Lawmakers are busy introducing tax bills in response to the release last week of President Donald Trump’s tax blueprint.
Senate Finance Committee Ranking Member Ron Wyden, D-Ore., introduced legislation Tuesday to prevent wealthy investors from using derivatives as a tax dodge and Sen. Tammy Baldwin and Rep. Sander Levin reintroduced their bill to close the carried interest loophole.
Wyden said in introducing his Modernization of Derivatives Tax (MODA) Act of 2017 that the Trump administration issued in its tax blueprint last week “a series of unprincipled tax reform goals that would allow wealthy investors to pay lower taxes than they are now.”
As it stands now, “certain taxpayers are able to exploit a complex array of tax rules to make financial bets relatively risk free by delaying, minimizing or even avoiding taxes in ways that hardworking Americans can’t do,” Wyden said.
“Our tax code is riddled with loopholes and elite giveaways that unfairly benefit the fortunate few,” he said. “This legislation takes aim at a loophole that allows sophisticated investors to artificially lower their tax bills. It also eliminates the ability for these taxpayers to pick and choose what kind of tax they want to pay, and when to pay it. Ending these aggressive tax planning tactics is critical to achieving comprehensive tax reform that benefits all Americans, not just those at the very top.”
The bill creates “one set of clear rules” for taxing derivatives by requiring the recognition of gains each year — “mark to market”– and applying ordinary tax treatment to these gains, shutting down sophisticated tax games in the process.
The bill would also repeal nine tax code sections and “revise many others, making it easier for taxpayers to comply with a complex tax code,” Wyden said.
Baldwin, D-Wis., and Levin, D-Mich., said in introducing their bill that Trump promised on the campaign trail to close the loophole, but his tax plan doesn’t reflect that.
Trump’s one-page tax reform outline was “full” of tax breaks for the wealthiest Americans but it did not include any reference to closing the carried interest loophole, they said.
The Carried Interest Fairness Act, which would end the tax loophole, “has received broad bipartisan support from government officials, economists, investors and hedge fund managers,” the two lawmakers said.
— Check out DOL Fiduciary Rule Spared Death in Spending Bill on ThinkAdvisor.