It's Like The GOP Wants To Drive The Economy Over The Fiscal Cliff
Among the loopholes built into the tax code specifically to allow corporations and wealthy people (campaign donors) to avoid paying their fair share of taxes are regulations amounting to the loss of billions of dollars to the treasury. Among the most egregious regulations that conservatives gifted the wealthy are:
Deferred Compensation: Executives and high-income individuals can defer a portion of their compensation to future years, allowing them to delay paying taxes on that income. This can result in significant tax savings, especially if they are in a lower tax bracket when they receive the deferred compensation.
Carried Interest: This loophole allows certain investment fund managers to treat a portion of their income as capital gains, which are taxed at a lower rate, instead of ordinary income.
Tax Breaks for Private Jets and Yachts: The tax code allows for deductions and exemptions related to the operation and ownership of private jets and yachts. These benefits obviously favor the wealthy and should be exactly the opposite— heavily taxing the wealthy for using them.
Offshore Profit Deferral: U.S. multinational corporations can defer taxes on their foreign profits until those profits are repatriated to the United States. This allows them to keep profits in low-tax jurisdictions indefinitely, reducing their current tax liability.
Intangible Asset Transfers: Companies can transfer ownership of intangible assets, such as patents and copyrights, to low-tax jurisdictions where they can attribute a significant portion of their profits. By doing so, they can allocate a disproportionate amount of income to these jurisdictions and reduce their tax liability in the United States.
Tax Subsidies for Specific Industries: Certain industries, such as fossil fuels and real estate, have been criticized for benefiting from various tax subsidies and incentives. These provisions can result in reduced tax liability for corporations and wealthy individuals engaged in these sectors, leading to a massive and unfair distribution of tax burdens to scumbags like Joe Manchin.
Depreciation Deductions: Companies can claim deductions for the depreciation of assets over time, which can significantly reduce their taxable income. These deductions often don’t accurately reflect the true decline in value of assets and can be manipulated to generate tax benefits. This is one of the loopholes that Trump bragged about using and calling people who don’t talk advantage of not “suckers.”
Corporate Tax Credits: The tax code includes various credits and incentives that companies can claim to reduce their tax liabilities, such as credits for research and development or renewable energy investments.
Like-Kind Exchanges: Similar to the tax-free exchanges, Section 1031 of the tax code allows for like-kind exchanges of certain types of property, such as real estate, without incurring a tax liability. This provision provides wealthy investors with significant tax advantages.
S-Corporations: S-Corporations are a type of pass-through entity that allows owners to avoid paying corporate-level taxes, instead passing profits and losses through to individual tax returns. While this can benefit small businesses and startups, many wealthy individuals use S-Corporations to avoid paying higher tax rates on their income.
Deductions for Business Meals and Entertainment: Companies claim millions of dollars in deductions for expenses supposedly related to business meals and entertainment for their executives and clients. They’re a major scam and overly generous, allowing companies to claim deductions for lavish expenses that are not really a reasonable part of conducting business— first class airline tickets, bottles of wine that cost hundreds of dollars each, luxury hotel suites, daily meals unrelated to business, clothing, front row seats for concerts and sporting events, trips abroad, family parties, etc
This morning Congressman Ted Lieu (D-CA) told me that “All you need to know about the fairness of the US tax code is that you can get a tax break for owning a yacht. Closing these kinds of tax loopholes is an important step towards creating a fairer and more just society. CEOs should not pay lower tax rates than their secretaries. Tax loopholes allow certain individuals and corporations to avoid paying their fair share of taxes, which can lead to an unfair burden on the rest of society. By closing these loopholes, the government can ensure that everyone contributes their fair share to support our society.”
Erica Payne, president and founder of the Patriotic Millionaires, has a similar perspective and told me that “The GOP doesn't care about the deficit at all, it's just a convenient excuse to demand spending cuts. They have shown over and over and over again that when faced with a choice between shrinking the deficit or cutting taxes for the rich, they will choose tax cuts for the rich every time. They didn't care about the deficit when they passed a nearly $2 trillion tax cut for the rich under Trump in 2017, and they don't care enough about it now to accept even the smallest tax increases on the rich. The only people that they will ever ask to suffer for the sake of the deficit are the poor.”
And there are many more where those came from. As part of the negotiation to avoid default, the White House proposed closing many of the loopholes. The Republicans rejected every single cut on the White House list (of about a dozen specific loopholes). Jeff Stein broke the story in the Washington Post yesterday. The House Republicans even turned down a measure aimed at cryptocurrency transactions and another for large real estate investors.
The GOP’s rejection of the White House tax proposals— which has not previously been reported— reflects the near-unanimous opposition among congressional Republicans to using higher revenue to rein in the federal debt.
Republicans have characterized rising debt as an existential threat to the nation’s future and economic health, aggressively seeking to leverage the nation’s borrowing limit— which must be raised to avoid a potential financial catastrophe— to force through trillions of dollars in spending cuts as a solution. The White House would prefer to cut into the debt with targeted tax increases.
But Rep. Dusty Johnson (R-SD), a leader of the House GOP’s [fake] moderate faction, told reporters Thursday that House Republicans have only two “red lines” in negotiations, one of which is that it not include tax increases. (The other is for the debt ceiling increase to not be “clean,” meaning Republicans will insist on some concessions for raising it.)
The White House proposals to close a cryptocurrency-related tax loophole and a real estate loophole were both previously proposed by the administration. The cryptocurrency proposal would ensure that investors cannot claim a loss on an asset that they then quickly repurchase— a rule that already exists for stocks and other assets. Similarly, the real estate proposal sought by the White House would prevent investors from deferring taxes on swaps of property— similar to a rule for stock trades.
The real estate plan and cryptocurrency rule changes would probably raise around $40 billion in new tax revenue, compared to the $4.8 trillion in spending cuts Republicans are seeking to close the deficit.
“Both of these proposals close loopholes— they close opportunities for taxpayers to reduce their tax liability artificially,” said Steve Rosenthal, a senior fellow at the Tax Policy Center, a nonpartisan think tank. “Outside the affected industries, I don’t think anyone feels as a tax policy matter that either are defensible.”
…Policy experts sharply diverge on the extent to which new revenue is needed to reduce the deficit. Congressional Republicans have been adamant that the U.S. deficit was caused by rising spending, pointing to trillions of dollars in higher federal outlays during the pandemic.
“Despite the federal government collecting as much in taxes from American families as at any point in our history, federal spending is rising even faster and our debt is soaring,” McCarthy and other GOP leaders said in a statement this spring. “This is a spending problem, not a revenue problem.”
Liberals have contested that premise. The Center for American Progress, a center-left think tank, found in a recent report that debt as a percent of the U.S. economy would be falling without the tax cuts initiated by the most recent two GOP presidents. Revenue has been significantly lower than nonpartisan forecasters projected before the tax cuts.
“The debt ratio is increasing because of tax cuts, not spending, so taxes should be part of any deal around the debt,” said Bobby Kogan, the report’s author.
This is fight is right up Aaron Regunberg’s alley. He’s the Blue America-endorsed candidate running in the special election for the open Rhode Island congressional seat and this morning he told me that "We should be very clear about this: Republicans don’t care about the federal debt. They have been perfectly happy to raise the debt ceiling again and again to fund trillion dollar wars and tax cuts for billionaires and massive corporations. And they’re refusing every measure to lower the debt by closing unfair tax loopholes. The GOP is creating the current crisis solely as a means of targeting workers, seniors, and children, who rely on the life-or-death programs they are targeting. The Democratic Party must stand firm against these cynical, shameless attacks.” Help elect Aaron— because he will stand firm.
Aditya Pai is the progressive Democrat running for the Orange County seat held by GOP robot Michelle Steel. He feels much like Regunberg does about the partisan game-playing the GOP is engaging in right now— and his opponent is right in the middle of it. “Congressional Republicans like my opponent Michelle Steel are putting our nation in serious economic peril— just to preserve tax loopholes for people who least need them. The same DC politicians who didn’t hesitate to borrow $5.8 trillion for two wars and $2.3 trillion for Trump’s tax cuts are now cosplaying as champions of fiscal responsibility. It’s a farce.”