emptystep
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- Jul 17, 2012
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This is pretty dated but I just got a email from a email list I am on. Republican will be sure to bring this up during debates spending cuts, or perhaps not.
AIG’s past losses cost taxpayers now and into the future - The Washington Post
By Elizabeth Warren, Damon Silvers, Mark McWatters and Kenneth Troske, Published: March 29, 2012
AIG’s past losses cost taxpayers now and into the future - The Washington Post
By Elizabeth Warren, Damon Silvers, Mark McWatters and Kenneth Troske, Published: March 29, 2012
When the U.S. economy was in crisis in October 2008, Congress passed a $700 billion bailout of our financial system. The Troubled Assets Relief Program (TARP) was heavily scrutinized in the media and passionately debated on Wall Street and Main Street. Congress created a bipartisan committee on which we served to oversee the funds distributed through TARP. The committee conducted dozens of public hearings and produced 30 oversight reports.
Compare that experience with a recent event. AIG, a massive insurance company that received $182 billion in TARP and Federal Reserve bailouts during the financial crisis, reported in February that it had earned $19.8 billion in the fourth quarter of 2011. Its profits increased a staggering $17.7 billion from a loss of $2.2 billion a year earlier because of special tax breaks from the Treasury Department.
Yet there was no congressional debate, no front-page story, no special oversight committee. What happened?
When filing tax returns, companies must report whether they have turned a profit or lost money. If they have made a profit, they must pay the appropriate taxes. On the other hand, if they have suffered a loss, they may carry forward that loss to reduce future tax bills.
A company that loses $100 million in one year and profits $500 million the following year will pay taxes on only $400 million of the profit, thanks to the reserved tax loss. That $100 million tax loss carry forward has clear monetary value: At todays corporate tax rate of 35 percent, a company could reduce its tax bill by $35 million.