http://www.nasdaq.com/aspxcontent/NewsS ... 01107.htm&
Second, from the NY Times...UPDATE:Rangel Tax Plan's Centerpiece Is 30.5% Top Corp Rate
(Updates with source saying all industries included in proposal to tax financial managers' carried interest as regular income)
By John Godfrey
OF DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Corporations would see their top tax rate cut to 30.5% from 35% under a tax plan unveiled Wednesday by House Ways and Means Committee Chairman Charles Rangel, D-N.Y., to fellow committee members.
Rangel plans to publicly announce the plan Thursday morning.
To offset the cost of the lower tax rate, the plan would alter a number of business tax provisions, according to lawmakers, congressional staff and lobbyists familiar with the plan as outlined Wednesday night.
The plan will repeal a tax deduction for domestic manufacturers. It will prevent companies from using an accounting method known as last-in, first-out, or LIFO, that can cut their taxes during times of rising prices. Repealing LIFO could result in a substantial tax for companies currently using the method, but aides briefed on the plan say the change would be phased in over eight years, thereby blunting the initial impact.
The plan would also require companies to defer deductions for certain expenses of foreign subsidiaries of U.S. companies until the money is repatriated to the U.S.
A lobbyist tracking the bill said the provision would likely hurt those who benefited most from an October 2004 Act allowing a one-time amnesty to repatriate foreign income at reduced tax rates. Companies lobbied for the break arguing they would be able to use the money to create new jobs, but there has been little evidence to suggest that is what happened.
"That's going to get thrown into their faces," the lobbyist said.
Middle and upper-middle income families would benefit under the plan by a repeal of the alternative minimum tax starting Jan. 1, 2008.
Upper-income families, however, would pay for that repeal with a 4% surtax on incomes above $150,000 for a single earner or incomes above $200,000 for a married couple. That surtax would grow to 4.6% for incomes above $500,000.
The surtax will also make possible an expansion of the earned income tax credit, an increase in the standard deduction, and an increase in the value of the child tax credit for those earning too little to owe federal income taxes.
A third section of the plan would address a number of pressing tax issues, including a temporary patch of the alternative minimum tax prior to Jan. 1, 2008, and the extension of a number of expiring tax provisions.
Absent a patch, the alternative minimum tax will expand to hit roughly 25 million taxpayers, up from 4.4 million in 2006, increasing their taxes by a total of nearly $50 billion, according to congressional estimates.
Expiring tax breaks, known colloquially on Capitol Hill as "extenders," include the research-and-development tax credit, tax breaks for teachers buying schools supplies and a deduction for state and local sales taxes.
Part of the cost of the third section of the bill would be offset by taxing carried interest paid to financial managers as regular income and not as capital gains. While some said the change wouldn't apply to real estate investment trust managers, a source familiar with the plan said all industries are included.
Revenue-raising measures in this third section also include a tax on deferred compensation plans of offshore hedge funds and a requirement that financial service providers give customers information on basis of sold securities.
The plan also changes current laws to require small businesses in the services sector to pay payroll taxes for their workers.
Rangel doesn't expect his plan to come to a vote before the House this year. But the third section of temporary provisions will be stripped from the plan and introduced as a separate bill next week.
Rangel said Wednesday night he may disaggregrate the bill further, splitting the third section into an AMT patch bill and an extenders bill, both with separate revenue offsets.
This two-bill approach could help Senate Democrats maintain fiscal discipline.
Lawmakers there are balking at raising revenues to offset the cost of the AMT bill. Separating the extenders from the AMT bill, therefore, could protect the extenders from getting stuck in that fight, Rangel said Wednesday night.
http://www.nytimes.com/2007/10/25/busin ... nted=print
Lastly, from the Ways and Means Committee Ranking Member Jim McCrery (R)WASHINGTON, Oct. 24 — The House’s leading Democratic tax writer will propose a sweeping overhaul of the tax code on Thursday that would increase taxes on many people with incomes above $200,000 but cut them for most others.
The bill, to be introduced by Representative Charles B. Rangel of New York, chairman of the Ways and Means Committee, would also overhaul corporate taxes by eliminating many major tax breaks and lowering overall tax rates.
Mr. Rangel has acknowledged that he does not expect to enact such a bill this year, and President Bush would almost certainly veto legislation that raises taxes on the wealthy.
The plan is probably most important as a preview of what Democrats are likely to pursue after the 2008 elections, especially in rolling back a good part of Mr. Bush’s tax cuts for people at the top of the income ladder.
On individual taxes, the heart of his plan calls for eliminating the alternative minimum tax — which was originally created to prevent millionaires from taking too great advantage of tax breaks but now touches people with upper middle incomes and is poised to affect tens of millions of families with incomes as low as $50,000 a year.
Eliminating the alternative tax would reduce projected revenue by almost $800 billion over the next 10 years, according to Congressional estimates.
Mr. Rangel’s bill would also expand some tax breaks for middle- and low-income people. It would increase the standard deduction, at a cost of $48 billion over 10 years. And it would widen the earned- income tax credit, which primarily benefits working single parents with low incomes, to include more low-income workers who do not have children. That would cost $29 billion over 10 years.
To offset the cost of those reductions, the bill would impose a new “replacement tax” for the top 10 percent of income earners who would have otherwise had to pay the alternative minimum tax.
The replacement tax would not apply to couples with incomes as low as $200,000, but aides to Mr. Rangel said many people with incomes as high as $500,000 would still end up with at least slightly lower taxes than under current law.
In effect, the bill would roll back a big part of Mr. Bush’s tax cuts for people with top incomes. In that respect, it is similar to the general positions on taxes that most of the Democratic presidential contenders have taken.
On Wednesday, Mr. Rangel described his plan as harking back to the tax overhaul of 1986, which was negotiated in Congress and signed by President Ronald Reagan. That legislation eliminated scores of tax breaks and sharply reduced the highest rates.
“It is my hope that the Bush administration will seize this opportunity,” Mr. Rangel said in a written statement, “as the Reagan administration did 21 years ago, to work with Congress to simplify the tax code and put money back in the pockets of working families.”
That is unlikely to happen, because Mr. Bush views his tax cuts as one of his signature achievements.
In contrast to the bill’s provisions for individual income taxes, Mr. Rangel’s proposals for corporate taxes are in many ways similar to ideas championed by Treasury Secretary Henry M. Paulson Jr.
Mr. Paulson has argued that it is possible to reduce corporate tax rates substantially by eliminating breaks like the tax credit for research and development and by simplifying the tax code.
Mr. Rangel’s plan would reduce the top corporate rate to 30.5 percent from 35 percent now, costing an estimated $364 billion over 10 years.
To make up for that lost revenue, the bill would eliminate a variety of tax breaks — many of them ones business groups fought hard to achieve in a sprawling corporate tax measure just three years ago.
Mr. Rangel’s biggest revenue-raiser would come from eliminating a special tax break on profits from domestic manufacturing — a provision that Democrats championed in 2004 over the opposition of Mr. Bush.
But even if the administration agrees with that idea, it is likely to oppose provisions that would make it harder for American companies to escape income taxes on profits from their foreign subsidiaries. Those provisions would raise $106 billion over 10 years, but they affect tax breaks that provide major benefits to the pharmaceutical industry, international banks and globe-spanning conglomerates like General Electric.
http://republicans.waysandmeans.house.g ... NewsID=133
Being someone who isn't rich and doesn't know how much taxes impact the rich, I'm all for increasing tax rates for the wealthy. I suspect though, that the misinformation around this topic will be (or already is) clouding the issue.My Friends,
At a bipartisan Ways and Means caucus last night, Chairman Rangel outlined his long-awaited “Mother of All Tax Hikes” legislation. The basics of the package are simple: This is the largest individual income tax increase in history.
The bill will add a 4% surtax on Americans earning more than $150,000 a year ($200,000 for couples). That is on top of the scheduled expiration of the 2001 and 2003 tax cuts. So, under Democrats’ plan, over the next few years, the individual income top tax rate in the United States will rise from 35% to 44%. By way of comparison, the other 29 Organization for Economic Co-operation and Development countries – basically other developed nations - have an average top marginal tax rate of 35.7%. In fact, only five OECD countries would have higher top marginal tax rates in 2011 than the United States if the Democrats’ bill is enacted.
This crushingly high tax rate will affect approximately 10 million taxpayers directly - including those who report business income, like small business owners and farmers - but the damage will ripple throughout our economy. Because small businesses and family farms often pay their income taxes as individuals, this is a massive tax hike on the engine that drives job growth in this country.
In addition, the surtax is on adjusted gross income, not taxable income. This sounds like a technical issue, but it means that Rangel’s bill will erode the value of a series of tax deductions – including for mortgage interest, charitable giving, medical expenses, state and local taxes, and the standard deduction. And, because the surtax kicks in at $150,000 for individuals and $200,000 for couples, the bill creates a monster of a marriage penalty.
Chairman Rangel will claim that these tax increases go to provide tax cuts to 90 million Americans, but he is selling pure snake-oil. Many if not most of those taxpayers are getting a purely imaginary “tax cut.” Some of them are the roughly 20 million people that Republicans shielded with the Alternative Minimum Tax patch. Millions more are people who have benefited from the 2001 and 2003 tax cuts, and only get “tax cuts” if you assume that the 10% bracket, marriage penalty, and $1,000 per child tax credit will expire. Others, like single people who will now be eligible for the Earned Income Tax Credit, are getting a tax refund from the government even though they don’t actually pay income taxes.
It will take time to analyze this bill and sort through the data, but we know from the start that the 90 million figure is pure hokum. In fact, before you know it more taxpayers may wind up paying higher taxes – and fewer paying less - under Rangel’s plan than they did last year.
Which brings us to the larger fallacy of the Democrats’ “paygo” system. There is no need to “pay for” protecting taxpayers from a massive AMT tax hike. The government never meant for the AMT to affect middle-class Americans, and we have a responsibility to make sure it doesn’t. By arguing that preventing this tax increase requires us to raise taxes elsewhere, Democrats are trying to lock Congress into a system where we are guaranteed to raise taxes by $3.5 trillion over ten years.
That’s right. $3.5 trillion. The baseline that the Democrats are using for “paygo” includes revenue from an “un-patched” AMT and from the tax increases that occur when the 2001 and 2003 tax laws expire after 2010. Together they total $3.5 trillion over ten years. If we play by the Democrats “paygo” rules, that is the size of the tax increase we are imposing on the American people. That will hurt our nation’s competitiveness and cost us American jobs. The Rangel bill is the first step down a road none of us want to follow, and I urge you to oppose it strongly.