Wednesday, June 25, 2008

Will the Borrowers Win Again?

Back in December, I wrote about how Representative Scott Garrett had joined the tax cut and borrowers in voting against meaningful AMT reform. Well, today he did it again.

Once again, the $61.5 billion in projected borrowing to provide relief to 20 million families is being off-set by targeted tax increases directed at 5,000 or so hedge fund managers. Here's how the AP explains it:
The offsets in the package before the House Wednesday include a measure that would raise $31 billion over 10 years by increasing the tax rate on the share of investment profits received by private equity and hedge fund managers, also known as carried interest. Managers of private equity and hedge funds are now generally taxed at the 15 percent capital gains rates on the profits they share instead of the 35 percent individual income tax rate that would normally apply to high-income individuals. The bill would tax most of their profit-sharing income at the higher 35 percent rate.

That's right, there are roughly 5,000 people paying an average of $620,000 less in taxes than they would be if they were taxed like normal people. Many Americans won't make that much money over 20 years of work, let alone skip the taxes annually.

As a deficit hawk, it's extremely frustrating to watch this debate every year. The dream used to be getting the Democrats around to supporting balancing the budget. Then, almost as soon as it happened, the Republicans became the deficit spending lovers. What gives?

While I haven't seen a comment from Garrett this time around, Representative Jim McCrery provides a decent soundbite as to the Republican logic:
Republicans believe that Congress should not raise taxes on one group of
taxpayers in order to prevent an increase on another set of taxpayers.

So instead, Republicans want to raise the taxes on entire future generations payable to the Chinese?

Taxes today are about 25% higher than they need to be because of interest due on previous deficit spending. How high are we going to go if these special interest driven partisan games continue?

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