H.R. 3221, the housing bailout bill that President Bush signed on July 23, 2008 is a $300 billion handout to home builders, mortgage companies who made bad loans and borrowers who took loans for homes they could not afford.  The bill was exacerbated by the last-minute inclusion of a potential $25 billion (or more) taxpayer subsidy for the nation’s two mammoth government-sponsored enterprises, Fannie Mae and Freddie Mac.  Despite claims that the money would not be used, the taxpayers may be on the hook sooner rather than never.  It turns out that there were other nasty surprises tucked into the bill as well.

One such provision was supported by Alabama Sens. Richard Shelby (R) and Jeff Sessions (R), as well as the entire Alabama House delegation.  It bestows a $300 million tax break on a foreign privately-owned rail car manufacturer.

In the aftermath of Hurricanes Katrina and Rita, Congress enacted the Gulf Opportunity Zone Act of 2005 (GO Zone) to grant tax incentives to individuals and businesses who make “qualified investments,” mostly in Alabama, Louisiana and Mississippi, in order to facilitate rebuilding efforts.  GO Zone incentives are administered through the states and are supposed to be allocated in counties which suffered the most damage.  Alabama’s portion of GO Zone tax breaks are capped at $2.1 billion overall.

Instead of focusing the money close to the coast where it is most needed, the Alabama delegation expanded the GO Zone to Colbert County, which is 300 miles from Gulf and had not previously been eligible for the tax incentives.  The primary beneficiary of the tax incentive being made available through congressional largess is National Steel Car, a Canadian rail car manufacturer.  The total cost of the facility is $350 million.

In order to close the deal with National Steel Car, Alabama state officials offered a $109.7 incentive package and a promise to obtain the GO Zone expansion for Colbert County and the concomitant $300 million tax break that came along with it.  Without it, the state would have had to ante up another $13 million of its own for the company itself and local officials would have been on the hook for another $2.5 million for land acquisition.

To add insult to injury, four U.S. rail car companies, which have been forced to lay off workers in the economic downturn, protested the provision, to no avail.  House Financial Services Committee Chairman Barney Frank (D-Mass.) also objected, but only faintly.

After President Bush signaled his desire to sign H.R. 3221 as quickly as possible, it was on a fast track for passage.  In the end, the housing bill railroaded taxpayers in more ways than one.