Interesting editorial in the WSJ re: the GM bailout.
Everybody knows the GM’s stock holders were wiped out, that secured debt holders were subordinated to the unsecured UAW claims and haircut to about 50 cents on the dollar, and that “New GM” stock is trading about 25% below its IPO price — leaving taxpayers with a $15 billion book loss on Treasury holdings.
What most folks don’t know is that GM got a special deal that rolls old GM’s $45 billion in accumulated tax losses into new GM. That’s usually not allowed when restructuring companies — as a means of stopping companies from just acquiring losses from other companies as a tax dodge.
Bottom line:
In a 2011 working paper, J. Mark Ramseyer of Harvard and Eric Rasmusen of Indiana University argue that by manipulating corporate tax rules by fiat, “Treasury gave the firm (and its owners, including the UAW) $18 billion more in assets.”
The WSJ observed:
Mr. Obama crowed yesterday about GM’s “highest profits in its 100-year history.”
We’d be interested to hear how its effective tax rate compares with Warren Buffett’s secretary’s.
Hmmm ….
