JP Morgan’s potential $US13 billion settlement with the government hasn’t been finalised yet, but already politicians and public interest groups are crying foul because up to $US9 billion of the settlement is tax deductible.
That means the bank could write $US3 billion off their corporate tax bill as a business expense, according to Americans for Tax Fairness and the U.S. PIRG, the federation of state Public Interest Research Groups.
On Monday, Americans for Tax Fairness and the U.S. PIRG presented Congress with a 160,000 signature petition asking the Justice Department to add a provision to the settlement that would stop this from happening, and a bunch of Congressmen have jumped on board, calling U.S. Attorney General Eric Holder to do something.
“Taxpayers should not be subsidizing more than $US3 billion of JPMorgan’s penalties at a time when federal priorities like education, clean energy, infrastructure and other job creating investments are facing budget cuts. This settlement has to be meaningful if it is going to deter future abuses. I join the 150,000 people today who are urging Attorney General Holder to stand firm and fight for taxpayers and middle class families,” said Senator Mazie K. Hirono (D-HI).
Hirono is the lead signatory on a letter sent to the Justice Department by five Senators — Elizabeth Warren (D-MA), Bill Nelson (D-FL), Martin Heinrich (D-NM), and Sheldon Whitehouse (D-RI) — urging the DOJ to “ensure the final settlement is clear about the tax treatment of the entire settlement amount and explicitly prohibits the tax deductibility of such payments.”
And lest you think this idea has no bipartisan report, Senator Chuck Grassley (R-IA) is in the mix too.
“A settlement has to mean something or it won’t have the deterrent effect it’s supposed to have,” says Grassley. “Federal agencies should do everything they can in negotiating settlements to limit deductions.”
At the same time, Congressman Peter Welch (D-VT) has introduced a bill to the House that would end the corporate tax deductibility of all legal settlements, it’s called The Stop Deducting Damages Act(HR 3445).
He also sent a letter to Jamie Dimon — here’s a snippet (you can read it in full here):
It was the taxpayer who initially funded the bailout of Wall Street. It was the taxpayer who continues to endure the consequences of the worst recession since the Great Depression. The taxpayer should not, therefore, be required to contribute a nickel towards the fines imposed for conduct that got America into this mess in the first place.
So in case you’re wondering why it’s taking JP Morgan so long to cough up $US13 billion — this could be one of the snags.