Paterson folds like a cheap suit on Native cigarette taxes.
Along with a host of other sin/luxury taxes and fee-raisings on everyone but the very wealthy. Then again, after the Madoff Ponzi revelation, the very wealthy may be even poorer than you and me.
Let’s say you’re a successful businessman who has managed to earn $10 million this year, but who also had $10 million invested with Bernie Madoff. Obviously, you’re not happy about seeing your savings wiped out — but if I’m reading this WSJ article correctly, since your loss is a “theft loss”, the whole thing is deductible, and you basically get to keep all your income tax-free! And it gets better: because of Madoff’s high-turnover investment strategy, you probably paid as much as $500,000 in taxes in each of the past three years on fictional trading gains. All those can now be refunded as well…
On the other side of the ledger, of course, the IRS was expecting $4.4 million from you this year, but now is going to have to pay out $1.5 million to you instead. Which works out at $6 million less money available for the public fisc. I haven’t seen estimates of the total cost of the Madoff fraud to the US government, but it’s surely in the billions, and quite possibly in tens of billions.
There’s no way all this can end well.
Updated: Sean Kirst has a terrific column on Paterson and Native issues today. Go read it.