{"id":949041,"date":"2023-01-07T16:05:01","date_gmt":"2023-01-07T16:05:01","guid":{"rendered":"https:\/\/dissidentvoice.org\/?p=136758"},"modified":"2023-01-07T16:05:01","modified_gmt":"2023-01-07T16:05:01","slug":"irs-winks-at-50-billion-tax-giveaway-to-the-rich","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2023\/01\/07\/irs-winks-at-50-billion-tax-giveaway-to-the-rich\/","title":{"rendered":"IRS Winks at $50 Billion Tax Giveaway to the Rich"},"content":{"rendered":"

President Biden\u2019s landmark Inflation Reduction Act earmarks $80 billion<\/a> over the next ten years for the Internal Revenue Service (IRS). According to the Treasury, most of the money will be going toward increased enforcement\u2014specifically<\/a>, stopping rich Americans from cheating on their taxes.<\/p>\n

Yet the same agency has strangely signed off on a huge tax loophole that could put another $50 billion<\/a> in the pockets of the rich by 2025. Laws<\/a> enacted in 29 states allow the owners of certain high-income businesses to fully deduct state and local income taxes on their returns. The laws, rubber-stamped by the IRS<\/a>, give millions of the wealthy a made-up way to avoid the $10,000 deduction limit that applies to everybody else.<\/p>\n

President Trump never challenged the laws, and himself became a major beneficiary when New York State adopted the loophole. Surprisingly though, President Biden has taken no action either\u2014even though he\u2019s repeatedly said<\/a> that it\u2019s time for America\u2019s richest to pay their fair share.<\/p>\n

It would take only a word from the IRS to end the giveaway, which effectively guts the deduction limit laid down by Trump\u2019s 2017 tax bill. So far, the word hasn\u2019t come; perhaps it will from Daniel Werfel, the president\u2019s nominee<\/a> to become the new IRS commissioner.<\/p>\n

If Werfel acts, it won\u2019t be any too soon for the alert academic who spotted what was happening, put it under the microscope, and blew the whistle. Daniel Hemel<\/a>, a professor at the NYU School of Law, lays out his findings in “The Passthrough Entity Tax Scandal<\/a>,” a 28-page research paper scheduled for publication in 2023 in the Florida Law Review<\/em>.<\/p>\n

\"\"<\/a>The phrase “passthrough entity<\/a>” is a technical, tax-related term for the most common types of businesses in America. They include sole proprietorships, partnerships, limited liability companies (LLCs), and millions<\/a> of small businesses that operate as S-Corporations\u2014doctors, lawyers, hedge fund managers and other high-income professionals. The IRS notice specifically exempts partnerships and S-Corporations from the $10,000 SALT limit.<\/p>\n

Passthrough owners had already gotten a bonus in the Trump tax bill, a special provision<\/a> allowing them to shield up to 20 percent of their income from federal taxes. In 2024, based on estimates from the Joint Committee on Taxation, the top 1 percent of households will reap 61 percent of the benefits of that provision\u2014compared to just 4 percent for the bottom two-thirds. The numbers from the new handout likely won\u2019t be much different.<\/p>\n

Hemel\u2019s analysis takes a deep dive into the weeds of tax policy and government bureaucracy. Here\u2019s an everyman\u2019s summary using material both from his research paper draft and from the online coverage it generated.<\/p>\n

The paper sharply criticizes the IRS. The agency \u201chas not provided a plausible legal rationale for its position.\u201d It \u201cdoesn\u2019t even pretend to reconcile its surprising conclusion with the relevant statutes and regulations.\u201d Its position \u201ccontravenes any notion of tax fairness.\u201d It\u2019s \u201cscandalous\u201d and \u201castonishing,\u201d and \u201cit ought to elicit moral outrage.\u201d To top it all off, the agency\u2019s actions represent a \u201cflagrant violation<\/a> of federal law.\u201d<\/p>\n

It’s flagrant, suggested one scholarly review<\/a>, mainly because Hemel went about \u201cmeticulously analyzing the statutory text and the legislative history.\u201d Post-analysis, passthroughs have no claim whatever to special treatment: the $10,000 SALT cap \u201cplainly applies to state and local income taxes paid or accrued in carrying on a trade or business.\u201d<\/p>\n

Simply put, there\u2019s no justification for allowing those taxes to be deducted as a business expense on tax returns\u2014which is what the giveaway allows S-Corporations and partnerships to do.<\/p>\n

Tax loopholes always have political roots; this one comes with a double dose of political irony as well. As Hemel points out, \u201cthe benefits of the passthrough entity workaround flow to a particularly powerful constituency within the Republican Party: high-income passthrough owners.\u201d True enough, but the SALT limit was passed by Trump and the Republican Party to punish<\/a> Democratic states. Second irony: Democrats also have a high-income constituency, and their efforts to overturn SALT have led to sharp divisions<\/a> within the party.<\/p>\n

The last word goes to the sleuth who uttered the first word. Hemel says it\u2019s up to the errant IRS and the Biden Administration to end the $50 billion passthrough fiasco: \u201cAll they need to do is enforce the law (the SALT limit) that is on the books.\u201d<\/p>The post IRS Winks at $50 Billion Tax Giveaway to the Rich<\/a> first appeared on Dissident Voice<\/a>.\n

This post was originally published on Dissident Voice<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"

President Biden\u2019s landmark Inflation Reduction Act earmarks $80 billion over the next ten years for the Internal Revenue Service (IRS). According to the Treasury, most of the money will be going toward increased enforcement\u2014specifically, stopping rich Americans from cheating on their taxes. Yet the same agency has strangely signed off on a huge tax loophole [\u2026]<\/p>\n

The post IRS Winks at $50 Billion Tax Giveaway to the Rich<\/a> first appeared on Dissident Voice<\/a>.<\/p>\n","protected":false},"author":407,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[469,55903,55904,49,9744,51,55907,5126],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/949041"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/407"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=949041"}],"version-history":[{"count":1,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/949041\/revisions"}],"predecessor-version":[{"id":949042,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/949041\/revisions\/949042"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=949041"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=949041"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=949041"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}