There's a strange loophole in the federal tax code. Those Americans who become wealthy thanks to private-equity funds -- hedge-fund managers, vulture capitalists -- get to pay a special, lower tax rate. The result is a tax policy dynamic that's obviously unfair: some millionaires end up paying a lower rate than most of the middle class.
Democrats have proposed closing the loophole with something called the "Buffett Rule," which would require those who make $1 million or more to pay at least a 30% rate, and the Senate is scheduled to act on the proposal today. Is there any chance the measure might pass? Well, no -- Republicans have vowed to kill the proposal with a filibuster when Democrats try to bring it to the floor this afternoon.
When the Senate minority prevents an up-or-down vote today, they'll not only ignore the wishes of most members of the Senate, they'll also ignore the wishes of most of the country -- Gallup reported on Friday that Americans favor the Buffett Rule, 60% to 37%.
Gallup
As for why Republican lawmakers oppose the Buffett Rule, it's surprisingly tricky to get a coherent explanation out of them. Sen. Scott Brown (R-Mass.), an alleged moderate, explained late last week why he'll side with the far right against closing the tax loophole.
"We're in the middle of a three year recession," said Sen. Brown. "To raise taxes on anyone is a jobs killer."
First, we're not "in the middle" of a recession; we're actually at the beginning of a fragile recovery. Second, this isn't raising a tax; it's closing a loophole. And third, if Brown can explain in any depth why millionaire hedge-fund managers paying a lower tax rate than police officers creates jobs, I'd be very impressed.
Remember, this guy is what passes for Republican "centrism" in the 21st century.
As for the media, a variety of pundits have decided not to take today's Buffett Rule showdown seriously, dismissing it as a "gimmick." As others have already explained in detail, these pundits are making a mistake.
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The Hedge Fund Managers bought this change to the tax law in 2002.
Question of the day: Why do we have local and state elected offices?
Answer: To provide proof that when the wealthy select them for national offices that those they have bought will stay bought.
Not to worry. If there was anything even close to this getting passed in the senate, the Corporately Owned Dumbocraps would have rallied to protect their investors.
And you immediately lose all credibility by resorting to name calling. if you can't make a point without calling anyone names, you have no point.
KMG365: Amen!! So many people on this forum can't make their point by name calling. Bravo to you for calling them out!!
Thought about this one for a while...
Baucus D-MT
Begich D-AK
Conrad D-ND
Feinstein D-CA
Johnson D-SD
Landrieu D-LA
LIEberman I-AIPAC
Manchin D-WV
Nelson D-NE
Pryor D-AR
Schumer D-Wall Street
Tester D-MT
Is the objection to referencing these as Corporately Owned or to referencing these as Dumbocraps? Is 'dumbocrap' any worse than referring to democratic senators as Blue Dogs?
Is there an objection to the above list whose members take turns voting with the repuknican senators to keep the wealthy protected from the peon classes?
A point I would make is that if Obama is reelected and the democrats supposedly have a veto proof majority, they will not have a real veto proof majority because of the 'democratic' senators listed above.
Dumbocrap Senators / Repuknican Senators / Blue Dog Senators / Rethugnican Senators / Corporately Owned Senators of Both Parties ...
What is name calling and what is oblique references to the truth?
The vote will be on ending the filibuster so those senators can vote for the end without voting on the merits of the bill. Republicans are not going to let it proceed under any circumstances so the vote on the filibuster allows those Dems to have a vote without consequences.
Since we are having these extreme weather conditions with tornadoes, are these Republican Governors still denying that Global Warming exists? Is the GOP/Republican Party finally publicly going to admit to the people that we have to do something about these catastrophic events?
As soon as the oil and coal industries stop financing them. Or when the oceans have risen to the point where most of the east coast is uninhabitable. My bet would be on the 2nd.
With apologies to Joseph Conrad, "The Heart of Darkness" spoke yesterday in Cheyenne, Wyoming:
"I can't think of a time when I felt it was more important for us to defeat an incumbent president today with respect to Barack Obama. I think he has been an unmitigated disaster to the country," Cheney said .
-and that is why the "Buffett Rule" will not pass.
As for why Republican lawmakers oppose the Buffett Rule, it's surprisingly tricky to get a coherent explanation out of them
I can answer that. They don't want to pass it because then THEY would have to pay more in taxes.
Does the bill in question mean that those who make millions via capital gains pay 30% on income over a million? Or just hedge fund managers?
Since the actual wording of the legislation has yet to be written, it appears that the intention is that once your income crosses $1,000,000 then your tax rate goes up to 30% for all of your income from dollar one. However if your AGI is $999,999 then your effective tax rate would be unchanged from what the current tax code allows. So the unintended consequence of enacting this moronic legislation is that individuals would manage their dividend income and defer capital gains to be below $1 million. I doubt that the treasury would collect anywhere close to the $4.7 billion of projected additional annual revenue from this surtax.
I was wondering how the legislation closes the Buffet Rule. It would be a little easier for us to discuss if we knew how the legislation worked. After all we are all sensitized to tax talk the next day or so.
The Democrats have to make the Republicans pay for their position. Any bets as to whether Democrats are able to pull that off?
http://thomas.loc.gov
A special tax on private-equity funds is not a 'strange loophole' in the tax code. The law was passed with help from plenty of Dems back in the early Bush II days (excuse me while I barf.) This is why the Democratic Party is such a tricky institution. I mean, I voted to elect Senator Sherrod Brown back in '06, but in exchange I also got the likes of Ben Nelson, Joe Lieberman, and Blanche Lincoln, and the '08 large Democratic majority in both the Senate and the House was unable to pass, say, a one-payer health insurance law, and not that long ago Obama was more than willing to screw around with SS and Medicare.
How about a special tax on politicians. Maybe 1% tax on income for each lie during the year?
The whole "job creator" schtick has gotten old. In our consumer driven economy, aren't the real "job creators" consumers? Without demand businesses don't hire. Without our spending, they won't hire. I don't see where reduced taxes on the wealthy really makes a difference. After all. we've seen the lowest job creation rates since WWII under the bush tax cuts.
The problem is that the Democrats have been so cowed by the Republican noise machines for the last thirty years that they are afraid to be Democrats.
We also need new economic rules for recessions. The classic rule of not raising taxes during a recession does not apply when one of the major cause of the recession is a tax system that favors the rich in such a way that all the money goes to the top and the rest of us do not have enough money to spend. One of the major causes of the Great Depression, according to the very liberal Milton Friedman, was that most of the money got stuck in the bank accounts of a few rich people.
The main cause of the Great Recession was that too much money got sucked up by speculation on Wall Street. When the housing bubble burst, much of that "money" simply disappeared because it was not really money at all. Money is a medium of exchange. When it sits in a bank account, it does not really exist. It is like electricity. When it is not flowing into the real economy, it does not really exist.
Those rich people who are contributing to the real economy by producing real goods and services get hurt in a recession because consumers cannot buy their goods and services. I do not know that a hedge fund produces a single thing that can be called real wealth. They just grab as much of the wealth that others create and sequester it in the Camen Islands or a Swiss bank account. It then disappears as real money. It certainly does not create any jobs. It should be taxed so that the government can return it to the real economy by purchasing goods and services that the country at large needs, such as roads and bridges, teachers, police, etc.
Governments create jobs by purchasing goods and service we all need but cannot pay for by ourselves. Hedge funds do not create jobs.
I have it on good authority that Bain Capital created jobs! Somewhere between 20 to 30 of them in their corporate offices. Which is about average for the number of employees in the big hedge fund offices.
Bravo to this.
I've been saying for years that the problem with the economy is that nobody seems to understand what money really is or how it works. Thus we end up with absurd redistribution of economic clout based on nothing more than a collective fantasy.
bflynch, Good comments. But Milton Friedman was a very conservative economist! He opposed all of Keynesian economics for a strict monetary policy. He despised the Fed. but only barely acknowledged that since it existed the ONE thing it could do was control (tightly) the supply of money.
They PRETEND and scream for tax reform , then knock it down when it is presented , the media has a historical roll in keeping the status quo on such legislation , the majority of the nation know it is the right direction , but the minority will never allow it to happen
IMO That is why we should focus on rooting out the real barrier to passing such bills , kill the super majority rules , the leadership will sell you the line that it will come back to haunt dems , I say poppycock , and I'm done falling for that line , if they can get 51 senators to vote to destroy soc security , have at it , just like the polls on the BUFFET RULE show , the majority of americans would trash the gop out of office if they pulled that
It would expose dems and repubs for what they stand for immediately, instead of watching them play politics endlessly , it would undermine the lobbyist , because RIGHT NOW alls they need it to buy 1 or 2 senators , the reason Reid and Co will not do it has everything to do with the billionaire corporate lobbyist not allowing them to do it imo , BECAUSE THEN WE WOULD HAVE AN EFFICIENT RUNNING GOVERNMENT , that actually accomplishes something
One thing no one ever seems to mention is that when these "investors" are making money, they are taking it out of companies, thus not creating any jobs whatsoever. If they leave the money in the companies they will have no profit to be taxed on, but long term growth and stability for the companies they have invested in. The long term investor has all but disappeared.
There will always be loopholes for the rich. They will always pay nothing or next to nothing compared to people that get a secretary's salary. Then there is always that offshore account. Or is that accounts?
When they control the money, the laws, and business in general, they make all the rules and they are not going to make rules against themselves.
Summing up a recent panel discussion concerning the Buffett Rule, Howard Gleckman of the non-partisan Tax Policy Center writes that "We pretty much agreed that imposing a minimum tax of any kind is an admission of policy failure. If the president thinks the rich don’t pay enough, he ought to restructure the tax code so they do, not stick on yet another Band-Aid." http://bit.ly/IGp8od
Gleckman is right, Implementing the Buffett Rule won't change the core problems of our tax system, especially when estimates from the Tax Policy Center show that on average millionaires already do pay a 29% tax rate, which is higher than the average American family. http://bit.ly/yyLJDp
No one proposed that it would fix our tax problems. This is a straw man argument. You are arguing against a false hypothetical. The Buffet Rule is meant to help the current tax system by closing a tax loophole that's currently in existence. In doing so closing this 1 loophole will pay off about 4% of the federal deficit. No one pretended nor presented this like it would represent complete tax reform: in fact President Obama said that it did not represent tax reform explicitly. But what it does do is help us to close one of many tax loopholes that need to be closed.
Why is Obama the arbiter of setting the threshold for the buffet rule at income over $1,000,000? Why isn't the threshold set at $1,250,000, $900,000 or $750,000 or $500,000? For any other sub-set of our population who was singled out and penalized, this would be decried as discrimination. Fact is that the buffet rule is bad policy. The real debate should be whether income earned on dividends and long term capital gains should be taxed at a lower rate than earned income. I believe that it should be to encourage saving and investment over consumption. However if the majority feel that it shouldn't enjoy a preferential tax treatment, then we should raise the dividend and cap gains rate for everyone and not arbitrarily raise it for those over $1,000,000 in annual income.
Le sign.
The Mouzer,
Actually, the real problem isn't that all capital gains are being taxed at low rates, but more that “carried interest” is taxed at low rates.
The carry allows private equity managers overseeing an investment deal to receive their compensation as tax-advantaged capital gains instead of as salary, which is taxed as ordinary income. http://bit.ly/xsYfBg
The problem with the Buffett Rule, and the reason I am not in favor of it, is that it wouldn't do anything to fix this problem specifically. In other words it doesn't close any loophole, it would just put a band-aid over it, and a very flimsy one at that.
Instead of saying the rich need to pay more, we need focus on overhauling the tax code using a Bowles-Simpson like plan so that it promotes economic growth and collects the required amount of revenue to support the needs of our country.
Well, SadOldVeteran called it!
Pryor (D-AR) voted against cloture.
Wikipedia tells us that "Pryor has expressed opposition to abortion on demand, and voted in favor of the partial birth abortion ban"
Recall, the Republicans didn't contest Mark Pryor's seat in 2008 and his seat is not up for election until 2014. Why doesn't he vote with his Party? Maybe he is soon to join the "Citizens United" party!