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The Congressional Connector
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Week of August 27 - 31, 2007 |
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Levin Proposal to End Unfair Tax Break Gains Friends/Enemies
Earlier this year, Rep. Levin introduced legislation [H.R. 2834] to correct an abuse in the tax code that allows some wealthy “private equity” investment fund managers to pay tax on a large portion of the compensation they receive for managing their investors’ money at the 15 percent capital gains tax rate, rather than the ordinary income tax rates (up to 35 percent) that would otherwise apply. The legislation is definitely getting a lot of people’s attention. The Washington Post recently reported: “Private-equity firms, fighting legislation to raise their taxes, have spent at least $5.5 million on lobbying in the first half of this year, up from $1.4 million for all of 2006.”
Levin’s bill is gaining support in other quarters, however. Paul Krugman recently wrote in his New York Times column, “It's not exactly straight salary, but none of this income comes from [a hedge fund manager] putting his own wealth at risk. Except for the fact that he might make a billion dollars a year, he resembles a waitress whose income depends on a mix of wages and tips, or a salesman who lives on a mix of salary and commissions, more than he resembles an entrepreneur who sinks his life savings into a new business. So why does he get the same tax breaks as that entrepreneur? Not to put too fine a point on it, why does [private equity manager] Henry Kravis pay a lower tax rate on his management fees than I pay on my book royalties?”
To read more of what people are saying about the legislation, click here.
Congressional Watchdog Issues Wake-Up Call on Nation’s Long-Term Challenges
David Walker is the Comptroller General of the United States. He is the head of the General Accountability Office (GAO), which is the non-partisan investigative arm of Congress. Mr. Walker has been touring the country to raise awareness of our nation’s worsening financial condition and the need to address critical problems (globalization, entitlement reform, fiscal discipline) that are being ignored.
In a recent speech in Chicago, Mr. Walker said, “Simply stated, America is on a path toward an explosion of debt. And that indebtedness threatens our country’s, our children’s, and our grandchildren’s futures. With the looming retirement of the baby boomers, spiraling health care costs, plummeting savings rates, and increasing reliance on foreign lenders, we face unprecedented risks.... We also face a range of serious challenges when it comes to health care, education, energy, the environment, foreign policy, immigration, infrastructure, Iraq, and other issues. Current U.S. policy in all these key areas is on an unsustainable path over the long term. Tough choices must be made, and the sooner the better.”
To read the entire speech, click here.
Congress Takes a Hard Look at Impact of Hurricane Katrina
On August 2, the House Budget Committee held a hearing to explore the impact of the 2005 Gulf Coast hurricanes on the federal budget, including the impact that poor decision-making in the initial response had on long-term costs. Hurricanes Katrina and Rita did more physical damage than any disaster in U.S. history. According to the General Accountability Office (GAO), the full cost of rebuilding after the hurricanes will likely far surpass costs from the three other costliest disasters in recent history – Hurricane Andrew, the Northridge earthquake, and September 11.
To date, the federal government has already committed more than $116 billion in grants, loan subsidies, and tax relief and incentives to relief and reconstruction efforts, and witnesses at the hearing testified that the Bush Administration and the states are likely to request additional funds for levee reconstruction, wetlands restoration, and housing needs in the near future.
To view a detailed summary of the hearing’s findings, click here.
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