Doublespeak on Double Taxation
The Weekly Standard has a fascinating discussion this week regarding the Obama Administration and Koch Industries. It describes how Obama singles out these libertarian billionaires for their opposition to Democrats — something that other Democrat politicians have begun to do en masse.
Apparently, as part of Obama’s attack strategy, his administration disclosed tax information about Koch Industries (which, under law, is supposed to be confidential) in an effort to hint at tax impropriety.
There was also another important part of the article regarding taxes that was misrepresented by the Obama Administration.
“According to Mark Holden, senior vice president and general counsel of Koch Industries, a senior Obama administration official told reporters at an August 27 on-the-record background briefing on corporate taxes:
So in this country we have partnerships, we have S corps, we have LLCs,we have a series of entities that do not pay corporate income tax. Some of which are really giant firms, you know Koch Industries is a multibillion dollar businesses. So that creates a narrower base because we’ve literally got something like 50 percent of the business income in the U.S. is going to businesses that don’t pay any corporate income tax. They point out [in the report] you could review the boundary between corporate and non-corporate taxation as a way to broaden the base.
Holden tells THE WEEKLY STANDARD that this quotation from a senior administration official “came to our attention from different avenues”.
Folks, here we have a senior Obama Administration official going after non-corporate entities on-the-record. Austan Goolsbee intimated this very line of thought during his recent interview with Chris Wallace on September 12. That’s pretty bad.
What the administration also purposefully does not explain, however, is that the reason why these businesses file as non-corporate entities is so that they can avoid the egregious problem in our tax code known as double taxation.
Some companies–say a Fortune 500–pay taxes at corporate rates. The highest corporate rate is 35%. Right now, if a corporation pays taxes and reinvests its profits, there is no extra tax. But if it profits are given to the owner, they are taxed again on that amount–which is knows as double taxation. Those business owners who wish to avoid the double taxation instead pay at individual rates, the highest of which is also 35%.
Obama is specifically trying to discredit Koch Industries and a plethora of small businesses by leaving the impression that not paying corporate taxes is somehow wrong or underhanded. These types of small businesses are the backbone of our country. They will further be impacted if the Bush tax cuts for the top earners is allowed to expire because many of these non-corporate entities pay in that highest individual tax bracket, which is set to rise to 39.6%.
For an administration to target small businesses in this way is unacceptable. Doing it while discussing sensitive tax information that likely should not be disclosed (from my perspective as a CPA) is quite alarming.