Washington, DC. -"
DEMOCRATS and Republicans in the Senate have joined hands and are marching to rescue the U.S. housing market...But the mere fact that both parties agree on 'principles' to deal with
the mortgage problem does not guarantee that those principles are valid...We refer to the awful idea of extending the tax code's current 'carryback' provisions for net operating losses...Under current law, companies can use net operating losses to offset the
taxes they owe on profits made in the two previous years...The Senate is considering extending this 'carryback' period from two
years to four, meaning that companies that lose money in 2008 and 2009
could get money from Uncle Sam on the basis of profits they made way
back in the first half of this decade.
And who would be the biggest beneficiaries of this new tax break
(estimated cost: $6 billion)? Well, a good guess is the folks who made
money hand over fist during the housing bubble but have been losing
money at the same rate since the subprime mortgage market collapsed
last year: the home construction industry and Wall Street firms such as Merrill Lynch (MER) and Citigroup (C). In other words, this provision is a large, unwarranted bailout for the
very industries that helped send the U.S. economy on its scary
roller-coaster ride in the first place. Business lobbies failed to get
the carryback provision written into the fiscal stimulus plan that
sailed through Congress in February...It deserves to die again."
April 3, 2008