Hillary about to bring more taxes on the wealthy

WELCOME TO THE NEW YEAR: Chances are 2016 won’t bring about the sort of major tax deal that helped Washington usher out 2015. But if the first few days of this year are any indication, the presidential candidates will have plenty to say on the matter in the coming months — not that they were exactly silent way back in 2015.

HILLARY SAYS STAY TUNED: Hillary Clinton, the Democratic front-runner, let it be known over the weekend that she won’t be satisfied with just the Buffett Rule — and to stay tuned for even fuller proposals this month to tax the rich. The former Secretary of State said the latest batch of IRS data, which found that the wealthiest 400 U.S. taxpayers paid a tax rate just south of 23 percent in 2013, showed that even more needed to be done to bring fairness to the tax code. “It's clear that those at the top are still gaming the system and leaving hard-working American families holding the bag,” Clinton said in a statement. More on the latest from Clinton here: http://politico.pro/1RjTQWr. And Tax Pro Brian Faler on the IRS data: http://politico.pro/1RjTQWr


ICYMI: There’s no doubt that this NYT story ( http://nyti.ms/1moh0zk) from last week, which discussed the “sophisticated and astonishingly effective apparatus” that the super-wealthy have for keeping their money away from the IRS, played a big role in Clinton’s latest statement. (Her statement did link to the article, after all.) More from that piece: “Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans."

You could argue that the newest IRS numbers undercut that story a bit, finding as they did that the wealthy will pay more in taxes if you hike their taxes. (The effective tax rate for the wealthiest grew from 16.7 percent to 22.9 percent after the 2013 fiscal cliff deal raised taxes on both ordinary income and capital gains of top earners.)

But the NYT’s Noam Scheiber, a co-author of the piece on the wealthy’s “income defense industry,” argued on New Year’s Eve that those sorts of arguments miss the bigger point. For starters, the top 1 percent of earners paid more in taxes, around 27 percent, than the top 400 taxpayers. But more importantly, according to Scheiber: “Historical evidence suggests that the ultrawealthy will soon find ways to limit the impact of the recent rate increases under President Obama. For example, many wealthy taxpayers already exploit tax strategies, like keeping income in offshore entities, that allow them to defer taxes on investment income for years, allowing the money to compound on a tax-free basis.” More: http://nyti.ms/1OtS0RW

AND WELCOME BACK, MORNING TAX READERS. We hope that you all had restful and happy holidays, even if — like your Morning Tax author — you were stuck on the grid a lot of the time.

With the House headed back to town this week, we’re definitely interested in your tips and thoughts. Email: [email protected], [email protected], [email protected] and [email protected].

Twitter: @ berniebecker3, @ tobyeckert, @ brian_faler, @ katyodonnell_ , @ POLITICOPro and @ Morning_Tax.

TAXES, THE RICH AND WHY IT MATTERS FOR ’16: To be blunt about it, lots of voters already think that the rich don’t pay enough in taxes. And that’s not just Democrats, either, given the populist mood that seems to have hit a lot of Republicans recently. As Reihan Salam of the National Review pointed out on CBS’s “Face the Nation” on Sunday, around four in 10 GOP voters believe that the wealthy need to fork more over to the Treasury, according to some polling. (Other polls have found Republicans less bullish on that idea.)

Some of the more free-market voices on the right have argued that the working- and middle-class don’t actually vote out their frustrations about how much the wealthy pay in taxes because many of them have their own aspirations to be rich. And as the WSJ’s Bob Davis noted on Sunday, Republican candidates aren’t exactly breaking with GOP orthodoxy by uniformly calling for tax cuts on the rich to goose the economy — arguing that would, as Davis put it, “put money into the hands of people up and down the income scale.” http://on.wsj.com/1PGiK2A

But President Barack Obama was successful with an explicit tax-the-rich strategy in 2012, and Democrats said last week that pieces like the NYT story get at why voters are frustrated. “When folks say the rich should pay their fair share, it’s not envy. It’s anger at a system that’s blatantly rigged,” David Axelrod tweeted. ( http://bit.ly/1Z0unHx.)

And then there’s the GOP voter who’s currently siding with Donald Trump. The real estate magnate’s tax plan could lose as much revenue as $12 trillion over a decade, according to the Tax Foundation, and doesn’t appear nearly as populist as he’d like voters to believe. But Trump’s message does seem to be resonating with GOP voters worried about how immigration could hurt their job prospects, and skeptical about the sort of trade agreements normally embraced by mainstream Republicans.

Here’s conservative radio host Laura Ingraham on “Fox News Sunday,” not sounding all that different from that David Axelrod tweet as she wonders whether the GOP will go for a “more nationalist economic direction” in 2016: “There’s a sense that things just aren’t all that fair, and that a lot of the people in the middle- or lower working poor just can’t get ahead — even though in the global economy, a lot of people can get really rich.”

BERNIE SAYS STAY TUNED: Speaking of someone who thinks the system is rigged — Sen. Bernie Sanders of Vermont said on CNN’s “State of the Union” on Sunday that he’ll release more details on his tax platform before Iowa voters go to caucus in four weeks. “We have been very specific. We have more to do, and we will be doing that in the very near future,” Sanders said. http://cnn.it/1Ou2yk6

ON THE HOME FRONT: Tax Pro Katy O’Donnell takes a look at what the Obama administration wants to do to protect the corporate tax base in its last year, given the long odds facing international tax reform this year. The short answer: “The IRS will focus much of its attention overseas, taking on corporate inversions and other maneuvers multinational corporations use to limit their taxes.” That means maybe new rules on earnings stripping, and the country-by-country reporting called for by the Organization for Economic Cooperation and Development’s BEPS project. But don’t expect new 501(c)(4) rules, after Republicans barred the IRS from offering more guidance on what constitutes a “social welfare” group at the end of 2015. Link: http://politico.pro/1Tzlyhb

MISS THESE?: Your humble tax team wrote a fair number of stories over the last 10 days or so, so here’s a quick rundown if you’re scrambling to catch up this Monday morning.

Brian Faler on how Congress learned to love tax compliance measures — to the tune of some $30 billion — in 2015. The provisions — which will lead to more audits for hedge funds, fewer child tax credits for undocumented workers, and more reporting requirements for mortgage lenders, among other things — were scattered into different pieces of legislation. But “beefing up tax enforcement turned out to be a fertile middle ground between Democrats and Republicans in their long-running budget wars because it allowed them to raise billions without having to cut spending or raise taxes.” http://politico.pro/1ZDH0p1

Katy O’Donnell on how Pfizer’s decision to invert has caused lots of hand-wringing on both the campaign trail and in the halls of Congress — but few signs that the partisan impasse over the issue is subsiding. “Little has changed on the Hill, where the two parties can’t even agree on the cause of inversions, much less the potential solutions.” http://politico.pro/1R7J1qq

Brian and I examined whether K Street will miss the regular cash cow formerly known as tax extenders. The downtown crowd is saying that they’ll have plenty of other business in 2016, including on laying the groundwork for tax reform, tweaking some of the new permanent provisions and still some work on the temporary extenders. But also remember this piece of wisdom from someone on K Street: “The last thing that lobbyists really want is to succeed. Because there’s one less issue to lobby.” http://politico.pro/1OTolhk.

Here I am discussing how GOP presidential candidates have been very detail-oriented on how they want to cut taxes — but not so much when it comes to cutting spending. History also suggests that cutting spending is easier said than done for Washington, and fiscal hawks are more than a little worried that the falling yearly deficits have sucked the energy away from deficit reduction. “Even some on the right say that Republican primary voters should be asking for more details from their candidates when it comes to offsetting their tax plans.” http://politico.pro/1MxOv7l

And look — there’s bonus Obamacare coverage. Nancy Cook on how Sen. Dean Heller (R-Nev.) became labor’s ally on delaying the Cadillac tax. http://politico.pro/1Z0GunU. Plus Sarah Wheaton and Paul Demko on how Democrats have helped put some cracks in the Affordable Care Act’s foundation. http://politico.pro/1TyJy44.

STATE UPDATE

SWEET HOME CHICAGO: There’s going to be plenty of new taxes and fees — about $755 million worth — coming out of Chicagoans’ pockets, WLS reports. That incudes a higher sales tax, new taxes or fees on both cabs and Uber, new taxes on Netflix and Spotify and higher property taxes. http://abc7.ws/1PFmKi2

QUICK LINKS

House Speaker Paul Ryan wants rank-and-file input on 2016 priorities. http://on.wsj.com/1R9JnPa

The New York Post has some questions about the National Rifle Association’s tax filings. http://nyp.st/1Sty6Iu

The Dallas Morning News backs Apple and Tim Cook on corporate tax reform. http://bit.ly/1mtO9tV

And there's speculation that Rep. Jim McDermott, a senior tax writer, will retire today. http://kng5.tv/1YZO9xx

DID YOU KNOW?

Pabst Blue Ribbon beer won the, yes, first-place blue ribbon at the 1893 Chicago World’s Fair. http://bit.ly/1mtO9tV

Follow us on Twitter Toby Eckert @tobyeckert



Bernie Becker @berniebecker3



Brian Faler @brian_faler



Aaron Lorenzo @aaronelorenzo