Terrific: Senate Dems offset cost of student loan bill with higher taxes on small business

posted at 12:41 pm on April 26, 2012 by Morgen Richmond

Let the games begin. With Romney expressing his support earlier this week for extending the freeze in student loan interest rates, defusing this as a wedge issue just as the President was embarking on his college tour, Democrats in the Senate have decided to counter with, what else, the class warfare card. Via Bloomberg (emphasis added):

Senate Democrats and the White House are seeking a one-year freeze in the interest rate. The $6 billion cost would be offset by limiting a tax provision that allows some owners of so-called S-corporations to avoid paying Medicare payroll taxes on their earnings, Senator Tom Harkin, an Iowa Democrat, told reporters yesterday.

Harkin said the legislation would require the Medicare payroll tax on income of more than $250,000 a year earned at S-corporations with fewer than three shareholders.

“This is a loophole that needs to be closed anyway,” he said. “So this is the right time to do it and for the right cause.”

Current law exempts the profits earned by S-corporations from Social Security and Medicare taxes, taxing only the salaries earned by shareholders who are employed by these firms. The IRS requires the allocation of reasonable compensation for work performed, so closely held S-corporations cannot (legally) classify all of their net income as profits, thus bypassing these payroll taxes. To call it a “loophole” is disingenuous. It’s no more a loophole than hundreds of other avenues through which businesses and individuals can cheat on their taxes, if they are willing to subject themselves to the consequences of breaking the law.

Millions of small, family owned businesses around the country are classified as S-corporations, and would be caught up in this tax net for no reason other than that they are small, and successful. And keep in mind that the profits which are credited to shareholders of S-corporations often remain in the business, funding the salaries of new employees and other investments.

The worst of it is that this a new, permanent tax on small businesses – $9 billion over 10 years according to the CBO -  to fund the cost of just one year of the interest rate freeze ($6 billion). If this is the “right cause” then the cause isn’t long-term financial relief for college students, it’s the re-election prospects of Democrats in November.

Backing this bill would be a dangerous precedent to set ahead of the real class warfare battle to come this summer, and thus Republicans in Congress, as well as the Romney campaign, should withhold their support unless another means is found to pay for it.


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Ed – here’s the problem.

You’ve done a 180 from the TrueCon position you held during the primaries. If what you’re saying today is your true beliefs, why did you fight so hard for Santo? He agrees with nothing you’ve been stating for the past few weeks.

So why are you here?

budfox on April 26, 2012 at 3:03 PM

http://www.irs.gov/taxstats/bustaxstats/article/0,,id=96405,00.html

angryed on April 26, 2012 at 2:57 PM

Your link did not work.

Is there data to support your claim that S corp are (in the vast majority) business consultants with little to no start-up costs or overhead? I didn’t ask how many employ people other than the shareholders.

totherightofthem on April 26, 2012 at 3:06 PM

Yes. Shareholders. As in an s-corp with 2 shareholders doesn’t employ anyone. Once a company gets big enough to need employees, the shareholders go LLC or regular corp.

Flyover country….wasteland of thinking.

angryed on April 26, 2012 at 2:53 PM

I am one of 76 owners in a S-corp. We employ 17 employees at two branch locations.

Widdle angwyed wivs in mama’s basement….a wasteland of thinking.

lakeman on April 26, 2012 at 3:08 PM

It’s a tax dodge. Someone doing the exact same job as a W2 employee or as a sole proprietor making $300K pays Medicare on all $300K. That same person doing the exact same thing but is paid via an S-corp pays Medicare on only $200K. That’s the only reason anyone would go the S-corp route. Might as well be called the “Evade Medicare Tax Corp”.

angryed on April 26, 2012 at 1:19 PM

It is difficult to find something more amusing than someone who does not operate a business talking about how and why the businesses are structured in a specific way.

Only a true -retard- would operate any business in the US as a sole proprietor for the reason of liability. One also needs to be rather stupid to operate a small business as a C-Corp due to the double-taxation of profits.

EvilCapitalist on April 26, 2012 at 3:08 PM

Shoe me 2 posts where I fought for Santorum. As usual you people live in imaginary world. I was against Romney, I was not for Santorum. I know logic is hard for you people.

angryed on April 26, 2012 at 2:59 PM

Bullshit, Ed.

It’s not my job to dig up your endless TrueCon screeds.

Everyone here knows exactly what I’m referring to.

As I said, I knew you would try and redefine your position. So, we’ll play that game.

You were pro-Santo only because you were anti-Romney.

It still does not change the fact that any position you’ve taken since then, does not correlate with one GOP nominee. Not even Scott Brown, Snowe or Collins agrees.

I’d say you were a Paulnut, but he would disagree with your position on S-Corps.

So, I’ll ask again.

Why exactly are you here?

budfox on April 26, 2012 at 3:10 PM

Ok, self-edit…

The Democratic party is the party of slavery.

The Republican TEA party is the party of freedom.

ITguy on April 26, 2012 at 3:11 PM

I know math is hard in flyover country.
 
angryed on April 26, 2012 at 2:48 PM

 

Flyover country….wasteland of thinking.
 
angryed on April 26, 2012 at 2:53 PM

 

And FWIW, math is extraordinarily easy here in flyover country.
 
You don’t spend more than you make, and you expect people to pay their bills.
 
rogerb on April 26, 2012 at 2:52 PM

 
I agree 100%.
 
angryed on April 26, 2012 at 2:54 PM

 
I like you. You’re funny.

rogerb on April 26, 2012 at 3:12 PM

angryed on April 26, 2012 at 2:59 PM

Bullshit, Ed.

So, I’ll ask again.

Why exactly are you here?

budfox on April 26, 2012 at 3:10 PM

Because he has lost his mind. Last year he seemed generally reasonable.

arnold ziffel on April 26, 2012 at 3:13 PM

I’m not blaming anyone. I’m stating a fact. Do you think it’s fair that someone making $150K a W2 employee pays Medicare Tax on $150K but someone else doing the exact same job but doing it as an S-corp pays Medicare on only $100K?

angryed on April 26, 2012 at 1:29 PM

Yes, I think it is more than fair. In fact, the difference should be quite a bit more – when you want to have no skin in the game, you should pay a lot more in taxes for -security- of someone else paying you.

Oh and you stop spreading garbage – S-corps have shareholder limits, not employee limits.

EvilCapitalist on April 26, 2012 at 3:13 PM

Once again, like with healthcare, everyone’s looking at who pays the bill (or who can we tax, or confiscate money from, to pay the bill), instead of asking WHY is it so expensive?

*sigh*

Violina23 on April 26, 2012 at 2:48 PM

Aha! The question that never seems to get asked…

J.H. on April 26, 2012 at 3:18 PM

Yes. Shareholders. As in an s-corp with 2 shareholders doesn’t employ anyone. Once a company gets big enough to need employees, the shareholders go LLC or regular corp.

Flyover country….wasteland of thinking.

angryed on April 26, 2012 at 2:53 PM

To further point out your complete lack of understanding regarding S Corps, I have an S Corp client with 2 shareholders and 125 employees. I repsectfully suggest that you should not make tax arguments without doing a little research.

Ann on April 26, 2012 at 3:19 PM

I’d say you were a Paulnut, but he would disagree with your position on S-Corps.

budfox on April 26, 2012 at 3:10 PM

He ain’t with us!

thirtyandseven on April 26, 2012 at 3:19 PM

Sure. Happens all the time. Employees quit their job or are laid off, go back and do literally the exact same job as a “consultant”.

angryed on April 26, 2012 at 1:48 PM

And that’s fantastic – I wish every non-hourly employee was fired by every company and made into an independent contractor.

The moment they have to file their estimated taxes four times a year, comply with all the other paperwork filings, be forced to collect the stupidest receipts ever for the IRS, justify mileage logs on the vehicles and deal with having to depreciate a $101.17 phone ( because it is over $100.00 and its expected life expectancy is over 1 year ) leftists would be ran out of the country with the sticks by the angry mob of graphic designers, secretaries and copy editors.

EvilCapitalist on April 26, 2012 at 3:20 PM

Great! If this becomes law my small business will be subsidizing more Peruvian Bongo Studies and “Grievance” degrees. This will,of course, add even more people to the pool of college graduates that possess “talents” that are absolutely useless to businesses.

This plan is really another tax payer bailout. This time for academia.

What really needs to be done is have Colleges co-sign the loans of their students. Then they would be more selective of which students they admit and what degrees they offer.

jrgdds on April 26, 2012 at 3:25 PM

The moment they have to file their estimated taxes four times a year, comply with all the other paperwork filings, be forced to collect the stupidest receipts ever for the IRS, justify mileage logs on the vehicles and deal with having to depreciate a $101.17 phone ( because it is over $100.00 and its expected life expectancy is over 1 year ) leftists would be ran out of the country with the sticks by the angry mob of graphic designers, secretaries and copy editors.

EvilCapitalist on April 26, 2012 at 3:20 PM

Nice Rush/Hannity talking points you are spewing there in flyover county!

-Mr Ed

Ditkaca on April 26, 2012 at 3:25 PM

Because he has lost his mind. Last year he seemed generally reasonable.

arnold ziffel on April 26, 2012 at 3:13 PM

I agree. Even during the mid-early primaries, his points were acceptable.

But once the writing was on the wall with Romney/Santo, he flipped.

It’s too much time for him to be a standard troll. So I really don’t get WTF he’s trying to accomplish, other than build spite.

budfox on April 26, 2012 at 3:25 PM

And that’s fantastic – I wish every non-hourly employee was fired by every company and made into an independent contractor.

EvilCapitalist on April 26, 2012 at 3:20 PM

I walked away from that argument because he makes indie contractor sound like a breeze, which shows he’s never been involved.

budfox on April 26, 2012 at 3:28 PM

The funny thing about all of this discussion with angryed is that he will fight to the death to squeeze out another $6 billion to fund another failing program, i.e. nationalizing student loans, but how does it help out in the following:

Here is a boggling tidbit: the approximate deficit of the unvoted/unapproved Obama budget for FYI 2012 is 1.4 trillion dollars. Let’s simplify that to say it is 1400 billion dollars overbudget (1 trillion=1000 billion). Even if you assume NO economic impact from raising taxes among the job creators, look at what Obama’s proposed policies would do. The Buffet Rule would bite out approximately 5-6 billion dollars out of that 1400 billion. Does that make sense? What about the approximately “70 billion” from the Bush tax hikes? 75 billion from 1400 billion?
1400 billion overbudget angryed…and that is just the federal govt for one year.. sir

DrRich on April 26, 2012 at 3:32 PM

And… silence.

The stay-at-home millionaire genius angryed gets schooled once again by the idiots in fly over country.

Chuck Schick on April 26, 2012 at 3:43 PM

Nice Rush/Hannity talking points you are spewing there in flyover county!

-Mr Ed

Ditkaca on April 26, 2012 at 3:25 PM

Its my printer talking. It got tired of printing the depreciation parts of the tax return.

EvilCapitalist on April 26, 2012 at 3:46 PM

Because he has lost his mind. Last year he seemed generally reasonable.

arnold ziffel on April 26, 2012 at 3:13 PM

It is just attention-seeking. Over at Daily Kos he’s just one in the crowd, here he can stick out and people notice him and he can actually hijack the thread and create pages of conversation focused on him (using “him” for generic purposes here). He’s ironically one of the major revenue generators for the site. Every time someone refreshes the page to poke at the troll, it generates more ad views and THAT is the entire purpose of the site. They tolerate him because it’s good for revenue.

crosspatch on April 26, 2012 at 3:55 PM

I’m not blaming anyone. I’m stating a fact. Do you think it’s fair that someone making $150K a W2 employee pays Medicare Tax on $150K but someone else doing the exact same job but doing it as an S-corp pays Medicare on only $100K?

angryed on April 26, 2012 at 1:29 PM

Since I consider Medicare completely UNCONSTITUTIONAL*, I find your question to be a wasteland of un-critical thinking.

* Medicare is unconstitutional because while Congress does have the power to create new taxes, it is ALSO constrained in how it can use those taxes. Medicare passes the Constitutional revenue constraint, but fails on the Constitutional spending constraint.

dominigan on April 26, 2012 at 3:58 PM

budfox on April 26, 2012 at 3:10 PM

AngryEd is not a “truecon”… he is a liberal plant trying to stir up trouble. If you trace back over his past screeds, this becomes pretty apparent… bashing “fly-over land”, rich people paying their “fair” share (when fair actually means even more un-fair than now), etc.

dominigan on April 26, 2012 at 4:02 PM

Let the interest rates rise instead of being held artificially low.

A side effect will be that many recent grads will be incentivized to pay off their loans as quickly as possible instead of accruing more interest.

Obama and the Dems are simply pandering to every individual group that they can: African Americans, college students, Hispanics, Women. They are abandoning independents.

Romney didn’t “diffuse” the situation by buying into lowering the rate, he is giving Obama a free pass.

All he would have to say is that:

“Obama is trying to buy college student votes, just like he is buying the votes of women by offering free contraception, just like he is trying to buy African American Votes by commenting on Professor Gates and Trayvon Martin, just like he is trying to buy votes from Hispanics by suing states who are simply trying to enforce laws that Obama is refusing to.”

weaselyone on April 26, 2012 at 4:06 PM

This argument has been political fodder for so long it’s boring. Bill Clinton promised to make student loans tax deductable and never did. That alone would save loan payers a bundle over the years.

Redglen on April 26, 2012 at 4:11 PM

angryed on April 26, 2012 at 2:22 PM

What kind of “businesses” do you own that allow you the time to be here 24/7?

katy the mean old lady on April 26, 2012 at 4:20 PM

I don’t understand why interest rates on student loans would double to begin with, isn’t the Fed still keeping prime at near zero. I obviously don’t understand.

Cindy Munford on April 26, 2012 at 4:26 PM

Voter from WA State on April 26, 2012 at 4:32 PM

When I was “guaranteeing” student loan consolidations prior to 2008 the interest rates were 3%. That sure seems more than reasonable to me. What are they now?

Cindy Munford on April 26, 2012 at 4:39 PM

One also needs to be rather stupid to operate a small business as a C-Corp due to the double-taxation of profits.

EvilCapitalist on April 26, 2012 at 3:08 PM

Errr.. Depends on your definition of “small business”. There is a break-even point, somewhere around $50k-$100K in GI for most, where it becomes extremely advantageous to operate as a C-Corp, especially when you incorporate in a state with no state income taxes. My corporate structure saves me about $90k per year in taxes, by making the laws work for me instead of against me. But I’ll let you do your own research on how that works.

Harbingeing on April 26, 2012 at 4:44 PM

Last I heard, the on-base brothel was shut down just before Pappy Bush went to war with Noriega and they never came back, AFAIK.

AH_C on April 26, 2012 at 1:40 PM

oh, no, no, no, he’s frantically looking up, googling, wiki-ing, calling friends to come up with something intelligible to say after he’s been exposed for the pathetic fraud and ignoramus troll that he is…no worries, he’ll come up with a new shtick (he;d probably try to deviate from the topic, but back he will, in no time)…5,4,3…

jimver on April 26, 2012 at 4:44 PM

sorry, wrong thread :-)

jimver on April 26, 2012 at 4:45 PM

this was the quote I was posting in response:

And… silence.

The stay-at-home millionaire genius angryed gets schooled once again by the idiots in fly over country.

Chuck Schick on April 26, 2012 at 3:43 PM

jimver on April 26, 2012 at 4:48 PM

Errr.. Depends on your definition of “small business”. There is a break-even point, somewhere around $50k-$100K in GI for most, where it becomes extremely advantageous to operate as a C-Corp, especially when you incorporate in a state with no state income taxes. My corporate structure saves me about $90k per year in taxes, by making the laws work for me instead of against me. But I’ll let you do your own research on how that works.

Harbingeing on April 26, 2012 at 4:44 PM

You either have a bad accountant or you are retaining earnings, which puts you in a different pool. If you compare apples to apples, S-corp vs. C-corps would never go in favor of C-corp. At -best- it would be equal.

EvilCapitalist on April 26, 2012 at 4:58 PM

sorry, wrong thread :-)

jimver on April 26, 2012 at 4:45 PM

Where is the right thread? “Ho” trouble in Panama?

arnold ziffel on April 26, 2012 at 4:58 PM

Late to this party –
But – great – let’s take more money away from the job creators.
College may cost slightly less – but then there will be even fewer jobs available so they can go straight to welfare.

dentarthurdent on April 26, 2012 at 5:54 PM

Seems to me the expense of a college education is to blame – especially on degrees that cost a boat-load but have little chance of generating a decent (income) return on that investment. Raise interest rates to 10%, but drop public tuition by 50%. Private universities will follow suit and our poor college kids will save a tonne of money to boot.

1_more_opai on April 26, 2012 at 6:07 PM

How about: price controls on tuitions at all colleges and universities, et al (which accept any federal funding) to manage the bloated, unrelated-to-the-inflation-rate tuition growth at schools, and a salary cut for all federal employees to cover the current student loan percentage rein-in?

A win-win.

Cheaper schools (punishing the liberal hierarchy that runs them and who are charging ridiculous prices for their services) and less incentives for adding more federal workers, since their salaries won’t be as attractive.

profitsbeard on April 26, 2012 at 6:23 PM

The Democrat War on Prosperity continues.

WisCon on April 26, 2012 at 7:32 PM

So the thread is dead?
 
Granted some choose facts, links, and citing sources, but that’s a masterful defense. Well played.
 
Well played indeed.

rogerb on April 26, 2012 at 8:23 PM

“…if it moves, tax it.”

(sigh)

insidiator on April 27, 2012 at 8:10 AM

Need Adequate Terms

Class warfare does not adequately conjure the evil of what is going on here. It certainly has the Bolshevic aspect but if you think about it, those guys had an objective justification and just went after a small faction of exploiters.

Oh…and this 1% thing? It only takes $324,000 for entre and the small percentage is no accident, historical anticedants and all, but I digress.

I think we are brewing an economic civil war. Civil War.

And now that white racism isn’t making scars on blacks, we have MSNBC substituting reckless lies and brainwashing. Veritable Brillo pads and sand paper on real psychological scars.

I don’t even want to think about an evil Messiah and the idea of a Supposed Moses with a hate agenda.

I have good friends who are black. I have my own memories of hunger, poverty and frustration and I didn’t have skin I couldn’t remove.

When you are already damaged, having the right buttons pushed is dangerous. And emotional and psychological pain are sometimes worse than the real thing.

We have a group of people doing real damage to this nation. As an incitement for legitimate political action, they are creating a more destructive effect on their targets than they know.

They are warping psyches and making more than mere anger with their phony reports and exhortations. They are at least permanently warping some while making human IEDS of others.

We may need to adjust the First Amendment, but not for the reason Speaker Pelosi thinks.

IlikedAUH2O on April 27, 2012 at 8:56 AM

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