Here’s a great idea. At a time when the debt of the country is exploding exponentially and we are running budget deficits that would be the envy of any banana republic, let’s give favorable tax treatment to for-profit prison companies. This is a growth industry that we should all support, who cares that these United States has 5% of the World’s Population, yet 25% of its Prisoners. May as well try to improve on that; just imagine how high we could get the prison population if we actually put a banker in jail? From Forbes:
In early January 2013, both Corrections Corporation of America (CCA) and the GEO Group – the nation’s two largest private prison companies that control a combined 75 percent of the for-profit prison market in the United States – announced that they had each completed preliminary plans to convert their corporate structure to a Real Estate Investment Trust (REIT).
REITs are designed for companies that primarily invest in and generate revenue from real estate holdings, such as hotel chains; like other publicly-held corporations they trade on the stock market. There are special tax advantages for REITs, which generally pay no income tax. They also must distribute at least 90 percent of their income to shareholders in the form of dividends.
CCA is expected to make an initial estimated dividend distribution of $700 to $750 million to shareholders once it converts to a REIT, which it described as “a complex process.” In a May 2012 press release, the company said the benefits of the conversion would include “an increase in long-term shareholder value, a more tax-efficient corporate structure with higher cash flow, and a lower cost of capital, while maintaining access to ample capital to fund future growth.”
Regardless, the prospect of CCA and GEO Group converting to REITs has piqued the interest of investors, and both companies’ stock prices have increased as a result. In early January 2013, CCA’s stock hit a 13-year high, trading at up to $37.25 per share, while GEO traded as high as $32.24 per share in December 2012 after announcing its $350 million special dividend distribution.
So the biggest for-profit prison company in America is hitting new highs on the stock market. Is this something to cheer about? No, and it proves the point in my piece from yesterday The Stock Market: Food Stamps for the 1%.
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