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Old 02-23-2011, 10:16 AM   #1
rexster
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Default The GM Bailout: Part 2

Ok, so this sort of thing happens all the time. Subsidies are a good example, or when a state or city has it's citizens pay for a new stadium. But this sets a whole new precedent for handouts. We're all paying for (part of) a GM car without ever stepping foot in a showroom. Scrappydo, you may not want to read this one...

http://money.cnn.com/2011/02/23/news...lout/index.htm

(If anyone can easily inline quote it that would be cool...)
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Last edited by rexster; 02-23-2011 at 12:39 PM.
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Old 02-23-2011, 10:50 AM   #2
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what do you expect? its Baracks car company.......... Government Motors!
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Old 02-23-2011, 10:54 AM   #3
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NEW YORK (CNNMoney) -- The U.S. Treasury is giving up $14 billion in tax revenue because of a sweetheart deal it's giving U.S. automaker General Motors that's about to start paying off.

The company is expected to post its first profitable year since 2004 when it reports fourth quarter results on Thursday. But GM (GM) won't have to worry about being hit with a big tax bill on earnings because billions in previous losses will shelter it from taxes for years to come.

115Email Print That break will reduce GM's U.S. tax bill by an estimated $14 billion in the coming years and its global taxes by close to $19 billion, according to a company filing.

Companies typically get a break on future taxes because of past losses. But in most cases they lose that tax break during bankruptcy, because the losses are offset by the "income" the company receives from shedding its debt.

The power behind GM's throne
Since the company shed $30 billion in debt during bankruptcy, it should have wiped out most of the tax break. GM even warned it expected to lose those tax breaks shortly before filing for Chapter 11 protection.

But somehow, that never happened, and the automaker was able to keep most of its tax breaks, essentially receiving a $14 billion "gift" from the government.

While it's unclear why the automaker was allowed to carry over its losses, some experts insist that GM got preferential treatment.

"A lot of things were done differently here" said Heidi Sorvino, head of the bankruptcy practice at Lewis Brisbois Bisgaard & Smith. She said that the tax break was just another example of how GM's bankruptcy process was unlike any previous bankruptcies.

Officials with the Treasury Department and GM insist that the tax break was not special treatment and that any company going through bankruptcy could have gotten the same breaks. GM said its tax breaks were partly reduced following its emergence from bankruptcy, although it would not give details.

Why give GM a break?
One reason the government might have let General Motors claim the loss, was to reduce the perceived cost of the bailout, said Linus Wilson, finance professor at the University of Louisiana at Lafayette.

By allowing GM to carry over its losses, the reduced tax collections from the company were unlikely to be counted under most accountings.

Also, the fact that GM kept the tax breaks made its stock more attractive at the time of its initial public offering last November, Wilson said.


0:00 /2:11GM hits it big in China
"It made it easier to sell shares. It helped GM get on its feet sooner," he said.

Treasury held 61% of the stock at the time of the IPO and received $13.5 billion, or about three-quarters of the proceeds from the record first-day stock sale. So taxpayers got some benefit from the tax break.

But Wilson said the improvement in stock value due to the tax break will offset only a small fraction of the tax revenue Treasury is giving up.

"Is it worth the cost? No. It's a bad policy from a government point of view," Wilson said.
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Old 02-23-2011, 10:55 AM   #4
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But somehow, that never happened, and the automaker was able to keep most of its tax breaks, essentially receiving a $14 billion "gift" from the government.

While it's unclear why the automaker was allowed to carry over its losses, some experts insist that GM got preferential treatment.
I will never, ever buy a GM again.
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Old 02-23-2011, 10:56 AM   #5
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Default

I see the possibility for a negative tone, but I think beyond an emotional reaction this isn't shocking. Maybe I'm missing something, but isn't this all just being covered because of the looming spectre of the bailouts making it a ratings getter? I mean, I see why you'd be complaining, but companies take loopholes like this all the time, bankruptcy courts always go on a 'case by case basis' which translates to some getting better deals than others, and even individual taxpayers can sometimes get special waivers or allowances like this.
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Old 02-23-2011, 11:24 AM   #6
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I want my free Corvette. Now.
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Old 02-23-2011, 12:05 PM   #7
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Originally Posted by rexster View Post
We're all paying for a GM car without ever stepping foot in a showroom.
What does that even mean?

$14 billion / 308 million is a little over $45 per person . . .
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Old 02-23-2011, 12:27 PM   #8
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Quote:
Originally Posted by Bryan T View Post
What does that even mean?

$14 billion / 308 million is a little over $45 per person . . .
paying for a car.

look at your taxes that you paid to the government this last year, $45 of that went directly to GM.

that is what it means, doesn't even take into account the administrative costs of sending that money to GM, etc, etc, etc.
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Old 02-23-2011, 12:50 PM   #9
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i see now how certain radicals form their views.
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Old 02-23-2011, 12:51 PM   #10
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Originally Posted by mcu81 View Post
what do you expect? its Baracks car company.......... Government Motors!
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Old 02-23-2011, 12:52 PM   #11
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Quote:
Originally Posted by Bryan T View Post
What does that even mean?

$14 billion / 308 million is a little over $45 per person . . .
You're right, I edited the post, you are only paying for part of the car. I guess it's more like a citizens discount. There are far fewer than 308 million people paying taxes, the IRS processed ~140 million returns last year.
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Old 02-23-2011, 01:01 PM   #12
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This is old news. ALL the businesses that got cherry bailout deals are getting tax breaks. That's why tha banks went from losing major $$ to posting profits in the billions post bailout.

And now I'll lets for ScrappyDo and HipToBeSquare to have hissyfits....
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Old 02-23-2011, 01:04 PM   #13
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In a system of bankruptcy, this is not any different than John Doe getting tax breaks for loss income. The only difference is the government help to subsidize the funds as opposed to a bank. Oh wait, but banks charge outrageous interest rates for loans and give pennies in return for "investments".

So once you get passed your emotional withdrawals, you'll realize this is the 'system' in how it works. The difference is it's GM, so they are exposed on a larger scale and also because it's the government's involvement.

:shrug:

Quote:
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And now I'll lets for ScrappyDo and HipToBeSquare to have hissyfits....
As long as they behave (non-political comments), they can hissyfit all they want
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Old 02-23-2011, 01:06 PM   #14
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I don't know - I'm with Mr. Saabaru. Does it make sense to be paying taxes on a company that every American owns? The faster GM slides to profit-making, the faster the government gets out of owning a car manufacturer - seems like a fair trade-off. But then again, GM is embroiled in political maneuvering that it's hard to get a straight answer about anything happening with the company anyhow.

I think the bigger issue here is other multi-national companies (like Google - link) that pay ridiculously low taxes because they offshore their profits and operations to get around national tax laws. It makes sense that a company can reduce their taxes paid, but to the tune of 2.4%? Crazy...
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Old 02-23-2011, 01:13 PM   #15
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DC tells us they are making the taxpayer big profits on these loans. But if this is true why are we 14 $Trillion in debt now?
As far as taxes not owed by a company, the Gov. actually owed GE a $ Billion refund and the Bamaman hired their CEO recently.
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Old 02-23-2011, 02:12 PM   #16
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Originally Posted by manticus View Post
Does it make sense to be paying taxes on a company that every American owns? The faster GM slides to profit-making, the faster the government gets out of owning a car manufacturer - seems like a fair trade-off.
Why should GM get billions in subsidies that its competitors don't? As I understand it Ford didn't get any bailout money, but has to compete with a company that's been given billions from the taxpayers... all this does is harm the truly competitive companies by propping up the failures.
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Old 02-23-2011, 02:15 PM   #17
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Originally Posted by Masterauto View Post
DC tells us they are making the taxpayer big profits on these loans. But if this is true why are we 14 $Trillion in debt now?
As far as taxes not owed by a company, the Gov. actually owed GE a $ Billion refund and the Bamaman hired their CEO recently.

That's a tough post to respond to without making political commentary like the mods want, but I'll try. Basically, assuming GM got the lion's share of the $25 billion,

25,000,000,000
------------------ = .18%
14,000,000,000,000


That's how.

Quote:
Originally Posted by movieman View Post
Why should GM get billions in subsidies that its competitors don't? As I understand it Ford didn't get any bailout money, but has to compete with a company that's been given billions from the taxpayers... all this does is harm the truly competitive companies by propping up the failures.
Ford didn't request money. It isn't a subsidy. It's a loan. And any company that big would get the same help to survive. Debate too-big-to-fail all you like, but once you accept that as true, then this makes sense.

As opposed to some cases where individuals milked the system for millions each, the GM money went to millions of people once you consider all their employess, the employees of the suppliers, and the employees of the other car companies who can't make vehicles because their suppliers went out of business.

Last edited by MrSaabaru; 02-23-2011 at 03:08 PM.
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Old 02-23-2011, 02:47 PM   #18
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Originally Posted by Masterauto View Post
DC tells us they are making the taxpayer big profits on these loans. But if this is true why are we 14 $Trillion in debt now?
As far as taxes not owed by a company, the Gov. actually owed GE a $ Billion refund and the Bamaman hired their CEO recently.
Sorry, you expect returns from loans in the billions to resolve a debt in the trillions?
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Old 02-23-2011, 07:22 PM   #19
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Originally Posted by mcu81 View Post
what do you expect? its Baracks car company.......... Government Motors!
Get it right. It's Tim Geithner's car company.

GM = Geithner Motors
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