Throwing Money At Those Who Don’t Deserve It?
by Tim Manni
-One of our dedicated readers Chris passed this article along — he thought our other readers would find it interesting-
When a bill that included the extensions of both the homebuyer tax credit and unemployment benefits was circulating through Washington, most of chatter surrounding the legislation had to do with the former rather than the latter. However, there was another aspect of the bill that no one seemed to hear very much about: “a tax break that lets big companies offset losses incurred in 2008 and 2009 against profits booked as far back as 2004,” writes the New York Times.
Who stands to reap the greatest reward from the tax breaks which are estimated to be worth upwards of $33 billion? Some analysts say home builders.
Gretchen Morgenson of the New York Times sees this as just one more example of how the government is getting it all wrong:
This is getting to be a habit: companies that participated on the upside and are now reaping rewards from the taxpayers on the downside. The banks that underwrote so many dubious loans, for example, received government aid to get them lending again. Unfortunately, that hasn’t been the result.
But dropping helicopter money on the home builders — the folks who massively overbuilt in community after community — seems decidedly less urgent (unless you are one of these companies, of course). Given that the supply of housing far outstrips demand, it is unlikely that these companies will use these tax breaks to hire workers (unless they go into a completely new line of business).
Will this extra money at least be used to generate job growth? From the responses we’ve read so far, the answer seems to be “no.” The consensus is that job growth is more closely conjoined with overall economic recovery, not cash reserves.
The tenor from the builders is that the money will be used to buy more land, support their current operations “and, when market conditions improve, fund future growth and expansion,” said Caryn Klebba, a spokeswoman for Pulte Homes.
Unfortunately, this seems to be another example of an age-old phenomenon: Good Things Come to Those With Lobbying Power.
Securing this tax break was a top priority for home builders, lobbying records show. The Center for Responsive Politics reports that through Oct. 26 of this year, home builders paid $6 million to their lobbyists. Last year, the industry spent $8.2 million lobbying.
Much of this year’s lobbying expenditures were focused on arguing for the tax loss carry-forward, documents show.
Is this an example of Washington throwing money at those who don’t need or deserve it? We hope their reasoning wasn’t that it would spur job growth, since some of the big builders have already made it clear that it won’t.
Next month, the president’s job summit better drum up better ideas to stem job loss besides tax breaks, for this is an example that throwing money at an issue can’t solve the problem.
