Discussion of Ramseyer and Rasmusen's "Can the Treasury Exempt Its Own Companies from Tax? The $45 Billion GM Net Operating Loss Carryforward

This provocative paper by Mark Ramseyer and Eric Rasmusen provides a useful overview of the restructuring of General Motors, and in particular highlights the political economy of the GM deal in which the U.S. Treasury wore two hats, being both an equity holder and a regulator. They focus on one of the main assets GM had on its balance sheets: its net operating losses (NOLs) valued at $45 billion. The reorganization of ‘‘Old GM’’ into ‘‘New GM’’ enabled New GM to retain the NOLs. Owning the NOLs increased the value of New GM and facilitated a restructuring deal that was favorable to the United Auto Workers (UAW) pension and health plans. However, as Ramseyer and Rasmusen argue, because of the 1986 Tax Reform Act, once the Treasury sells its holdings in New GM, the NOLs should be canceled and the value of New GM should decline dramatically.