Taxes Made Simple

American Express made the move yesterday to become a bank holding company, rather than an independent credit card company. Why the change? As a bank holding company, American Express is now eligible for low cost financing from the Fed as a result of the bailout package. What makes this situation unique is that Amex wasn't in danger of collapse. They're just doing it to take advantage of low-interest money in order to increase their profits.

This move has garnered its share of criticism. Pundits are saying that Amex is taking advantage of the American people. For example, over the The Money Hawk, Kevin says he's outraged. He urges people to stop using their Amex Cards, and businesses to stop accepting them as a form protest.

I'm a big fan of Kevin's blog. And I see where he's coming from. American Express is using taxpayer dollars in order to jack up their profits. He's right.

My question is this: Can we blame them?

The way I see it, Amex management has a responsibility to the shareholders to do what it can to maximize profits. (I know, I know. There are limits to this responsibility. For example, physicallly harming someone in order to improve profits is still not warranted.)

The argument that Kevin makes is that we, the taxpayers, lose out. We foot the bill. And yes, we do.

But how is that any different from a business claiming a perfectly legitimate business deduction? In that situation, the business's tax bill is decreased, leaving the rest of the American public to pay a higher percentage of the bill for the services our government provides.

As far as I can tell, this situation is exactly the same: A business's management is taking an entirely legal action to lower its operating costs. This is precisely what they're paid to do! Even when it means that somebody else ends up having to pay more.

If we want to point the finger...

Let's point it at ourselves. We (or more precisely, our elected representatives) are the ones who made this sort of thing legal. If we don't want businesses do to something, let's not pass a law that explicitly says they can do it.