Domestic Taxes

The U.S. Conference of Mayors has weighed in against a tax increase on a common payment for hedge fund managers. Read more...

The left-leaning U.S. Public Interest Research Group (U.S. PIRG) will embark on an eleventh-hour push to keep a tax increase on carried interest a part of legislation extending several measures.  

"We're really trying to communicate to the senators that there's a lot of support for closing this loophole," U.S. PIRG's Nicole Tichon told The Hill on Friday. "There's a lot of support, but I also know there is very vocal opposition, and it's very powerful. We know it's an uphill battle." 

One hurdle confronting the group is a letter from five senators to Finance Chairman Max Baucus (D-Mont.) asking him to ensure the tax increase does not affect all sectors using this form of compensation. 

Earlier this week Senate Finance Chairman Max Baucus (D-Mont.) received a letter from Sen. Scott Brown (R-Mass.) and four Senate Democrats urging him not to increase the tax on carried interest, a form of compensation for investment managers as well as others.

The levy increase is to help pay for extending several business and individual tax breaks that expired last year, which will be included in a broader package extending several spending measures. The letter states a tax increase of this kind would be ill-timed, given the economy is on the verge of recovery.  

Federal regulators will head back to Capitol Hill next week to discuss the causes of the nearly 10 percent drop in stocks on May 6.

Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler will testify Thursday morning before the Senate Banking Subcommittee on Securities, Insurance and Investment. 

Regulators haven't yet pinpointed why the market dropped nearly 1,000 points then made a quick recovery late last week, Gensler and Schapiro told a House panel earlier this week. 

Although nothing has been ruled out, the two regulators said there wasn't any evidence of trader error, computer hackers or terrorism. There will likely be multiple reasons for the market's free fall, which occurred on a day when stock volatility was heightened because of fears surrounding the European debt crisis as riots broke out in Greece.

The SEC and CFTC have formed a joint advisory group to look at market regulations to determine what happened on May 6 and what, if any, changes are needed. 

Sen. Blanche Lincoln (D-Ark.) on Thursday told The Hill that a fix for the estate tax should be aimed at helping small businesses, and not wealthier taxpayers since they have the resources to weather whatever tax rate Congress throws at them.

"The ultra-wealthy don't deal with the estate tax," she said. "The Bill Gateses of the world — those individuals don't deal with the estate tax because their estates are so large. They've already figured out how to do a foundation or they've used tax attorneys and the estate planners and accountants and everybody to figure out how they deal with the kind of wealth they have."

Lincoln argues that small businesses don't have the profit margins to survive the coming tax hike on estates if Congress fails to act before the end of the year. The levy is currently repealed, but is slated to return in January with a vengeance by socking estates worth more than $1 million with a tax that tops out at 55 percent.

"I don't think there's any American out there who believes you should work all of your life to find that when you die, 55 percent of [your estate] has got to go to the government," the senator said. "Coming up with more balanced exemptions and rates is critical."

Lincoln is working with Senate Republican Whip Jon Kyl (Ariz.) to craft an estate tax package that will go easier on small businesses. The senator did not disclose the details of the proposal.

"We're working with Sen. Kyl on that and certainly [Senate Finance Committee] Chairman [Max] Baucus [D-Mont.] to figure out when we can bring it up in committee," Lincoln said.

Sources close to the matter recently told The Hill that the lawmakers are looking to give taxpayers the option of prepaying their estate tax. The levy would be set at 35 percent for those worth more than $3.5 million; however, the exemption would ultimately increase over time to $5 million and would be indexed for inflation. Prepayment trusts would pay a lower rate.

— J. Taylor Rushing contributed to this post.

Rep. Mark Schauer found a hat and keychain made in China in a bag of promotional materials for the census.

Lawmakers might replace a tax increase on carried interest with a tax increase on foreign insurers in legislation extending several measures, sources told The Hill. 

The reason for the possible change is Senate opposition to increasing the tax on carried interest at a time when the market is just starting to rebound. 

Sen. Olympia Snowe (R-Maine) on Thursday was undecided about supporting legislation that extends several tax and spending measures and expressed some concern on how the bill intends to raise taxes on carried interest.

"I'm concerned about anything that raises costs of doing business these days," she said. "I know they [Democrats] express concerns about taxes going up, spending going up, and deficits; but on the other hand it seems to be moving in the opposite direction of raising taxes and spending more." 

Snowe is one of a handful of centrist Republican senators that Democratic leaders hope will ultimately support the legislation. 

At least one Republican vote is needed for passage, assuming all 59 Senate Democrats back the bill. 

House Ways and Means Chairman Sandy Levin (D-Mich.) on Wednesday announced his committee would host a hearing on tax proposals related to legislation to legalize Internet gambling. The hearing is scheduled to take place May 19. 

The committee will discuss the current tax laws and reporting requirements applicable to wagering in the U.S. It will also consider tax and other proposals related to pending legislation in Congress to license and regulate Internet gambling.

Senate Democratic leaders have designated Sens. Olympia Snowe (R-Maine), Susan Collins (R-Maine), George Voinovich (R-Ohio) and potentially Scott Brown (R-Mass.) as possible supporters for legislation extending several tax breaks and spending measures because they are deemed to be the chamber's most moderate of conservatives, said a Democratic aide.  

Democratic leaders only need 1 of these senators to support the measure and pass it from the chamber, assuming all Democrats support the bill.

Members like Sens. Chuck Grassley (R-Iowa) are expected to oppose the bill because it includes a wide range of spending initiatives, most of which will not be offset, and tax increases that are considered controversial, the aide said.