Congressional Democrats are out of the their minds
Posted by Mike Sylvester - 6/5/10 @ 4:50 pm - Filed Under 2010 Local Elections, 2010 National Elections, Featured, Local Politics, National Politics, State Politics, Uncategorized
HR 4213 passed the House of Representatives on a largely Party line vote. Every Democrat reading this blog should be ashamed to be a Democrat after reading this bill. This is an awful bill. There are several reasons it is awful:
- The Democrats campaigned in 2006 and 2008 on a platform of allowing the “Bush tax cuts” to sunset. President Obama specifically campaigned on this. HR 4213 extends many of these tax cuts for anywhere from 2 - 10 more years.
- This bill serves to make the entire tax code even more complicated. Our government needs to simplify the tax code; not make it more complicated.
- The bill has four broad sets of increases or revenue offsets embedded in it. These four provisions are expected to increase Federal tax revenues by almost 56 billion dollars from 2010 - 2020. The Democrats are calling this bill the “American jobs and closing tax loopholes act of 2010.”
- The first set of revenue offsets (about 15 billion) are all designed to enable the US to tax more foreign income. I do not prepare tax returns for many people with foreign income and hence do not know a lot about these provisions. I am not sure if these provisions are a good idea or not.
- The second set of revenue offsets (about 18 billion) are designed so that those people (hedge fund managers etc) who earn “carried interest” are taxed at a higher rate than they are currently taxed. Currently most “carried interest” is taxed as a capital gain. The new law is complicated; however, it will eventually cause much of the “carried interest” to be taxed as regular income. I would favor this provision if it were done in a simple and fair way; however, Congress is incapable of that.
- The third set of revenue offsets (about 12 billion) is a 34 cent per barrel tax on oil. This is supposed to go into an Oil Spill liability Trust Fund. I oppose this provision; the oil companies are already responsible for paying to clean up oil spills; we do not need another tax at this time on oil.
- The fourth set of revenue offsets (about 11 billion) is a special tax that will only target certain small business owners. Basically this tax will only be levied against certain subchapter S corporations. It will target certain professional service S corporations and will ignore the rest of S corporations. This tax will effect only certain professional service S corporations in certain industries; it also will only effect those with three or fewer members. I think this provision is extremely unfair and I hope it is killed in the US Senate. I will post more about this in separate posts because the way the House Democrats worded this provision it could cost my wife and I well over $12,000 in additional annual taxes starting in 2011. Worse yet it will effect a large number of my clients who own small businesses.
I am so angry at the Democratic Party that it is hard to put my feelings into words. The Democrats in the House are complete idiots and need to be voted out of office in November.
The United States economy is extremely fragile. Why is the Democratic Party targeting professional service businesses in only certain industries with a new tax if they have three shareholders or less? How is this fair? For example I own an Accounting firm with two owners. I will have to pay a higher percentage in taxes than an Accounting firm with four owners. Does this make sense to anyone?
Would any of you Democrats like to defend your brethren in the House of Representatives?
Mike Sylvester
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14 Responses to “Congressional Democrats are out of the their minds”
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Fair? - No.
Makes sense? - Yes.
Just follow the logic: A business with only a few employees probably can not afford to make a sizable campaign donation. Therefore, they are totally irrelevant to the political process.
The title of your post might as well have been “I’m extremely upset that I can’t afford to bribe my Congressman.”
I support some of the provisions in this bill but not the portion regarding S corps. The IRS already has the authority to force S corp owners to report a “reasonable” amount of income as earned income.
I think this bill points to a bigger problem - namely that bills are now so large that items like this can get passed without many of the members even realizing what they are voting for. Why isn’t this bill broken up into 9 or 10 smaller bills whose scope is greatly reduced and much more obvious?
In this case it’s because they are trying to find revenue offsets for their increased spending but there has to be a better way than this…
Find two good friends, make them part owners (.5% each?), problem solved…
Kent
Not an “excuse”, but here’s the purported motivation on page 24: http://waysandmeans.house.gov/media/pdf/111/America_Jobs_Summary.pdf
To better understand your point-of-view, Mike, do you disagree with the assertion that tax strategies that pay a nominal wage to avoid SS/Med taxes is a “loophole”, or believe the bill doesn’t accomplish that goal?
Jeff - absolutely right, these should be separate bills, so a (more) honest debate on the merits can be had, and spending increases aren’t masked. What happened to the requirement for germaneness?
How would making two good friends have a combined ownership of one percent solve any problems? I’m not following….
Mike said he would pay higher taxes with only two owners than a company with four. Since he only has two, and didn’t like paying the extra taxes, he just has to add two more owners. If he has family members that could be owners, that would be a solution as well.
Now he would just have to figure out if the taxes were better than having more owners! Like I said, they would have to be really good friends…
I must admit, I’m a bit confused. What party is it that Mike belongs to? He changes every three months or so, and I lose track.
Kent,
Adding two .5% shareholders will not work because the main asset of my business would still be the “expertise and three or fewer people.”
Mike
Scott,
You ask “To better understand your point-of-view, Mike, do you disagree with the assertion that tax strategies that pay a nominal wage to avoid SS/Med taxes is a “loophole”, or believe the bill doesn’t accomplish that goal?”
Of cousrse it is not a loophole. S corps have been around since 1958 and the Courts of this Country have repeatedly held up the fact that owners only have to pay self employment taxes on their wage which must be “reasonable.”
This bill is entirely unfair, it just pickes on certain small service S corporations.
Mike
Kent,
There are provisions that prevent you from adding family members and counting them towards the three person total.
Mike
Craig,
You need to get off the drugs and read the posts. It is clear what Party I support. I just do not mindlessly support my Party 100% of the time.
Mike
Rats Mike! Trying to help you out and you keep raining on my parade….
Maybe you should run for one of these offices and change the laws!
Kent
Mike-
“…pay self employment taxes on their wage which must be “reasonable.”
It’s that discretion which can be considered a loophole. The bill does pick on small service companies, but maybe they have gotten a relative benefit by only charging $20-$30k as wage when their expertise can be paid a much higher amount working in another company.
Where does a business owners labor stop and business income begin? Instead of having the government be in the business of trying to separate income based on source and “reasonable”-ness, this is another great example of the consumption-based “Fair Tax” needs to be explored seriously.
Scott,
I agree that some S corproation owners have abused the reasonable wage rules.
The IRS should enforce the reasonable wage rules instead of making a bunch of new rules that only effect some S corps in some circumstances.
I support scrapping the income tax code and moving to a consumption tax.
Mike