By Bill Van Auken
13 November 2008
An extra-legal measure quietly enacted by the Treasury Department in the shadow of the $700 billion Wall Street bailout package will hand the country’s biggest banks another $140 billion windfall, the Washington Post reported this week.
In a five-sentence memo issued on September 30, on the eve of the first House vote on the bailout bill, the Treasury Department unilaterally overturned a two-decade-old tax law passed by Congress. The measure denied profitable companies the ability to shield their profits from taxation by buying up bankrupt firms as shell companies and using their losses as a tax dodge.
The law, section 382 of the tax code, was enacted by Congress in 1986. It was aimed at curtailing what was seen as an egregious corporate scamming of the tax system. The Republican right and corporate lobbyists have been pushing for the measure’s repeal or amendment ever since.
Treasury Department spokesman Andrew DeSouza defended the action, telling the Post that the administration had the power to overturn a law passed by Congress as part of its mandate to interpret the tax code. He further insisted that the action was a necessary means of rescuing the banks from the financial meltdown.
“This is part of our overall effort to provide relief,” he said.
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