Monday, November 20, 2017

How to Cut Taxes For Small Businesses and Entrepreneurs!!

Vince Kolber, chairman of Residco, a transportation equipment leasing company  (and, take note Donald Trump, a Wharton School grad), writes in an op-ed for The Wall Street Journal:
Those who make the bulk of their annual income from investments have for years paid a 20% tax rate on so-called carried interest. Congress has allowed these equity-fund managers to treat their profit-sharing and service fees as capital gains rather than as ordinary income, for which the top tax rate is 39.6%. Most American entrepreneurs who own and operate small business in the nonfinancial economy pay at the higher rate...

The carried-interest provisions in the tax code have been a boon to private-equity managers. It would be nice if Congress decided to tax the rest of America’s businesses at 20% so they, too, could grow and prosper. The effect of the carried-interest tax rate on the financial sector has proven that low marginal tax rates can stimulate—if not launch—entire industries.

Instead of cutting tax rates on job-creating entrepreneurs to the same level as [equity fund managers] ...Congress is proposing to tax 70% of an entrepreneur’s business income at the highest personal ordinary income rates. This will result in a marginal tax rate exceeding 35% on entrepreneurs who run so-called “pass through” businesses, where owners report profits as income on their personal tax returns... take heed of Senator Ron Johnson’s proposal to maintain the “balance” in the tax treatment of large publicly traded C corporations and pass-throughs.

Simply put, Congress should extend the 20% tax rate on carried interest to all job creators and entrepreneurs.
This is by far the best realpolitik suggestion I have seen with regard to the current tax reform bill. It is a magnificent tax cut across the board, not just a cut for Trump's crony buddies.

And, of course, government spending should be cut by at least an amount equal to the losses in tax revenues.

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