In my column on Thursday, I included the following observation about some Wall Street products:
At their worst, they boiled down to an offer to charge a customer a dime for letting him evade 20 cents in taxes. Such transfers do nothing for the larger society.
The ultimate in that may have been reached. The Wall Street Journal reports today that Goldman Sachs is trying to arrange to buy tax credits from Fannie Mae. Obviously, it would buy them at a discount.
Goldman, you may recall, was saved with taxpayer money when the panic spread last year. A naïve person might think such a company would see a patriotic virtue in paying taxes.
Fannie Mae is currently a ward of the government. So this boils down to a proposal to pay Uncle Sam perhaps 15 cents to avoid paying 20 cents to Uncle Sam. The gall involved in even proposing such a thing is awesome.
It also points out one reason companies pay so little in taxes. These tax credits exist as a nonbudgetary way of stimulating investment in low-income housing. It would be a lot cheaper for the government to simply subsidize that, but instead it offers tax credits so there is no “expenditure” for foes of big government to criticize.
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Floyd Norris, the chief financial correspondent of The New York Times and The International Herald Tribune, covers the world of finance and economics.
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