Aiming to put the needs of Main Street ahead of Wall Street, the House Friday approved legislation to clamp down on corporations that avoid paying taxes and provide incentives to create American jobs.
It’s now up to the Senate to decide whether to maintain a provision of the bill that would close a loophole that gives preferential treatment for wealthy investment fund managers who pay the same taxes as other Americans who make much less.
The House passed the the American Jobs and Closing Tax Loopholes Act by a vote of 215 – 204, which would curtail tax avoidance by multinational corporations and lessen the incentive to move jobs overseas. The act also would tax the income of investment fund managers as income and not at the 15 percent capital gains rate, which is the current practice.
It also would aid small business lending, and help spur job creation through infrastructure projects and other provisions, according to a summary of the bill provided by the House Ways and Means Committee.
“This is a jobs bill,” says Ways and Means Committee Chairman Sander Levin (D-Mich.). “It will create more jobs and help sustain the recent job creation and recovery we have seen in recent months. This bill spurs job creation through tax cuts and loan relief to small businesses, as well as bond provisions to fund infrastructure improvements in our cities and towns. This bill provides more than $26 billion in tax relief for families and incentives for businesses and infrastructure improvements to create jobs. We pay for these investments in families and businesses by closing loopholes that encourage companies to ship jobs overseas.”
Major labor unions and consumer-interest groups hailed the new legislation for putting the interests of average Americans ahead of the desires of big corporations and banks.
“These tax reforms couldn’t come at a more important or more appropriate time. This bill ends the practice of subsidizing Wall Street gamblers who get a tax break for getting up in the morning and doing their jobs. It changes a system that rewards corporations that move jobs and profits offshore,” says Nicole Tichon, tax reform analyst for U.S. Public Interest Research Group (U.S. PIRG). “These are simple, common sense ways to simultaneously make the tax system more fair and help restore fiscal responsibility.”
Jim Hoffa, general president of the 1.4 million-member Teamsters union, praised a number of the bill’s provisions, including measures that would protect pensions, limits to companies’ ability to avoid paying taxes, and extension of unemployment benefits.
“For most working families, this country is still in a recession,” Hoffa says. “Extending unemployment benefits not only help workers who’ve lost their jobs, but they help the economy as a whole because recipients spend them quickly in their local community.”
Lawmakers left Washington for the regular congressional Memorial Day recess. The Senate, though, is expected to consider the bill when it reconvenes in June. Supporters of the legislation say they will want to see how senators treat the so-called “carried interest” provision contained in the House bill.
The Carried Interest ‘Injustice’
The House bill closes the “carried interest” loophole that enables wealthy traders on Wall Street making tens of millions of dollars annually to pay the same tax rate as an American making just $34,000 a year or less, Tichon says.
Tichon sent Senate Finance Committee Chairman Max Baucus (D-Mont.), and ranking Republican Charles Grassley of Iowa a letter earlier this month, urging them to keep the loophole closed in the final legislation.
“To put the injustice in perspective, a single person qualifying for a 15 percent rate makes $8,375 – $34,000 per year. But top fund managers, who also pay a 15 percent rate, bring home at least $75 million per year in [a] ‘down year’ and as much at $570 million in a good year,” the letter says. “Two types of workers, with an income spread of multiple millions, are taxed the same.
“While millions of Americans lost their jobs, their savings, their retirement, their health care and their homes, why is Washington in the business of subsidizing some of the very people who bet on the market collapse? It’s unfathomable that by simply mislabeling their income these mega-millionaires are taxed at a rate less than teachers, police officers and small business owners, for example,” she adds.
Those who don’t want to see the loophole closed have characterized its closing as a “tax increase,” when “in fact it is just treating these employees and employers like the rest of us,” Tichon notes.
“Similarly situated workers are taxed at a rate of 35 percent and have payroll taxes added on as well,” she says.
The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.