Goldman wants tax credits at its price

Steve Henn Nov 2, 2009
HTML EMBED:
COPY

Goldman wants tax credits at its price

Steve Henn Nov 2, 2009
HTML EMBED:
COPY

TEXT OF STORY

KAI RYSSDAL: Goldman Sachs is doing way better than Ford. Its quarterly profits last time ’round topped $3 billion. That has the company shopping around for ways to slim down its tax bill. The Wall Street Journal reported this morning one option Goldman’s considering — buying unused tax credits from Fannie Mae. Sounds smart. But Marketplace’s Steve Henn reports it just doesn’t look good.


STEVE HENN: At first glance this seems like exactly the kind of thing folks worry about when elected officials take over a private company: Politicians gumming up a perfectly logical business deal because of political considerations.

Mark Calabria is at the libertarian Cato Institute:

Mark Calabria: Particularly with questions of politics, there are also questions of perception where you are responding to public anger whether or not the anger is rational.

Sure, few of us are eager to see Goldman Sachs trim its tax bill. But Fannie Mae owns these tax credits it can’t use, so why not sell them?

CALABRIA: Fannie Mae is not making profits and will hence not be paying taxes, so it certainly makes sense for Fannie Mae to sell off assets it has for a tax offset.

After all, that benefits Fannie, and U.S. taxpayers basically own Fannie. So it should benefit us too, right? Well, not quite.

See, Goldman’s not offering to pay full price for this tax break. So taxpayers would lose. And there’s another wrinkle.

The Feds issue these tax credits to builders to stimulate the construction of affordable housing. Then builders sell them to banks or Fannie to finance their projects.

But Affordable Housing advocates like Judith Kennedy worry that if banks like Goldman are buying old tax credits from Fannie instead of new ones from builders …

JUDITH KENNEDY: It means there will be fewer starts, fewer construction jobs, fewer affordable rental units at a time of foreclosure crisis when we need more rather than less.

But on the upside, there would be one big tax break for Goldman Sachs.

In Washington, I’m Steve Henn for Marketplace.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.

Raise a glass to Marketplace!

Just $7/month gets you a limited edition KaiPA pint glass. Plus bragging rights that you support independent journalism.
Donate today to get yours!