The S Corporation Association joined with more than 40 other organizations in a letter to Congressional leadership calling for action on to pursue comprehensive tax reform that lowers rates on all forms of business income while also addressing entitlement spending. States the letter:
[W]e call on Congress to avoid raising marginal tax rates on employers, either as part of negotiations over the fiscal cliff, or as part of larger effort to reform the tax code. Instead, Congress should seek to enact comprehensive tax reform that simplifies the tax code and encourages economic growth for both pass-through businesses and corporations.
[W]e are eager to see Congress enact permanent, comprehensive tax reform, but this alone will not solve the long-term fiscal imbalance. The Trustees to Social Security and Medicare have made clear that, absent reform, these programs are unsustainable. While Congress should commit to tackling comprehensive tax reform, it is also imperative that Congress agree to develop a long-term plan to address America’s entitlement programs as well.
Simply put, we need to reform our tax code and we need to reform our entitlements.
Spearheaded by your S-CORP team, the letter was sent up to the Hill yesterday and immediately garnered attention on the Hill and in the press, including a Fox News segment on the fiscal cliff. You can check it out in the segment below.
Ways and Means Republicans and House Majority Whip Kevin McCarthy were among those who rapidly issued statements in reinforcing the message in the letter.Said McCarthy, “ The role of small businesses in our economy must never be understated: they are the engine of job growth in this county, and their voice belongs at the table.” We couldn’t have said it better.
With everybody focused on the fiscal cliff negotiations, S-CORP and a coalition of organizations representing pass-through businesses are doing our best to make sure the voices of private businesses are heard. Our next task is to take this letter to the Hill to help reinforce this message.
More on the Buffett Tax
Warren Buffett continues his crusade to raise taxes on everyone but himself. We’ve pointed out the flaws of his arguments in past posts, including the observation that by almost every credible measure of respective tax burdens, the underlying premise of the “ Buffett Tax” is flawed — as the federal tax code is already sharply progressive.
Rather than repeat the same points, this time we’ll turn to Harvard Professor Greg Mankiw to make the obvious more clear:
A Master of Tax Avoidance
Warren Buffett has an op-ed in today’s NY Times on one of his most popular themes: The rich should pay more in taxes. At first blush, his position seems noble: A rich guy says that people like him should pay more to support the commonweal. But on closer examination, one realizes that Mr. Buffett never mentions doing anything to eliminate the tax-avoidance strategies that he uses most aggressively. In particular:
- His company Berkshire Hathaway never pays a dividend but instead retains all earnings. So the return on this investment is entirely in the form of capital gains. By not paying dividends, he saves his investors (including himself) from having to immediately pay income tax on this income.
- Mr. Buffett is a long-term investor, so he rarely sells and realizes a capital gain. His unrealized capital gains are untaxed.
- He is giving away much of his wealth to charity. He gets a deduction at the full market value of the stock he donates, most of which is unrealized (and therefore untaxed) capital gains.
- When he dies, his heirs will get a stepped-up basis. The income tax will never collect any revenue from the substantial unrealized capital gains he has been accumulating.
To be sure, there are pros and cons of changing the provisions of the tax code of which Mr. Buffett takes advantage. Tax policy always involves difficult tradeoffs. But it seems odd to me that whenever Mr. Buffett talks about taxing the rich more, the “loopholes” that he uses never seem to enter into the conversation.