Obama Can End the “Carried Interest” Loophole Without Congress

Wow, you really do learn something new every day.

I really, really hate the “carried interest” loophole that lets the ordinary income of hedge fund and private equity guys get taxed at the lower rate for capital gains.  Right now the top rate for ordinary income is 39%, and only 20% for capital gains, so we’re talking real money.  The top 25 hedge fund managers made more than $24 billion in 2013.

I always thought that Congress gaveth that loophole and Congress would have to taketh it away.

But nooooo!  As David Lebedoff writes at Slate*, the IRS issued a ruling in 1993, before hedge funds existed, that was intended to apply to real estate investments.   Congress never voted on it.  When hedge funds arrived on the scene, the IRS applied this ruling to them.  But President Obama could — right now, today, before his bedtime in Europe! — tell the IRS to stop doing that.

Looking for a real IRS scandal?  This is it.

* “Why Doesn’t Obama End the Hedge Fund Tax Break?”

The Party Who Cried Wolf

It seems to me that the VA scandal — which is a real scandal — would have a lot more oomph and impact if the GOP hadn’t wasted (and continues to waste) so much energy and outrage on phony scandals like Benghazi and the IRS.

They’ve squandered a lot of credibility and induced scandal fatigue because so many Americans believe that anything the Republicans get worked about stems from their visceral hatred of the Kenyan Muslim socialist.

Media Squabble Alert

If you like this sort of thing, Salon and MSNBC are having a tiff.

Alex Seitz-Ward wrote a story yesterday calling out the media for falling for the IRS scandal.  I quoted from the story on this blog.

Last night, Lawrence O’Donnell did a long “Rewrite” on his MSNBC show, faulting Seitz-Ward for not crediting O’Donnell with recognizing the phoniness of the scandal early on and in 24 (O’Donnell kept emphasizing that 24) segments on his show.

Now Alex Pareene has a post up at Salon slamming O’Donnell  — “Lawrence O’Donnell outraged to read story that isn’t about him.”

I’m sure we’ll be hearing from O’Donnell this evening.

Where’s the Media Apology on BS IRS “Scandal”?

From “How the media outrageously blew the IRS scandal:  A full accounting,” Alex Seitz-Wald, Salon:

“While the initial reports about the IRS targeting looked pretty bad, suggesting that agents singled out tax-exempt applications for Tea Party and conservative groups for extra scrutiny, the media badly bungled the controversy when supposedly sober journalists like Bob Woodward and Chuck Todd jumped to conclusions and assumed the worst from day one. Instead of doing more reporting to discover the true nature and context of the IRS targeting, or at least waiting for their colleagues to do some, the supposedly liberal mainstream press let their eagerness to show they could be just as tough on a Democratic White House as a Republican one get ahead of the facts. We expect politicians to stretch reality to fit a narrative, but the press should be better.

“And they would have gotten away with it, too, had their narrative had the benefit of being true. But now, almost two months later, we know that in fact the IRS targeted lots of different kinds of groups, not just conservative ones; that the only organizations whose tax-exempt statuses were actually denied were progressive ones; that many of the targeted conservative groups legitimately crossed the line; that the IG’s report was limited to only Tea Party groups at congressional Republicans’ request; and that the White House was in no way involved in the targeting and didn’t even know about it until shortly before the public did.

“In short, the entire scandal narrative was a fiction. But it had real consequences, effectively derailing Obama’s agenda not long after a resounding reelection, costing several people their careers, and distracting and misinforming the public. It’s not that nothing went wrong at the IRS, but that the transgression merited nowhere near the media response it earned. But instead of acknowledging its error or correcting the record, the mainstream political press has simply moved on to the next game.”

The whole piece is worth a read, as Seitz-Wald also calls out David Gregory, Jon Stewart, Andrea Mitchell, Chris Matthews, and Robert Gibbs for taking the bait so credulously without doing their homework.

Well, That Explains It

Now that we know the IRS was scrutinizing the entire political spectrum, looking for a level of political activity that would disqualify groups from a 501(c)(4) tax exemption with key words like “progressive” as well as words like “Tea Party,” I was wondering why the original Inspector General report that triggered this whole BS “scandal” mentioned only conservative groups.

It’s because Congressman Darrell Issa (R-CA), the ringmaster of this circus, asked for an audit limited to targeting of conservative groups.

So we’ve come full circle.  He’s an even bigger piece of shit than I thought.

For more, see “Sander Levin:  IRS tea party probe ‘flawed in a fundamental way,’ Lauren French, Politico; “Darrell Issa’s credibility is over,” Alex Seitz-Wald, Salon.com; “Documents Show Liberals in I.R.S. Dragnet,” Jonathan Weisman, NYT

Headlines of the Day

“Mitch McConnell Realizes IRS Scandal Is Over”

“House Republican Hate Poor Too Much to End Farm Socialism”

Both come from Jonathan Chait at New York Magazine.

The Phony IRS Scandal

Dems on the House Oversight Committee have released transcripts showing that an IRS manager in Cincinnati — who refers to himself as a conservative Republican — is the one who came up with the idea of centralizing Tea Party-type applications for review.  I think centralize is a better word for what happened than “targeting,” with its perjorative connotation.  It makes sense to centralize similar applications to make sure that you are processing them consistently, and that’s exactly what the manager says he was doing.

He also says that the White House wasn’t involved.

Some IRS officials in Washington became involved as well after the Cincinnati guy originated his centralized reviews, but there’s no evidence that they weren’t trying to find fair criteria to judge how much of these groups’ activities was political and not “general welfare” to determine if they deserved a tax exemption as 501(c)(4) groups.

But Darrell Issa’s attempts to portray a White House going after its “enemies” as Richard Nixon tried to do seems exaggerated and misguided.

I was angry at the White House for initially acquiescing right away that there was an IRS “scandal” here at all and for accepting the term “targeting” of Tea Party groups.  Centralizing is not targeting.

Happy Days Are Here Again…

Consumer confidence is at its highest level since February 2008.

Housing prices in 20 major cities jumped 10.9% in the past year, the biggest annual increase since April 2006.

We know the deficit is looking much, much better than expected, as recovery brings more revenue to the government.

So for 2014, the GOP is left trying to sabotage Obamacare and trying to milk all the mileage they can out of the Benghazi, IRS, and reporter (AP/Fox’s James Rosen) “scandals.”  I remain unconvinced that any of these is really a true scandal.

How Apple Stops the IRS from Biting

From “Here Comes the Sun,” Joe Nocera, NYT:

“Among the many things Tim Cook apparently learned at the knee of Steve Jobs, during his long tenure as Apple’s No. 2, was how to create a ‘reality distortion field.’ Or so it would appear after watching Cook, now Apple’s chief executive, testify on Tuesday at a Senate hearing on the company’s tax avoidance schemes.

“Jobs was so persuasive that he could claim the sun was setting when it was actually rising, and everyone would nod in agreement. On Tuesday, despite the overwhelming evidence presented by the Senate Permanent Subcommittee on Investigations that Apple engaged in dubious tax avoidance gimmicks, Cook claimed that Apple never resorted to tax gimmickry. Even though the company appears to pay about ten percent of its pretax income in taxes — when the federal corporate tax rate is 35 percent — Cook said, ‘We pay all the taxes we owe — every single dollar.’ He added that Apple had never shifted any of its American profits to an offshore tax haven when, in fact, that is basically what it has done, routing tens of billions in pretax profits to a shell corporation in Ireland that exists solely to avoid taxes in the United States. He even said that the low taxes Apple pays overseas is on the profits of its overseas sales. Not to put too fine a point on it, but this was a flat-out lie.

“In other words, Cook spent Tuesday claiming that the sun was setting when it was actually rising, and, predictably, by the time the hearing had ended, most of the senators were agreeing with him.

“Yet as documented both by The Times and the Senate subcommittee, Apple is as much an innovator in tax avoidance as it is in technology. Take, for instance, a scheme known as The Double Irish, which it largely invented and which many American companies have since replicated. This strategy, which was the primary focus of Tuesday’s hearing, involves setting up a shell subsidiary in an offshore tax haven — a k a Ireland — and transferring most of Apple’s intellectual property rights to the dummy subsidiary. The subsidiary, in turn, charges ‘royalties’ that allows it to capture billions of dollars in what otherwise would be taxable profits in the United States. In Ireland, according to Apple, it pays an astonishing 2 percent in taxes….”

Emphasis added.

They Can’t Just Take the Gift

You’d think the Tea Party folks would just take the gift-wrapped IRS bias scandal and exploit it for all it’s worth, which is a lot actually.

But noooooooo, because they’re crazy, they have to over-reach.

Michele Bachmann is running around saying that because the IRS is involved in Obamacare (they will administer the monetary penalties for those who choose not to buy health insurance), the IRS is going to delay or deny health care itself to conservatives.  So they’re not just giving your group a hard time about getting a tax exemption, they’re going to kill you!

And so the tide turns back against them because they can’t resist one-upping the IRS on being outrageous.