The federal government quietly agreed to forgo billions of dollars in potential tax payments from Citigroup as part of the deal announced this week to wean the company from the massive taxpayer bailout that helped it survive the financial crisis.
The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.
While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.
Look, it's all politics anyway, this wrestling over who gets tax breaks and who doesn't. This is a clear example that Obama recognizes that targeted breaks should go to those who are actually paying taxes so the game is conceded.
But the game can still be easily, and better, played. Why not just give a refundable tax credit to everyone who files a tax return? Want to still play the "don't-give-tax-breaks-to-the-rich" game? Fine. Reduce the credit, but don't phase it out entirely, based on income. That way the money goes directly into the hands of people who can then decide best on how to spend it.
Oh, but then there wouldn't be any opportunities for graft, would there?
Never mind.
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