What are unions for? Note Teamsters Local 707, President is a Suffolk County Legislator, who takes his money from Nassau County Public employees of Nassau OTB. Makes the Taliban look straight?
Tax the rich.
What
do you think a Republican congressman would say about a tax proposal
that contained numerous provisions to take away benefits from some
taxpayers simply because they made too much money?
The proposal in question would force some high-income taxpayers to pay taxes on municipal bonds
that have so far been tax-free. They would lose the tax break available
to others when they sell their homes. They would have to pay taxes on
the value of their employer-provided health insurance and would lose the
deduction for contributions to 401(k) retirement plans.
Furthermore, everyone who has taken advantage of the “carried interest” tax dodge that lets private equity
partners treat their pay as capital gains would lose it. That provision
allowed Mitt Romney to pay an effective tax rate of less than 15
percent on millions of dollars.
This
particular proposal would also hit high-income taxpayers by phasing out
some deductions and other tax provisions for couples making more than
$450,000. Other benefits would vanish for those making more than
$517,500.
The
interplay of all these complicated provisions would — for a few
taxpayers — lead to marginal tax rates as high as 67 percent.
If this were President Obama’s tax proposal, you can be assured that there would be cries about “class warfare.”
But it’s not.
Instead,
it describes some of the proposals in the Tax Reform Act of 2014
proposed last week by the chairman of the House Ways and Means
Committee, Representative Dave Camp, a Michigan Republican.
The
Camp proposal seems unlikely to go anywhere, in no small part because
the House Republican leadership has gone out of its way to distance
itself from the proposal, praising Mr. Camp for his diligence and
calling it worthy of consideration but not getting close to an
endorsement.
The
proposal is fascinating, as much for what it does and does not contain
as for its inability to accomplish either of Mr. Camp’s two stated
goals. He promised a greatly simplified tax code but instead clutters it
up with detailed ways to only partly confront assorted tax advantages
that were handed out to various groups over the years. The summary of the bill takes up 194 pages.
He
wanted to reduce the top tax rate to 25 percent but could not do that
without taking away many more tax goodies than he does. So he has a
special 35 percent bracket that applies to couples with incomes of more
than $450,000 but picks and chooses what income above that level is
taxable. Municipal bond interest can be taxed at a 10 percent rate, but
there is no extra tax on manufacturing income.
There
is also a special tax on big banks. That is something you might expect
from a liberal Democrat, and there are reports that some Wall Street
organizations are so angry they are threatening to withhold donations to
Republican candidates this year.
There
was a time when any proposal by the Ways and Means Committee chairman
would be viewed as a blueprint for legislation that would most likely
become law. In those days, chairmen sometimes seemed to serve forever,
and they knew how to work across the aisle to get deals done.
Wilbur
Mills, an Arkansas Democrat, was committee chairman from 1958 to 1974,
during five presidential administrations. In the press, it often sounded
as if his title were truly “Powerful Chairman.” He had the power to
grant, or withhold, tax provisions that individual members sought for
favored constituents. A legislator who offended him might face problems
for years.
Only scandal could bring him down, and it did. There were two episodes involving alcohol and a stripper who went by the name of Fanne Foxe, and he was forced to give up his chairmanship.
Mr.
Camp, on the other hand, is a lame duck. Next year, under the rules of
the House Republican Caucus, he will have to step down after four years
as chairman. I had hoped that his eagerness to accomplish something
would overcome inertia, but it appears it will not. The last thing the
House Republican leadership wants is votes that will call attention to
splits within the party.
Seniority
no longer calls the shots when new chairmen are named, and the
campaigning to replace Mr. Camp is already underway. One man who wants
the job is said to be Paul Ryan, the Wisconsin Republican who was Mr.
Romney’s running mate.
In
the talk about tax reform, there has been a general agreement that top
rates should be reduced and loopholes closed, something Mr. Ryan has
loudly endorsed. But there has been a great reluctance to get specific.
This proposal does get specific, and in doing so it makes clear that
much more needs to be done to reduce tax preferences and loopholes if we
want both to finance the government and to lower tax rates.
Within
the community of tax policy wonks, the Camp proposal has garnered
admiring reviews just by providing something to analyze. “In a world
where policy makers actually wanted to make policy, it would be a good
starting point for discussion,” said Len Burman, the director of the
nonpartisan Tax Policy Center and a professor at Syracuse University.
Even
with the efforts to soak the rich, Mr. Camp comes up well short of
making the proposals revenue-neutral, although some artful dodges enable
him to claim that is true over the next 10 years.
To
make the limited progress he does, Mr. Camp has to attack many tax
preferences. Some are easy (did you know that for some reason the
National Football League is tax-exempt?), but many are not. Americans
who work overseas lose a tax break. The tax credit for buying electric cars
goes away. So does the credit for adopting a child. A lot of tax
provisions to provide aid for higher education costs are consolidated.
The
dodge of avoiding taxes through a “like-kind” exchange would end.
Clever ways that some self-employed people have found to avoid paying
payroll taxes on their income would be barred.
He
would change the way we save for retirement, something that prompted
outrage from the retirement industry. He would do that by limiting the
amount of pretax money that can be saved. Traditional individual
retirement accounts would vanish (for new contributions, that is.) The
amount of pretax money that could go into 401(k) accounts would be
reduced.
Instead,
Roth I.R.A.s would be encouraged and made available to high-income
taxpayers who cannot use them now. The money you put into a Roth I.R.A.
is money on which you have paid taxes. But it then accumulates tax-free
and you don’t pay taxes on the money you withdraw after you retire.
Normal I.R.A.s, like 401(k) accounts, produce taxable income when it is
withdrawn after retirement.
Similarly,
the bill would put an end to so-called deferred compensation at many
companies, where the money is put into a savings plan but not paid out
until years later, when the employee may be in a lower tax bracket. The
effect would be to raise tax revenue now and reduce it in the later
years when the deferred compensation would have been paid.
Continue reading the main story
Advertisement
There
is no logical reason employees should be taxed on the money they are
paid but not on the value of the fringe benefits the employer provides.
Mr. Camp touches that on the margin, with the provision on extremely
wealthy people, but not for the rest of us. He reduces the mortgage
interest deduction, but only for those with the most expensive homes.
The
bill also would force companies to take depreciation expenses over a
longer period. That makes sense economically, but it would also push
corporate taxes up in the next few years, though not over the long term.
All of those things combine to make the estimate that the bill is
revenue-neutral suspect. It may be neutral over the 10-year period they
count, but not over a longer period.
It is good to see some specifics. It is too bad that nothing is likely to come from it.
“Tax
reform is never going to happen without bipartisan cooperation,” said
Mr. Burman, who worked on the Tax Reform Act of 1986 as an economist in
the Treasury Department’s Office of Tax Analysis
and later served as a senior Treasury Department official under
President Bill Clinton. “A significant number of people in both parties
will have to believe getting things done is more important than scoring
points.”
UPDATE ON CARRIED INTERESTS
www.mccarter.com/.../NYLawjournalIpdatedCarried...
Mar 12, 2014 - result of the First Circuit Court of Appeals decision in Sun Capital Partners III v. New Eng. Teamsters & Trucking Indus. Pension Fund, 724 ... On February 26 Representative David Camp, Chairman of the House Ways and Means ... update the carried interest proposal is referred to as the “Camp proposal.”).
McCarter & English
No comments:
Post a Comment