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Tag: carried interest loophole
Budget Bill Revives Biden Vow To Tax Wealthy And Corporations

Budget Bill Revives Biden Vow To Tax Wealthy And Corporations

By Steve Holland

WASHINGTON (Reuters) -- President Joe Biden's campaign promise to increase taxes on corporations and the wealthy as part of a battle against glaring income inequality in the United States got an unexpected boost on Wednesday.

Early proposals to increase tax rates from Biden and his fellow Democrats hit a brick wall in Congress after Republicans -- and some Democrats -- opposed them. But a sudden reversal by West Virginia Democratic Senator Joe Manchin, a swing vote in the divided Senate, has given Biden's tax agenda a new lease on life.

The amount U.S. companies contribute to tax revenue that funds roads and schools has plummeted since the 1940s.

Biden has often said in office that companies should instead pay a "fair share," a contrast to deference to private markets begun by Republicans with former President Ronald Reagan's election in 1980, and buoyed by rounds of tax cuts and deregulation, by both parties.

The new compromise bill includes $430 billion in new spending on energy, electric vehicle tax credits and health insurance investments. It more than pays for itself by raising minimum taxes for big companies and enforcing existing tax laws, Manchin and Senate Majority Leader Chuck Schumer said in a statement.

Biden said during a speech on Thursday that the deal would "for the first time in a long time begin to restore fairness to the tax code - begin to restore fairness by making the largest corporations in America pay their fair share without any new taxes on people making under $400,000 a year."

The bill would impose a 15 percent minimum tax on corporations with profits over $1 billion, raising $313 billion over a decade, they wrote. Companies could claim net operating losses and tax credits against the 15 percent.

The U.S. corporate tax rate dropped to 21 percent from 35 percent after a 2017 tax cut pushed by then-President Donald Trump and his fellow Republicans, but many companies pay much less than that, and some of the largest pay no federal taxes, research groups including the Institute on Taxation and Economic Policy have found.

Biden proposed raising that rate to 28 percent last year as part of an infrastructure spending bill, but the tax component was struck from the bill.

The new Manchin-Schumer bill also aims to close the so-called carried interest loophole, long a goal of Democrats.

Carried interest refers to a longstanding Wall Street tax break that let many private equity and hedge fund financiers pay the lower capital gains tax rate on much of their income, instead of the higher income tax rate paid by wage earners.

Eliminating the loophole would raise $14 billion, the senators say.

Schumer said he expected the Senate to vote on the legislation next week, to "lower prescription drug prices, tackle the climate crisis with urgency and vigor, ensure the wealthiest corporations and individuals pay their fair share in taxes, and reduce the deficit."

The Manchin-Schumer measure is substantially smaller than the multi-trillion-dollar spending bill Democrats had envisioned last year.

But it still represents a major advance for Biden's policy agenda ahead of midterm elections on Nov. 8 that could determine whether Democrats retain control of Congress.

It came just as Biden celebrated Senate passage of a bill aimed at boosting the U.S. semiconductor industry, another key priority of his administration, and as he struggles with low job approval ratings and ebbing support from his own party after a series of conservative Supreme Court rulings.

"This bill will reduce the deficit beyond the record-setting $1.7 trillion in deficit reduction we have already achieved this year, which will help fight inflation as well," Biden said in a statement.

"And we will pay for all of this by requiring big corporations to pay their fair share of taxes, with no tax increases at all for families making under $400,000 a year," he said.

(Reporting By Steve Holland; editing by Heather Timmons and Mark Porter)

Trump’s Tax Plan: The Grifters Do ‘Tax Reform’

Trump’s Tax Plan: The Grifters Do ‘Tax Reform’

If you were paying attention to what we learned about Donald Trump during the 2016 campaign, then you know that the president of the United States was once the impresario of a student-swindling Trump University, the founder of a Trump Foundation designed for tax evasion and illegal self-dealing, and the chief executive of a Trump Organization that has long relied on various techniques of grifting, from rip-offs of workers and contractors to serial bankruptcies.

And if you know all that, then you cannot be surprised by the way that he and his family have conducted themselves during the first 100 days of his presidency, which is also the way they will behave until they leave or are removed from the White House. They have misused the office of the president to enrich themselves in ways that none of Trump’s predecessors, not even the most venal, could have imagined doing.

Nor can you be surprised that this grasping figure and his appointed cronies, notably Treasury Secretary Steve Mnuchin, have floated a tax “reform” that will enrich the very wealthiest Americans by trillions of dollars, while decimating necessary government functions and depriving millions of working families and the poor of health care. Should this tax plan become law, it would result in thousands of people dying in order to transfer more money to those who already have too much.

While Trump has long refused to abide by the customs and traditions that dictate tax disclosure by presidents and presidential candidates, we know enough about his taxes to see that his new plan, although sorely lacking in detail, will serve his personal interest above all. (No, he didn’t put “America first.”) Although tax policy is often complicated and numbingly dull, the changes that Trump is seeking to benefit himself are really quite simple.

The plan’s biggest “reform” is to slash the corporate tax rate from 35 percent to 15 percent — including the rate on so-called “pass-through” companies like more than 500 such firms owned by Trump, which allow him to receive business income taxed at the lower rate instead of wages. It also cuts the personal income tax rate on the highest earners such as Trump, including the 3.8 percent Obamacare tax on unearned income. It eliminates the alternative minimum tax, which required Trump to pay $31 million in 2005, according to a tax return that leaked last year. And the plan establishes a “territorial” tax system leaving all the profits earned by the Trump Organization in foreign countries.

He aims to take care of his children, too, if not yours or America’s — so his plan also eliminates the estate tax entirely, allowing his billions to be inherited absolutely tax-free by Ivanka, Don Jr., Eric, Barron, and perhaps even Tiffany.

Now if you’re a middle class or working class taxpayer, you may recall that Trump promised that as president he would be independent of banks like Goldman Sachs and close the gaping “carried interest” loophole that benefits billionaire hedge fund managers. The author of his tax plan, Treasury Secretary Mnuchin, vowed last winter that Trump’s reforms would not disproportionately benefit the rich. In fact, he went further:

“Any reductions we have in upper-income taxes will be offset by less deductions, so there will be no absolute tax cut for the upper class. There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.”

That was then, this is now — which with Trump usually means that he was lying.

He appointed two former Goldman Sachs bankers, Mnuchin and National Economic Council chief Gary Cohn, to write the tax “reform,” which doesn’t mention the carried interest loophole at all. They cut taxes so drastically on hedge fund managers (and every other corporate and finance billionaire) that the carried-interest scam might no longer matter.

As for that pledge repeated so often by Trump and then Mnuchin to cut middle-class taxes, the Treasury Secretary was unable to say this week whether taxation on middle class and working class families will go down — or up, as some analysts of his plan warn they might. “I can’t make any guarantees,” Mnuchin said when pressed by reporters.

So if you’re a working class or middle class taxpayer, this “reform” offers nothing so far except uncertainty. When the details of the Trump tax plan finally emerge, you may discover that its collapsing of brackets has actually raised your taxes, and that its elimination of deductions for state and local taxes or student loan payments has left you owing more to the IRS.

But the latest polls indicate that if you’re a Trump voter, you don’t mind being conned — perhaps because you love watching a president who picks on immigrants and refugees, irritates liberals, and bombs a Syrian airstrip. Let’s hope you still feel happy when the bill comes due.

How Dangerous Is Donald Trump?

How Dangerous Is Donald Trump?

This post originally appeared with the Roosevelt Institute.

On Sunday, Vox posted a video in which editor-in-chief Ezra Klein makes his case that “Donald Trump is the most dangerous presidential candidate in recent memory.” While I agree that Trump is dangerous and appreciate Ezra as a brilliant and thoughtful journalist, I disagree with his analysis. In short, I fail to see how Trump is substantively more dangerous than any of the other potential Republican presidents, or how he could possibly prove more dangerous than many presidents we have had already.

Klein’s thesis—that Trump’s candidacy represents an unprecedented level of danger in American politics—ignores a rich history of deadly and destructive policy by the leaders of both political parties, to say nothing of the plight of many millions of Americans for whom the worst has already come to pass. I agree with Ezra that the time to take policy and elections seriously has come; I just disagree on when it came.

[Requisite Trump disclaimer:] I am, of course, deeply troubled by Trump’s candidacy and his success with American voters. The broad approval that his brand of paranoid xenophobia has received reveals something truly disturbing about a large portion of American voters.

But, in my mind, the danger Klein speaks of was real long before Trump.

If I am a Black youth in Ferguson, Missouri, or Baltimore, Maryland, how much weight do Donald Trump’s racist diatribes really add to the pre-existing burden of going through life knowing I could be shot dead by a police officer who would face no legal ramifications for my murder?

If I am a single mother living under the poverty line in Flint, Michigan, with scant job prospects and poisonous water flowing out of my kitchen tap, how much of an additional threat does Donald Trump truly pose to my well-being? I am already drowning in a sea of existential threats.

The truth is, American politicians have been playing with live ammunition since the first Congress was convened in 1789. Just ask the relatives and friends of 58,220 American soldiers unnecessarily slain in Vietnam. Ask the victims of Japanese internment. Ask the descendants of the Chickasaw, Choctaw, Muskogee, Creek, Seminole, and Cherokee tribes, forced out of their ancestral land and into a federally mandated death march.

These are dramatic examples, to be sure, but even more mundane-seeming policy questions elucidate the point that, when it comes to dangerous policy, Donald Trump is nothing new.

Republican candidates and presidents (Trump included) have a long history of proposing outrageous, unaffordable, and regressive tax cuts, many of which have become law, to the detriment of the American people and the economy. The carried interest loophole is one example: This provision costs billions every year, exists exclusively to benefit wealthy investment managers, and has been supported by every Republican presidential candidate—except Trump, who has proposed to end it. Overall, Trump’s tax plan—like those of his fellow candidates—is terrible and unrealistic, and this proposed repeal is mere lip service, but it is still more than any other candidate has proposed with regard to closing loopholes for the wealthy.

If it is Trump’s honesty Klein worries about (the man does love a good flip-flop), then again, I must insist the bar is set very low.

President George W. Bush led the American people to believe he possessed incontrovertible evidence of nuclear weapons in Iraq and used that misinformation to drag the country into a 15-year war that cost trillions of tax dollars and 4,486 American lives. Those were my generational brothers and sisters, as are those now living through unprecedented violence and political upheaval throughout the Middle East. So forgive me if I appear unfazed by Trump’s racism, because I already lived through eight years of a president who went to war over prejudice. If anything, Trump’s attitude seems par for the course.

And I in no way mean to be partisan: It was four presidential terms, split evenly between Democrats and Republicans, that led to the largest financial crisis the world has ever known and the worst recession since the Great Depression. We watched the perpetrators walk away without a scratch. Some got raises.

Looking at the other candidates, I detect no safe choice. In fact, all but Trump support defunding Planned Parenthood, and every single candidate followed his lead on supporting a ban on refugees from the Syrian civil war. Ditto his Sinophobia. Ditto the wall on the Mexican border. Is Trump dangerous for his beliefs, or is he just offensive for his willingness to state them?

What I suspect Klein is responding to is not the content of Trump’s policies but the disturbingly disrespectful way in which he hocks this ever-shifting platform of xenophobic rabble-rousing and racially charged scapegoating. And I don’t blame Klein for feeling the way he does: It is an ugly, ugly business, and it is revealing an ugly, ugly side of American culture. But to many observers of American politics, it is nothing new.

The Republican Party has been campaigning and leading on a platform of very thinly veiled (and sometimes completely unveiled) xenophobia, homophobia, and disregard for the poor and working class for quite some time. Trump is just saying in plain English what has been the implicit conservative platform for over half a century. Did the mild manners of previous candidates make their stances any less destructive to the American people? Perhaps Klein took solace in the panache of primary politicians gone by, but I do not, and I doubt that those who have suffered the worst ills of American policy do either.

Perhaps it is better that progressives can finally fight this battle out in the open, offering a direct challenge to the ugly underpinnings of right-wing ideology instead of grappling with the coded language and feigned innocence of other candidates.

Klein’s video suggests that, though we’ve lived through decades of unjustified war, top-heavy tax cuts, financial deregulation, and structural discrimination, now is when we are really at risk.

I think that moment came and went some time ago.

Photo: (L-R) Governor John Kasich, former Governor Jeb Bush, Senator Ted Cruz, businessman Donald Trump, Senator Marco Rubio and Dr. Ben Carson pose before the start of the Republican U.S. presidential candidates debate sponsored by CBS News and the Republican National Committee in Greenville, South Carolina February 13, 2016. REUTERS/Jonathan Ernst.