Senate Rejects Efforts to Boost Taxes on Buyout Firm Managers

[CharmCity]

Source: Bloomberg

Senate Rejects Effort to Boost Taxes on Buyout Firm Managers
2007-12-06 12:03 (New York)

By Ryan J. Donmoyer
Dec. 6 (Bloomberg) -- Senate Republicans blocked a
Democratic bid to debate legislation that would stop an
alternative minimum tax increase this year on 23 million
American households.
The legislation included a $54 billion tax increase on
managers of hedge funds and buyout firms that Democrats said is
needed to keep the federal budget balanced. Republicans said
Democrats shouldn't raise taxes permanently on Wall Street
executives to relieve burdens on middle-income Americans for
only one year. The vote to debate the measure was 46-48, 14
votes short of the 60 necessary to proceed.
The vote means final resolution on the matter is unlikely
until the final days of the year. The Internal Revenue Service
and White House have said such a delay may hold up tax return
processing and refunds in 2008 for tens of millions of U.S.
households.
``I say, stop the games,'' said Montana Senator Max Baucus,
the Democrat who is chairman of the Finance Committee. ``It's
not the time to play politics. It's a time to get things done.''


No link yet.

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Aside from Bloomberg's headline, the bottom line is the the Republicans in the Senate have chosen to tax an extra 23 million working Americans versus a handful of outrageously rich hedge fund managers by refusing to extend the Alternative Minimum Tax "patch."

An added bonus: the AMT extension was included in a set of other tax credit extensions that help the middle class. Those include:
Dependent care credit
Credit for the elderly and disabled
Adoption credit
Child tax credit
Credit for interest on certain home mortgages
HOPE scholarship and lifetime learning credit
Credit for savers
Credit for certain non-business entity property
Credit for residential energy-efficiency property
DC First Time Homebuyer credit

So those may be gone as well...

[Zynx]

1. Hedge fund managers are disgusting with how much money they have.

That amount of income should be taxed at 70%.

[aquart]

2. "Credit for savers"????

Goodness.

[truedelphi]

3. Okay some of this I find ambiguous - so any who understand please help

I understand the part about the hedge fund managers.

But is the article saying that the AMT tax situation is going forward?

ANd what is the article saying about the listed things, The education credits, savings credits, etc. - were they killed off when the banning of the AMT failed?

[CharmCity]

4. It looks like the AMT extension is gone.

AMT was originally designed in the Nixon era to ensure that even rich people paid taxes. So if you make X amount of dollars, if you have so many deductions that you start to pay less than the goverment thought you should, the alternative minimum tax kicks in to ensure you pay your fair share.

Problem is the AMT was never indexed with inflation. So more middle class taxpayers were getting slammed with the rich guy tax.

Congress recognized this and raised the AMT income threshold each year. Congress was poised to do that again. However, "pay go" budget rules say that if you spend x dollars, you must find a way to pay for it. So the Dems proposed a tax on a handful of profoundly rich Wall Street buyout and hedge managers to pay for that extension. Repugs said no to that. And the Dems don't have enough votes to overcome the Reps in the Senate.

Now, attached to the AMT legislation were a handful of other tax credits -- very lovely Clintonesque credits that make it a little easier to pay for child care, job training, etc. Idea was that even if a taxpayer got slammed with AMT, they could keep those credits.

But with the increasing view that the AMT bill is going nowhere, you find 23 million taxpayers -- and that's a lot of people -- who will suddenly find out that their taxes for 2007 is a whole lot higher than they expected. And if you get hit with the AMT tax and were qualified for the extensions, you'll lose those, too.

On the other hand, the handful of Wall Street execs -- who have spent a boatload of money on K Street the past few months just to defeat this bill -- are breaking out the champagne and planning their vacations to Bali.

Sorry if it was too ambiguous before; AMT is complicated and few are sure whether or not they will get stuck with it at the end of the year. But this is a very big deal that will affect millions who are already dealing with mortgage problems, gas prices, and so on. It just sucks.

[truedelphi]

5. Thanks for the full explanation

I actually like the Huckabee idea of a VAT - I have known my share of marijuana peddlers who live better than you can imagine - not just from the gross income, but from the fact that they pay no taxes. ANd there are plenty of others who don't pay their share either.

With a 22% tax on anything anyone buys, and no income taxes, someone who lives (like I was doing ) in a high rent area and no longer actually buys anything other than food would not feel that the tax code is so punishing. Groceries and medication would not be taxed under this proposal.

[toopers]

7. It is not a VAT . . .

Huckabee is supporting the "Fair Tax", which is a sales tax. I do like the idea of a sales tax because it enforces the correct behavior.

[1932]

8. Sales tax is an even worse allocation of the tax burden.

The average american spends as much as they make (the savings rate is 0% or lower).

If you change from an income tax to a sales tax, you'd probably be taxing a lot of people on money they don't even get. That's like an income tax rate of 100+ percent. And how do people pay for consumer goods? With credit. So the act of paying tax would create interest profits for lenders. I don't think our tax system should be a subsidy for private lenders.

And you know who doesn't spend all or most of the money they make? The rich. The rich are rich because their income is so much higher than their expenses. Taxing the spending of the rich would be a tax on a tiny tiny percentage of their income.

So, how does it make sense to lower the effective tax rate on the rich and raise it on people with lower incomes?

It makes sense if you're a republican because that's what you're trying to do all the time anyway.

[truedelphi]

9. If you leave rent, groceries and meds out of the equation

Plus a certain amount for clothes and shoes, I think it would equalize things.

And that is pretty much what Huckabee has said. Whether he would slant it for the rich once
<horrors> he became President, I don't know.

I do know that middle income people in high rent areas don't spend money on anything but those
items I mention - if you make $ 32K a year, and your rent is $ 1200 a month, you have a modest car payment, transportation costs to work, your taxes take one third, and you have one child to add to the grocery bill, you really don't have money for anything anyway.

[1932]

12. See my reply just below

[1932]

11. Uh. Ok. So, who's paying taxes then? Where do we get the money to run the government?

You just advocated a massive tax cut for the rich, and, to make it fair, you're eliminating tax for the bottom 25%, and reducing it massively for another 30%?

Now we've reduced tax revenues by,what, 75%, and the people carrying the biggest tax burden are the two school-teacher families?

Why don't we just have a progressive income tax that ALSO progressively taxes capital gains?

That way everyone feels the burden equally, and we can pay for a society that can actually leverage assets to make everyone better off.

[truedelphi]

10. Thanks for the clarification.

DOubt the fair tax will make it - as they will scare people away from it.

One argument used is that it affects the older people most - and of course, at least here in California that is true.

They own homes they bought for a pittance, and if they put aside for their retirement, they travel,
have new cars, etc. Yet don't have to pay a penny more in property tax than they did in 1978 or whenever they purchased their current home.

The spenders should be paying more tax. The survivors should be paying little or nothing, instead of one third of their income.

[Ian David]

6. Another IMAGINARY Filibuster? Oh, holy fuck... why do we let them do this? n/t