Republicans and Democrats want to close this tax loophole

There is general, bipartisan support in closing carried interest loophole following the presidential debate. This brief will help keep you updated on that and other tax news.

Mark J. Terrill/AP/File
In this photo taken Wednesday, Sept. 16, 2015, Republican presidential candidates, from left, Ben Carson, Donald Trump, and former Florida Gov. Jeb Bush chat during the CNN Republican presidential debate at the Ronald Reagan Presidential Library and Museum in Simi Valley, Calif.

Whither carried interest? The New York Times considers a growing bipartisan consensusagainst the loophole, fueled by this week’s GOP presidential debate. “Carried interest” refers to the share of investment gains earned as compensation by hedge fund managers, private equity executives, and venture capital partners. If the fund performs well, the manager does well—and his compensation is taxed as capital gains, not ordinary income. Last year the top 25 hedge fund managers earned about $467 million each. Is their tax treatment  fair? TPC’s Eric Toder doesn’t think so: “Look at salesmen who work on commission. Their compensation is at risk, too, but they don’t get to treat their income like a capital gain.”

Speaking of fairness: Mass transit riders should get the same tax break as car commuters, say 52 House members. US drivers can set aside $250 a month in pre-tax income to pay for commuter parking. That’s not fair, says a bipartisan group US representatives, since mass transit users can only exclude $130 a month for their commuting costs. The House members sent a letter to the House Ways & Means Committee asking for equal treatment, but the idea will probably get derailed.

Senate pressure grows to ditch the “Cadillac Tax.” Nevada Republican Dean Heller and New Mexico Democrat Martin Heinrich introduced a bill to repeal the 40 percent tax on high cost health insurance plans yesterday. Repeal would add $87 billion to the debt over 10 years and President Obama would veto it, even if Congress could pass the measure.

In Colorado, a pot tax holiday may have boosted sales, or just delayed purchases. Under its Taxpayer Bill of Rights, the state had to waive taxes on recreational marijuana on September 16 because  revenues exceeded budget expectations. Colorado collects a 10 percent retail tax on buyers and a 15 percent excise tax on growers. On the holiday, sales at one dispensary exceeded combined sales in the previous five days. The Associated Pressreports that shoppers saved about $20 an ounce, while pot growers saved about $300 a pound. Question is, did people really buy more or did they just wait a few days to take advantage of the tax break?

And in Boston, maybe a tax on booze. City Council President Bill Linehan wants a 2 percent tax on alcohol sold in the city. Under the proposal, annual tax revenue of $20 million would fund addiction services. If the City Council passes the measure after a hearing September 24, the proposal would need to be approved by the state legislature and signed by the governor. Massachusetts residents voted in 2011 to eliminate the state’s 6.25 percent alcohol sales tax.

The European Union can now cast a wider net. All member countries have now agreed to cooperate with the EU’s corporate tax investigation (Wall Street Journal paywall). Regulators have asked for ten to twelve tax agreements with companies from each nation. They’ll be able to see how tax rulings are used in each nation, and determine whether any break EU law.

The post All’s Fair in Tax Breaks and Hikes… Or Not. appeared first on TaxVox.

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