loarmistead
04-28-2008, 11:36 PM
Why can't we have more people like him in the Democratic party?
That didn't take long. Less than a year ago, Montana Democrat Max Baucus, the chairman of the Senate Finance Committee, and his Republican partner Chuck Grassley were promoting a punitive tax hike on hedge funds and private-equity shops. Now it appears that Mr. Baucus, at least, is having second thoughts. Or maybe it's just that a Montana ox is being gored.
Mr. Baucus's volte-face arrives in the form of a plan to lower the tax burden for U.S. timber companies, which he is trying to graft onto the farm bill now moving through Congress. Timber sales are treated as capital gains, taxed at 15%. Timber companies, however, face the full 35% corporate tax rate. So to pay the 15%, many companies have restructured as real-estate investment trusts or transferred holdings to individuals. But not all. So Mr. Baucus wants to equalize the tax treatment of all timber concerns, regardless of the corporate structure. Even better, he wants to effectively lower the top rate to 15% from 35%.
Fair enough: As Mr. Baucus notes, everyone deserves the same standard in a competitive market. It also seems right to treat timber income as capital gains, given long growth cycles, high front-end costs and vulnerability to natural risks. But hold on. Isn't that also true of the financial partnerships that have Mr. Baucus so worked up?
The lord of Gucci Gulch claims it is unfair that some of these partnerships pay only the cap-gains rate. But the corporations owned by these partnerships already pay the corporate tax rate when their profits are earned, so it makes sense to treat as cap gains the dividends that are passed on to their owners. These are, also, risk-based investments. If the risks don't pan out, there's no income to tax – just as if, say, a natural disaster wiped out some timber forest.
But apparently some businesses are more deserving of special treatment than others. While all politicians have favored constituencies, at least Mr. Baucus has had the courtesy to acknowledge his arbitrary assault on private equity. Still, this is no way to write tax policy.
The larger point is that America as a whole would be far better off if all U.S. companies paid the same low corporate tax rate – if not 15%, then no more than 25%. If the rate were lower for everyone, neither timber nor private-equity interests would need to lobby for a special, lower rate. More important, fewer U.S. companies would feel obliged to build their next plant in Ireland or other low-tax countries. Let's hope Mr. Baucus's timber exception is the beginning of his tax awakening.
The story behind that last paragraph is: the United States has the second HIGHEST corporate tax rate in the world. There was a time when we could tax the life out of businesses in return for the relative stability of operating in this country (no famine, no warlords, plenty of electricity, brains, ingenuity, etc). Those days are behind us. With the rest of the world quickly approaching us, other countries are able to offer the same stability as we've had here for the last century, and for less money! It's no longer worth the premium to operate a business inside the US. What idiot would pay a 35-39% tax on its profits in the US when they can move to Ireland and pay 12.5%? Don't just blame NAFTA for your job going overseas... blame the folks who write the internal revenue code.
http://online.wsj.com/article/SB120934099382148443.html?mod=opinion_main_review_ and_outlooks
That didn't take long. Less than a year ago, Montana Democrat Max Baucus, the chairman of the Senate Finance Committee, and his Republican partner Chuck Grassley were promoting a punitive tax hike on hedge funds and private-equity shops. Now it appears that Mr. Baucus, at least, is having second thoughts. Or maybe it's just that a Montana ox is being gored.
Mr. Baucus's volte-face arrives in the form of a plan to lower the tax burden for U.S. timber companies, which he is trying to graft onto the farm bill now moving through Congress. Timber sales are treated as capital gains, taxed at 15%. Timber companies, however, face the full 35% corporate tax rate. So to pay the 15%, many companies have restructured as real-estate investment trusts or transferred holdings to individuals. But not all. So Mr. Baucus wants to equalize the tax treatment of all timber concerns, regardless of the corporate structure. Even better, he wants to effectively lower the top rate to 15% from 35%.
Fair enough: As Mr. Baucus notes, everyone deserves the same standard in a competitive market. It also seems right to treat timber income as capital gains, given long growth cycles, high front-end costs and vulnerability to natural risks. But hold on. Isn't that also true of the financial partnerships that have Mr. Baucus so worked up?
The lord of Gucci Gulch claims it is unfair that some of these partnerships pay only the cap-gains rate. But the corporations owned by these partnerships already pay the corporate tax rate when their profits are earned, so it makes sense to treat as cap gains the dividends that are passed on to their owners. These are, also, risk-based investments. If the risks don't pan out, there's no income to tax – just as if, say, a natural disaster wiped out some timber forest.
But apparently some businesses are more deserving of special treatment than others. While all politicians have favored constituencies, at least Mr. Baucus has had the courtesy to acknowledge his arbitrary assault on private equity. Still, this is no way to write tax policy.
The larger point is that America as a whole would be far better off if all U.S. companies paid the same low corporate tax rate – if not 15%, then no more than 25%. If the rate were lower for everyone, neither timber nor private-equity interests would need to lobby for a special, lower rate. More important, fewer U.S. companies would feel obliged to build their next plant in Ireland or other low-tax countries. Let's hope Mr. Baucus's timber exception is the beginning of his tax awakening.
The story behind that last paragraph is: the United States has the second HIGHEST corporate tax rate in the world. There was a time when we could tax the life out of businesses in return for the relative stability of operating in this country (no famine, no warlords, plenty of electricity, brains, ingenuity, etc). Those days are behind us. With the rest of the world quickly approaching us, other countries are able to offer the same stability as we've had here for the last century, and for less money! It's no longer worth the premium to operate a business inside the US. What idiot would pay a 35-39% tax on its profits in the US when they can move to Ireland and pay 12.5%? Don't just blame NAFTA for your job going overseas... blame the folks who write the internal revenue code.
http://online.wsj.com/article/SB120934099382148443.html?mod=opinion_main_review_ and_outlooks