Maria Cantwell is gamely fighting to include her amendments in financial reform and put up a real firewall between investments and commercial banks. But in proof that you cannot simply label a politician a hero or a goat, at the same time Cantwell is leading a group of Democrats trying to get exemptions to the carried interest loophole, a sophisticated form of tax evasion where certain money managers can claim a far lower tax rate on their income. There has been renewed interest in closing the loophole because Democrats need revenue to pay for a big tax extenders bill. But Ryan Grim reports:
The Democratic effort to raise revenue for a jobs bill by closing a tax loophole that benefits money managers is running into opposition within the party itself as details are being worked out.
Two Senate Democrats, John Kerry (D-Mass.) and Maria Cantwell (D-Wash.), are pressing Finance Committee Chairman Max Baucus (D-Mont.) to treat certain fund managers different than others. Last week, Baucus agreed with House Ways and Means Chairman Sandy Levin (D-Mich.) that the “carried interest” loophole would be closed to pay for a jobs package of unemployment benefits, tax extenders.
The jobs bill promises to be a classic struggle between the haves and the have nots, which the Senate will debate once Wall Street reform is finished. It will pit money for job creation, unemployment benefits and health care subsidies for the jobless against special tax breaks for money managers. The Democratic in-fighting clouds the message the party is hoping to send.
In particular, Cantwell and Kerry want to allow venture capitalists to use the carried interest loophole. They would sacrifice revenue that is going directly into extended unemployment insurance and Medicaid help for the states (so they don’t have to drop recipients from the rolls) in the tax extenders bill. Cantwell is directly arguing to allow a big tax break to multi-millionaires at the expense of the poor.
Here’s the worst part of this. FDL News has learned that Maine Republicans Olympia Snowe and Susan Collins have no objection to closing the carried interest loophole to pay for the legislation. So Kerry and Cantwell, along with some other Democrats (I’ve heard Mark Warner, Jeanne Shaheen, Bob Casey and Patty Murray), are to the right of the Mainers on this issue.
But Cantwell and Kerry in particular went on the record.
“I think there’s a difference in the business models between venture capital, people who do job creation and lose money for a whole long period of time, sometimes as many as 18 or 20 years, and people who just make money because they’re financial engineers. I’m a little tired of the financial engineers, the people who are just making money off of money, telling everybody here what to do, versus people who actually make a product or a service,” Cantwell told HuffPost.
Kerry is also pushing for changes. “I think there are some distinctions that ought to be drawn, personally,” Kerry said. “There’s a distinction between long-term, patient, capital formation, with risk, and things that are sort of masquerading as an investment that are fees. I think there’s a distinction.”
That’s all well and good but we’re talking about tax fairness. If you want to give a credit to entrepreneurs, not only can you but those credits exist. This is a massive tax break, lowering their marginal rate from 35% to 15% at the highest level, for no good reason. It’s just protecting privilege.