Another tax loophole that needs to be closed–one you did not know about.

February 12th, 2016 at 10:50 am

Quick, think of the most egregious tax loophole you’d like to see closed. Many people, and not just lefties, will think of the carried interest loophole, where hedge fund managers get to pay capital gains rates (~24%) on their earnings (which would otherwise face the top marginal rate of ~40%). A fine choice, widely perceived to be unfair…even Trump says he wants to close this one.

To do so would save just short of $20 billion over 10 years.

Might I interest you in an equally egregious loophole that would save ten times that amount? Got your attention, there, no?

It’s the NIIT, or net income investment tax, a 3.8% surcharge on the investment income of wealthy households, introduced as part of the Affordable Care Act and intended to help strengthen Medicare’s finances. I run down the details over at WaPo–pass-through businesses, which increasing account for business income, have been avoiding this tax–but by closing this loophole and channeling the revenues into the Medicare Health Insurance Trust fund, which was the intention of the NIIT from its conception, we would significantly increase the solvency of this venerable social insurance program.

And don’t give me the “this-Congress-will-never-go-there” business. That’s a big “duh.” (This Congress won’t even close the carried interest loophole, and that one really doesn’t have a lot of friends down here.) The shut-down-the-NIIT-loophole movement begins here. It may not end in my lifetime, but good Buddhists worry little about such trivial and artificial limitations.

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6 comments in reply to "Another tax loophole that needs to be closed–one you did not know about."

  1. Amateur says:

    Let me dump this on you. Paul Krugman is a fine person, but if you disagree with him he’ll put your comments to the back of the pack.

    There was a time when my comments were routed directly to this Nobel Prize winner. He’s listened, and he’s reacted. Solow is listening. I know this.


    You can’t just cut that off because you have technical power…

    Krugman is not objective, and his support of Hillary is disturbing. I get the algorithm…

    FIne. You all hate me. Well, I’m funding Sanders. You can do what you will, but I’m funding Sanders.

  2. Amateur says:

    Do I know how many people use me as an inspiration? I can see it every day. My comments are repeated all over. Things I think of, I speak, and then people react.

    I’m not sure people realize this. I’m the guy yelling at my representative a while back. I’m sure you know that about me. Podesta: You’re out of touch! You don’t get it. Don’t get comfortable!

    Jared, how can we get these people out of influence? Bernie? Yes, that works…

  3. Amateur says:

    This is the golden era of democracy. Let us show it.

  4. Amateur says:

    OMG, Scalia death changes everything. Should it? Should we have a system were this changes everything? I think not.

    OMG. Our world changes drastically…

  5. Fred Donaldson says:

    Every levy has financial consequences, but today the outcomes are not evaluated by their benefit to society, but instead are judged by how much wealth they create for certain persons or classes. It’s called “follow the money” and wince.

    The result of the NIT is supposedly to provide more money to pay for the Medicare Fund, the same fund which was cut to provide more money for the Affordable Care Act. Like movable chairs, the money moves around, except it ends up usually in the same place – where it benefits the wealthy or satisfies the petulant philosophy of the financially austere.

    The problem with Medicare is not solved by throwing more cash at it, because that will only allow private providers (drug manufacturers, etc,) to raise prices with a subsidy that further clouds market prices. Anyone on Medicare will tell you that it is not how much procedures cost – and we usually don’t even see that bill – but how much it costs us in premiums and co-pays. Negotiation with every provider is the answer, but that will alarm the investor class and the recipients of its “contributions.”

    Medicare is a drain on the economy. We see charges of $10 a pill for popular drugs and lingering potholes that destroy cars. We see nursing homes that average $78k a year, forcing the sale of all savings to pay for care, leaving no inhertance to move on to the next generation.

    Too many pundits think of Medicare as some kind of wondrous program. In fact, it is much more expensive to the elderly than Obamacare, which does not allow participation to those past their 65th birthday. It’s no bargain and getting worse: