about reporting on this -- before it's a done deal -- on the front page?