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> So Goldman Sachs will get a government subsidy for defrauding the American public. The government is literally subsidizing their fraud with taxpayer money. T

by jonknee 11y ago

> So Goldman Sachs will get a government subsidy for defrauding the American public. The government is literally subsidizing their fraud with taxpayer money. That's not a fair shake at how deductions work. They aren't getting paid a subsidy, they are paying less tax because of higher expenses. No money is going from "the taxpayer" to Goldman. The government wanted it this way because they can point to a bigger number and get money to where they want it without having to get Congress to do anything (which they won't).

karmelapple 11y ago
> They aren't getting paid a subsidy, they are paying less tax because of higher expenses. They broke the law, but get to claim it on their taxes as an expense. That's like deducting my speeding ticket payments as an expense on my tax return.
- jandrese 11y ago
  I'm sure you wouldn't be the first person to try that, especially if he tries to justify the speeding as a business need. The difference of course is that you would get audited and maybe go to jail. Goldman Sachs's friends in government have written the law such that it's not even illegal for them.
  - karmelapple 11y ago
    As the other replies indicate, it's less about them writing the law in this instance, but rather having the government prosecution be complicit in boosting the dollar number they can publicize in exchange for a lower overall cost to the company. Both sides win in this arrangement, even though I'd argue most Americans do not want Goldman Sachs to do any kind of winning as a result of this very necessary legal action against them.
- jonknee 11y ago
  It would be more similar to having the option of paying a higher total fine, but with a portion of it in the form of a charitable donation (which is deductible). Higher total dollar amount, but the same as an overall lower fine that wasn't deductible. The government gets a big juicy number which is apparently what they wanted (in addition to being able to control where the money goes without having Congress involved).
  - karmelapple 11y ago
    I - and I think many others - feel that these companies should get negative consequences from their behavior. If the government is just inflating the number artificially, and actually resulting in something that benefits the group that did bad things... seems like most people would be pretty unhappy knowing that. Who do I talk to about getting that angle on this story out there? :)
- CPLX 11y ago
  It's actually not quite like that. Payments of fines to governments are not deductible, neither for you or Goldman. Payments of compensation and restitution are. For what it's worth there is some vague consistency on this issue.
  - karmelapple 11y ago
    Interesting - I didn't know that, and I think the penalty levied here should have been levied as a fine, rather than compensations or restitution. Where did the legal precedent or IRS rule be set that restitution should be a deductible business expense? If you need to pay compensation or restitution, it means you did something you should not have done as decided by a judge/jury, so having it be treated more like a "penalty" seems prudent to me.
athenot 11y ago
But the point remains that their tax liability shouldn't decrease because of a fine due to wrongdoing. This is money that would have gone to the taxpayer in the form of benefits like security, education, infrastructure. Contrast the corporation with the individual: any fines you may get from convictions don't reduce your own income tax liability…
- jonknee 11y ago
  This was a negotiated settlement and apparently the government preferred getting a higher total and more money for relief than a lower total that was not tax deductible. It's not hard to see why.
- Vraxx 11y ago
  They don't deduct the fine from their tax liability, they deduct the restitution payments from their tax liability. They are essentially being forced to "donate" $1.8B to those they wronged by their actions. Imagine if an individual were forced to make a charitable donation (in addition to being fined a certain amount) as a part of the the ruling. Despite being forced, it's still a tax deductable donation.
barrkel 11y ago
It would be nice to pay parking tickets etc. out of pre-tax income rather than post-tax, wouldn't it? This logic essentially categorizes government fines as a cost of business, rather than a punishment; as an input to the sausage, as it were, rather than a reduction in profits.
- jonknee 11y ago
  Sure, but they agreed to pay a bigger fine because portions of the relief was deductible. The government wanted as big of a number as possible for their press release. The general public will go "wow that's a lot" while the investors will do the math and move on with their day.
jsprogrammer 11y ago
I think the problem here is considering penalties an expense.
- jonknee 11y ago
  The actual penalty portion isn't an expense, but the full number includes billions of other stuff that is ($2.4b in "consumer relief"). Goldman essentially gets to write off the community service portion of their punishment. On the flip side, the government gets to brag about such a large settlement. It's not a sketchy deal or actually even unusual.
  - Vraxx 11y ago
    There's also the benefit of not having to do any appropriation of funds in congress for the consumer relief portion to actually be paid to the consumers that it is relieving. No possibility of that money not going directly to what it is being extracted from Goldman Sachs to do.
  - jsprogrammer 11y ago
    >The actual penalty portion isn't an expense... >...gets to write off the community service portion of their punishment. If it is a punishment (a bank handing out money counts as community service in these courts?) it is a penalty.

by jonknee 11y ago

karmelapple 11y ago

> They aren't getting paid a subsidy, they are paying less tax because of higher expenses. They broke the law, but get to claim it on their taxes as an expense. That's like deducting my speeding ticket payments as an expense on my tax return.

jandrese 11y ago
I'm sure you wouldn't be the first person to try that, especially if he tries to justify the speeding as a business need. The difference of course is that you would get audited and maybe go to jail. Goldman Sachs's friends in government have written the law such that it's not even illegal for them.
- karmelapple 11y ago
  As the other replies indicate, it's less about them writing the law in this instance, but rather having the government prosecution be complicit in boosting the dollar number they can publicize in exchange for a lower overall cost to the company. Both sides win in this arrangement, even though I'd argue most Americans do not want Goldman Sachs to do any kind of winning as a result of this very necessary legal action against them.
jonknee 11y ago
It would be more similar to having the option of paying a higher total fine, but with a portion of it in the form of a charitable donation (which is deductible). Higher total dollar amount, but the same as an overall lower fine that wasn't deductible. The government gets a big juicy number which is apparently what they wanted (in addition to being able to control where the money goes without having Congress involved).
- karmelapple 11y ago
  I - and I think many others - feel that these companies should get negative consequences from their behavior. If the government is just inflating the number artificially, and actually resulting in something that benefits the group that did bad things... seems like most people would be pretty unhappy knowing that. Who do I talk to about getting that angle on this story out there? :)
CPLX 11y ago
It's actually not quite like that. Payments of fines to governments are not deductible, neither for you or Goldman. Payments of compensation and restitution are. For what it's worth there is some vague consistency on this issue.
- karmelapple 11y ago
  Interesting - I didn't know that, and I think the penalty levied here should have been levied as a fine, rather than compensations or restitution. Where did the legal precedent or IRS rule be set that restitution should be a deductible business expense? If you need to pay compensation or restitution, it means you did something you should not have done as decided by a judge/jury, so having it be treated more like a "penalty" seems prudent to me.

athenot 11y ago

But the point remains that their tax liability shouldn't decrease because of a fine due to wrongdoing. This is money that would have gone to the taxpayer in the form of benefits like security, education, infrastructure. Contrast the corporation with the individual: any fines you may get from convictions don't reduce your own income tax liability…

jonknee 11y ago
This was a negotiated settlement and apparently the government preferred getting a higher total and more money for relief than a lower total that was not tax deductible. It's not hard to see why.
Vraxx 11y ago
They don't deduct the fine from their tax liability, they deduct the restitution payments from their tax liability. They are essentially being forced to "donate" $1.8B to those they wronged by their actions. Imagine if an individual were forced to make a charitable donation (in addition to being fined a certain amount) as a part of the the ruling. Despite being forced, it's still a tax deductable donation.

barrkel 11y ago

It would be nice to pay parking tickets etc. out of pre-tax income rather than post-tax, wouldn't it? This logic essentially categorizes government fines as a cost of business, rather than a punishment; as an input to the sausage, as it were, rather than a reduction in profits.

jonknee 11y ago
Sure, but they agreed to pay a bigger fine because portions of the relief was deductible. The government wanted as big of a number as possible for their press release. The general public will go "wow that's a lot" while the investors will do the math and move on with their day.

jsprogrammer 11y ago

I think the problem here is considering penalties an expense.

jonknee 11y ago
The actual penalty portion isn't an expense, but the full number includes billions of other stuff that is ($2.4b in "consumer relief"). Goldman essentially gets to write off the community service portion of their punishment. On the flip side, the government gets to brag about such a large settlement. It's not a sketchy deal or actually even unusual.
- Vraxx 11y ago
  There's also the benefit of not having to do any appropriation of funds in congress for the consumer relief portion to actually be paid to the consumers that it is relieving. No possibility of that money not going directly to what it is being extracted from Goldman Sachs to do.
- jsprogrammer 11y ago
  >The actual penalty portion isn't an expense... >...gets to write off the community service portion of their punishment. If it is a punishment (a bank handing out money counts as community service in these courts?) it is a penalty.