Well what do you know? Despite the rhetoric from President Obama and Congressional Democrats, it looks like the rich are set to reap more than their fair share from the Obama-Reid-Pelosi debt spending plan:
Billionaire Paul Allen is a Microsoft cofounder, the owner of the NFL's Seattle Seahawks and the owner of the NBA's Portland Trailblazers.
And, thanks to the stimulus bill President Obama signed this week, he's also about to be as much as a billion dollars richer.
- Allen owns a majority stake in cable provider Charter Communications.
- Charter Communications this month said it would reduce its debt load by $8 billion and enter Chapter 11.
- Normally, partners at a firm like Charter Communications would have to pay taxes on the amount of debt forgiven in this process, which is, in a sense a one-time income windfall. Tax law calls it a "deemed distribution."
But under the new bill, companies like Charter Communications will be able to avoid paying taxes on forgiven debt until 2014. Even then, Paul will have until 2018 to pay it completely off.
Paul owns about half of Charter, so his share of the Charter Commuincations' $8 billion debt forgiveness is around $4 billion. At a tax rate of 25%, Allen could avoid paying as much as $1 billion in taxes until 2014, tax expert Robert Willens told the WSJ.
Not clear how a corporate tax benefit would be passed through to Paul's personal tax payments? A reader informs us:
"It's not a 'corporate tax' since it's a partnership rather than a corporation. The partners pay tax on their share of a partnerships income, which is why partnerships are referred to as "pass-through" entities."
For what it's worth, one of Paul's representatives told the WSJ the billionaire didn't lobby for the windfall. It just fell into his lap, lucky dog.
Now I'm not sure if Allen's gain comes from the same provision that Carl Levin and Debbie Stabenow inserted into the bill at the last minute -- ostensibly to help General Motors. But both companies are benefiting from more favorable tax treatment after unloading a healthy chunk of debt. It sounds like the same provision. Of course, if Congressional Democrats had actually given Americans more than 10 hours or so to read the bill and examine the provisions, we might have figured out that Levin and Stabenow were making a billionaire richer by hundreds of millions.
Having delivered one of America's wealthiest men an extraordinary windfall, will Congressional Democrats now fix this oversight? Or will they give us reason to suspect that this might have been an intentional 'oversight?' After all, the Democrats are racing to fix the mistake they made with H1Bs - apparently due to rushing the bill without appropriate review. There's no reason to expect they won't do the same to fix the Paul Allen mistake too, right?
And there's one other person who owes her constituents an explanation: Nevada Representative Dana Titus, who says she read the whole bill. I don't expect her to have guessed that Paul Allen would get a lot richer because of her vote, I just want to know how she failed to ask questions about the provision. I mean, she read the bill, right? Is she telling us she didn't even understand what she had read?