Skip to comments.Terrific: Senate Dems offset cost of student loan bill with higher taxes on small business
Posted on 04/26/2012 10:16:20 AM PDT by SeekAndFind
Let the games begin. With Romney expressing his support earlier this week for extending the freeze in student loan interest rates, defusing this as a wedge issue just as the President was embarking on his college tour, Democrats in the Senate have decided to counter with, what else, the class warfare card. Via Bloomberg (emphasis added):
Senate Democrats and the White House are seeking a one-year freeze in the interest rate. The $6 billion cost would be offset by limiting a tax provision that allows some owners of so-called S-corporations to avoid paying Medicare payroll taxes on their earnings, Senator Tom Harkin, an Iowa Democrat, told reporters yesterday.
Harkin said the legislation would require the Medicare payroll tax on income of more than $250,000 a year earned at S-corporations with fewer than three shareholders.
This is a loophole that needs to be closed anyway, he said. So this is the right time to do it and for the right cause.
Current law exempts the profits earned by S-corporations from Social Security and Medicare taxes, taxing only the salaries earned by shareholders who are employed by these firms. The IRS requires the allocation of reasonable compensation for work performed, so closely held S-corporations cannot (legally) classify all of their net income as profits, thus bypassing these payroll taxes. To call it a “loophole” is disingenuous. It’s no more a loophole than hundreds of other avenues through which businesses and individuals can cheat on their taxes, if they are willing to subject themselves to the consequences of breaking the law.
Millions of small, family owned businesses around the country are classified as S-corporations, and would be caught up in this tax net for no reason other than that they are small, and successful. And keep in mind that the profits which are credited to shareholders of S-corporations often remain in the business, funding the salaries of new employees and other investments.
The worst of it is that this a new, permanent tax on small businesses – $9 billion over 10 years according to the CBO - to fund the cost of just one year of the interest rate freeze ($6 billion). If this is the “right cause” then the cause isn’t long-term financial relief for college students, it’s the re-election prospects of Democrats in November.
Backing this bill would be a dangerous precedent to set ahead of the real class warfare battle to come this summer, and thus Republicans in Congress, as well as the Romney campaign, should withhold their support unless another means is found to pay for it.
Oil companies should not feel alone. Democrats want to crucify business in general— just different ways for different sectors.
So, in other words, the democrats in their efforts to make people dependent upon them have raised taxes on small businesses which will dampen new hiring causing them to continue to be more dependent on democrat handouts...perfect world isn’t it???? (sarc off)
They get lower interest rates on their college loans in return for no job after graduation.
helping get rid of jobs will certainly help these graduates (rolling eyes)
But if The Won wins at least we know the Grievence Studies majors will be OK.
I hope the House, which is supposed to be the body that initiates revenue related bills, dumps this quickly. As for pitting small businesses against students, that tactic is to be expected from the Obama administration.
If “republicans” were smart, they would tie the decrease in interest rates to schools that receive the benefit of student loans. Schools making bad loans would have to pay higher “fees.” The more bad loans they make, the more “fees” they would have to pay the govt. Hopefully this would discourage schools from giving loans to the destitute as well as raise money to offset the loss of interest rate increase.
There is no relationship between small business and student loans. Small businesses gain nothing and lose everything with this harebrained idea from Obama, the dems and the RINOs in the Senate. This is an economy killer.
As an alternate arguement shouldn't Medicare taxes go to something like, oh I don't know, Medicare? Just sayin'.
What does Medicare have to do with student loan rates?
Oh, no the Feds are going to make(steal) less money. Why don’t they cut spending? I know, I know there is no point asking that question.
I hope these students realize they too will be crushed by higher taxes when they graduate and if they have any dreams of owning their own business and get ahead, they’re wasting their money because stupid is as stupid does.
They deserve the ‘0-future’.
Even if the loans were privately made, the lender suffers little or no risk on them since they are not dischargeable in court. As a consequence they should easily be traded at close to the market rate for any collateral loan, or mortgage ~ and with a government guarantee, that'd be at the lowest possible rate which is somewhere between 3.5% and 4.0%.
There is no need to OFFSET these loans with a tax on somebody else.
No Freeper should ever be persuaded that any Democrat can be truthful or honest about anything.
Why doesn’t the Government just tap in to university endowments in order to offset student loans under the guise of universities unfairly and arbitrarily setting tuition rates?
Some of those universities, such as Harvard, have absolutely insane levels of endowment.
Tell the students to quit school now and get a job. Stopping the increasing debt now will offset the higher interest cost. They’re not learning anything there anyway and employer’s don’t give a damn right now about degrees.
If they want to stay in school, then they’ll have to pay the higher cost to do so. This is the real world, even though the democrats and their republican handmaidens continously try to hide or delay its realization.
Wonder why no one is talking about this on Student Loans?
Obama thinks the students and younger voters will go for him in 11/2012 as strong as before. To make it more sure, he is promising them freebies on student loans and similar benefits.
Of course no government payment to a selected group is free, some other group, here small business, must be forced to pay more.
If our kids really learned in school, they would see Obama’s promises as false.
As usual, the democrats are liars. It is not a “loop hole” that S corporation shareholders do not pay payroll taxes on the dividends or the distributions they receive. It is sound tax logic and policy not to apply the payroll tax to that dividends and distributions. It is just a tax increase that will hurt small businesses.
A. Would it not be better if Congress "paid for" the interest rate subsidy by cutting Federal spending by $6 billion next year (or roughly 0.167% of the budget)?
B. Why the hell is Congress involved with determining the interest rate charged on any kind of loan, or with subsidizing private debt?
C. Why do Republicans continually allow themselves to be drawn into Democrat traps (in this case, they'll be accused of hurting students to help the "rich")? Because they're unprincipled and nearly as greedy as Democrats. Whoops - sorry, I answered that one myself.
‘What does Medicare have to do with student loan rates?”
is THE question
WTF, Dems really think people are stupid.
Never let a “crisis” go to waste....
Never let a “crisis” go to waste....
Never let a “crisis” go to waste....
Joe the Plumber gets his taxes raised to pay the student loan bill for Trent, the Sustainable Policy Analyst at the Center For American Progress.
Sounds about right.
LOL Dems stuck on , higher taxes , higher taxes ,higher taxes ,could have wiped out all the debt just using Obamas vacation money
Just in case anyone thinks about hiring.....NEVER MIND!