Sunday, October 19, 2008
Wall Street Journal: Obscure Tax Breaks Increase Cost of Financial Rescue; IRS and Treasury Take Series of Steps for Investors Caught Up in Crisis, Sparking Complaints of Overstepping Authority, by Jesse Drucker:
The $700 billion financial rescue package approved by Congress to shore up banks also carries a parallel bailout of the financial sector and other industries through a series of obscure tax breaks.
Operating mostly under the radar screen, Congress, the Treasury Department and the Internal Revenue Service have been rolling back various provisions of the tax code to help out industries and investors caught up in the turmoil.
The most costly -- and most controversial -- of the moves provide billions in extra tax relief to big banks such as Wells Fargo & Co. and Spain's Banco Santander SA. Another change gives aid to investors stung by the auction-rate securities meltdown. Still another shift relaxes tax rules to help big multinationals bring back cash from overseas. ...
Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, has complained about the sudden loosening of the rules. "Congress should have been informed and consulted before Treasury took such an extraordinary action that likely will add billions of dollars to the deficit," he said.
Some experts argue that the Treasury has effectively shifted from administering parts of the tax code to changing tax laws on its own. "It doesn't seem possible that they have this authority," said Robert Willens, an independent corporate tax analyst.