Bill Would Allow States to Tax GSEs

States would be permitted to tax the enormous profits earned by Fannie Mae and Freddie Mac under legislation introduced May 15 by Rep. Pete Stark, D-Calif.The two government-sponsored enterprises are "profitable enough to provide a steady stream of home loans without the state tax-exempt status that was once needed to draw investors," the lawmaker said. The two companies earned some $10 billion in combined profits in 2001 and are ranked on Fortune magazine's list of most profitable companies. Though they pay federal taxes, they do not pay state or local corporate income taxes. States would not be required to assess Fannie and Freddie under Rep. Stark's Secondary Mortgage Market Fair Competition Act, but they would be allowed to if they so desire. And the California Democrat left little doubt that, given a choice between cutting basic services or taxing two companies that are "amassing billions in profits each year," they would choose the latter. He said the two GSEs are successful enough that they no longer need to be sheltered by Congress. The 16-term lawmaker from Freemont, Calif., is the second-highest-ranking minority member of the House Ways and Means Committee.