Posted on 07/18/2007 9:54:57 PM PDT by gpapa
Guess what? Prominent Democrats in Congress may soon pass a huge tax increase. This tax increase will affect all, not just Wall Street. Because what is proposed is almost unknown to the American people and unless you, the American people, learn about this tax increase and protest to high heaven, they will succeed.
The proposed tax increase is H.R. 2834, a bill to amend the Internal Revenue Code of 1986 to treat income received by partners for performing investment management services as ordinary income received for the performance of services. It sounds innocent, but the truth is that since Harry Hopkins pronounced the formula to tax and tax, spend and spend, and elect and elect, many Democrats have adopted this as their motto. I am afraid that far too many Republicans also have an insatiable appetite for over-spending.
(Excerpt) Read more at townhall.com ...
B U M P
Of course!...the republicans have jumped on the “rape the taxpayer wagon” too! I guess I’ll quit my job and let Ted Kennedy take care of me!
That will only work if you're an illegal alien.
Of course, such tax policy would likely result in less overall taxes collected by the government. It is really all about punishing success and rewarding failure.
BUMP
The Democrats in Congress won’t last as a majority for the long-term unless illegal immigrants are also allowed to come into the U.S. in large waves over and over and then enough of them are also allowed to legally register to vote throughout the U.S.
Guess what? Prominent Democrats in Congress may soon pass a huge tax increase. This tax increase will affect all, not just Wall Street. Because what is proposed is almost unknown to the American people and unless you, the American people, learn about this tax increase and protest to high heaven, they will succeed.The proposed tax increase is H.R. 2834, a bill to amend the Internal Revenue Code of 1986 to treat income received by partners for performing investment management services as ordinary income received for the performance of services. It sounds innocent, but the truth is that since Harry Hopkins pronounced the formula to tax and tax, spend and spend, and elect and elect, many Democrats have adopted this as their motto. I am afraid that far too many Republicans also have an insatiable appetite for over-spending.
Leading the charge against this new tax is the Chief Deputy Minority Whip Representative Eric Cantor (R-VA). Cantor is not opposing this tax to be partisan. He is doing so because it is consistent with his record since coming to Congress.
H.R. 2834 is sponsored by Rep. Sander M. Levin (D-MI) and would reclassify carried interest as ordinary income. That represents a 133% on so-called flow-through investment partnerships. Retirees and anyone on a pension would be especially hard hit by this approach. The proposal would tax carried interest at 35% instead of the capital gains rate of 15%. Pension funds are some of the biggest investors in flow-through investment partnerships. Raising taxes on the partners will hurt the investors.
This measure does the opposite of what good public policy should. Good public policy creates capital. It does not discourage one from taking risks. Carried interest represents the sweat equity which general partners put into the deal. It is, in fact, capital and should be treated as such, which means taxing it at capital gains rates.
The management fee is already taxed as ordinary income, the profit -interest, or carry, represents an investment in the partnership. The tax treatment of profit interest on so-called flow-through entities has been settled for decades.
While compensation of employees and independent contractors is typically fixed and payable regardless of the success of the business, a partner's distributive share of partnership income is subject to the entrepreneurial risks of the partnership's business. The partners are rewarded only if the partnership succeeds.
A manager gets nothing back for his profit interest unless investors get all of their money back plus the negotiated rate of return. Wage earners are not taking that kind of risk. The policy reasons for drawing a distinction between long-term capital gains, short-term capital gains and ordinary income are the same as for giving capital gains treatment for carried interest. Current taxation of carried interest encourages the pooling of capital, ideas and skills in a manner which promotes entrepreneurship and risk-taking. The issue is whether Congress wants to change capital formation and the incentives for long-term investment.
In 2005, the last year for which we have such information, 2.8 million businesses were organized as partnerships. The flexibility of partnerships plays a very important role in the success of our economy.
One example of how these partnerships benefit retirees occurred in the state of Washington. There, the state employee pension fund netted an average of $26,000 more by investing in private equity than it would have by investing in the Sand P 599.
This bill would discourage such investment. If Congress can raise taxes on flow-through partnerships, it may challenge the current treatment of capital gains next. Let us remember, the economy really took off when the capital gains tax was lowered to 15%.
The problem with this tax increase is that it is a stealth increase. Few people know about it. It is also complex. The immigration bill could be defeated because the public easily understood it. Few understand this tax increase, which will be done in the name of fairness.
It is simple. Call your Congressman and tell him to vote no on H.R. 2834. If the Congressional staffer wants to get into all sorts of details with you, tell him your pot roast is burning.
All assets are the property of The State; from each according to his ability, to each according to his need. Let’s just be thankful that our government Lords and Masters allow us to keep anything at all.
Bump
"We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." Winston Churchill 1903
This would be non-issue under the FairTax.
Let’s ditch the Income Tax system and start over with a clean slate that encourages savings, investment, and productivity instead of penalizing success.
Except that it penalizes all prior success with a MASSIVE tax on savings... That $100 in your bank account suddently becomes worth MUCH less...
Focusing on the one ara of already-taxed savings is a mistake. If your savings was 50% 401k and 50% after-tax savings, then you would benefit from the waived taxes on the 401k while you lose on the after-tax account.
All the taxes deferred on the IRA accounts are going to be taxed at ordinary income tax rates when you finally use them. And, of course, all savings get to grow tax-free under the FairTax regardless of how long you hold the investment, so you don’t need to fear turnover anymore.
Personally, my savings is 75% in deferred 401k accounts so not having to pay ordinary income tax rates on that money more than offsets the FairTax on my already-taxed savings.
So monetarily I would be better off, but the real reason we should switch is exactly what is in this article — the existing system is bizzarre and corrupt and it is time to start over. Preferably with something that addresses the changing demographics and disadvantages we have in the world economy.
So you have absolutely nothing saved outside of retirement accounts?
I said I have 75% in retirement accounts and 25% in already-taxed accounts.
The benefit I receive from not having to pay the deferred taxes on the 75% in retirement accounts more than offsets the additional taxes I’d pay when spending the already-taxed 25%.
And how exactly is it that you think having the fair tax hit your 401k is better than an income tax? You’ll be paying tax either way... meanwhile your Roth is getting double hit.
I’d suggest thinking about this again.
Anyway, many of us have other savings. The immediate hit that a fair tax would effectively make to my savings through instant hyperinflation (via devaluation of that saved, already taxed money) would be equal to about what I pay in income taxes in 2 years.
I will never support the fair tax until that problem is fixed.
And I think the general idea of the fair tax is a good idea.
My 401k money is going to be hit with a 28% tax at the margin, but the FairTax is only 18% at the margin after you figure a 9% reduction in retail prices.
At an EFFECTIVE tax rate, my 401k is going to be hit by 16% under the income tax and about 9% under the FairTax. That takes into account the Income Tax Deductions and Exemptions compared to the FairTax Prebate and non-Taxable expenses like mortgage interest.
Meanwhile, my after-tax accounts will grow at 12% each year under the FairTax where under the Income Tax they would only grow at 10% as the Income Tax sucks away 2% of my 12% gains each year.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.