Corporate welfare at its worst
I was outraged when I first read how Congress is planning huge tax abatements for homebuilding corporations. Proposed legislation, which may become law this week, pretends to help people threatened by foreclosure by giving away $billions to big corporations. I’m glad to see other blogs, like B and B, sounding the alarm on this…
…one thing I am clear about is that giving out billions of dollars of taxpayers’ money to the housing industry that reaped in mega-profits during those years is profoundly wrong.
One locally notorious corporation, KBHome, is set to reap a windfall from this legislation. KB saw its pre-tax income jump from $154 million in 1998 to $1,374 million in 2006… a nearly 800% increase. Sure, it dropped back to a mere $768 million in 2006 and then to a loss of $1,461 million in 2007. Under the proposed legislation, KBHome will, by my calculations, receive a $565 million gift from taxpayers.
Apart from being enormously unfair, the bill seems to reward those who are most responsible for the problem, and to even exacerbate the root causes of the mortgage crisis. For instance:
- Homebuilders profited enormously from sales of houses enabled by sub-prime mortgages. Why do they need more rewards?
- It is likely that homebuilders helped create the problem by working hand-in-hand with sub-prime lenders to boost sales of their product.
- One of the stated purposes of the bill is to prop up house prices. However, astronomical prices are at the very root of the housing problem. Who can afford the median price of $400,000 or more that houses fetch in many markets?
- Where is the evidence that the “trickle-down” economics of giving billions to homebuilders will in any way help those in danger of foreclosure?
This legislation is corporate welfare at its worst.