Stimulus Plan Repeals Financial Sector Huge Tax Breaks

Well, this went sliding by. Obama's stimulus plan repeals tax breaks given to banks for mergers and acquisitions earlier this year. The repeal only affects future mergers and acquisitions.

To address the financial industry meltdown, the Treasury Department last fall issued a new tax rule to make it more attractive for healthy banks to buy troubled ones hit hard by the mortgage crisis. It allowed healthy banks to avoid billions of dollars in taxes by offsetting their profits with the losses of the banks they acquire.

Before, the merged bank could write off only a limited amount of the losses. Removing much of the restrictions enabled the acquiring banks to make huge reductions in their tax liabilities.

In some cases, the tax breaks exceeded the cost of acquiring the troubled banks. Wells Fargo & Co., for example, made a bid to acquire Wachovia Corp., just days after the change in tax rules was issued Sept. 30. Wells Fargo paid $14.8 billion in a stock deal to buy Wachovia, but stands to reap about $20 billion in additional tax savings from the transaction, according to analyses by private tax experts.

Pittsburgh-based PNC Financial Services Group Inc. reduced its taxes by about $5.1 billion through its takeover of National City Corp., according to the analyses

There are now $275 billion in tax cuts in Obama's stimulus plan. One group mentioned is low income families. Now this is quite interesting because most low income families do not pay income taxes already. Anyone with details please post a comment.

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