Fallout: The Financial Crisis

Income-tax relief could help business

Mitchell Hartman Jan 21, 2009
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Fallout: The Financial Crisis

Income-tax relief could help business

Mitchell Hartman Jan 21, 2009
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Scott Jagow: A lot of American companies probably wish they had a do-over. If they could go back to the boom times, maybe they wouldn’t borrow so much money. Because now, they don’t have the profits to pay it back. Today, the U.S. Chamber of Commerce will ask for some mercy — income tax relief so that businesses can get out of their debt and spend again. Mitchell Hartman has more on that.


Mitchell Hartman: Since the loans are shaky, banks have discounted them as much as 50 cents on the dollar. At those bargain prices, companies may have the cash to buy those loans back and retire the debt. But they’d face a big income-tax hit on the money they saved through refinancing.

Economist Ev Ehrlich served in the Clinton Administration. He’s studied the plan backed by the U.S. Chamber of Commerce to temporarily waive the income tax on these buybacks.

Ev Ehrlich: This proposal says, let the company go back to the bank and say we’ll take an uncertain, risky asset off your hands, and give you a certain, clear, and liquid one: cash. And we’ll take the debt back, and we’ll save ourselves the interest.

The Chamber of Commerce calls the plan the “lynchpin” of any economic stimulus for business.

I’m Mitchell Hartman for Marketplace.

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