Johnson's "don't cost taxpayers a penny" Loan Actually Cost Tax Payers 45.5 Million Pennies | WisCommunity

Johnson's "don't cost taxpayers a penny" Loan Actually Cost Tax Payers 45.5 Million Pennies

In yet another ridiculous claim, Ron Johnson said yesterday that a bond loan his company got where the lender got over a million in interest income at a basement-bargain tax rate of zero "didn't cost taxpayers a penny." 

This is simply not true.

For the sake of argument, let's conservatively estimate that Johnson got a 20 year bond loan at 3 percent.  On a four million dollar loan, that would generate about 1.3 million in interest income for the lender. Under normal circumstances, this income would be taxed at the corporate income tax rate of 35% and brought in $455,000 dollars in tax revenue.

This $455,000 is what is officially referred to as a "tax expenditure." 

What are “tax expenditures”?  They are rarely mentioned, but they are just like any other kind of government spending and do, in fact, "cost the taxpayers a penny."  The Joint Committee on Taxation defines tax expenditures as “any reductions in income tax liabilities that result from special tax provisions or regulations that provide tax benefits to particular taxpayers.”

Tax expenditures are no different than other government spending, because the end result is the same. For example, if a kid at a lemonade stand is forced to give all kids with red hair free lemonade, that costs the kid runnng the lemonade stand money in lost revenue and is just like any other expense.  The same is true for taxes – if a taxpayer get's a discount or doesn't have to pay taxes at all, it has the same budget impact at the end of day as other government expenses.

Although, to be fair, Johnson was technically correct:  the loan his company did not cost the taxpayers "a penny"-- more like 45.5 million pennies.

In addition, once again, Ron Johnson is attempting to kill the story with an absurd Nathan Thermesque "I never said that" defense.  In an a WisconsinEye inverview with Steven Walters, he was asked if he mispoke by saying that he has "never lobbied for special treatment or for a  government payment" and offered this silly subterfuge in response:

Nathan ThurmThe quote I made is true. I have never lobbied for any special treatment.  The industrial revenue bond... first of all, I never lobbied for it.  If there was any lobbying it was the city lobbying my brother-in-law to locate in Oshkosh-- by the way that decision was made before I ever  joined the company.  But, also for special treatment, this isn't special treatment at all.  These were widely available and widely used by start-up companies... offered by, you know, all ki nds of cities to do this.

 

Yes Ron, nothing to see here:   Cities hand out four million dollars, at nearly a half-million in taxpayer expense  all the time.

Published

August 31, 2010 - 11:48am

Author

randomness