Adding a bit to @ChuckCBPP's thread, specifically on how the Inflation Reduction Act would narrow the longstanding carried interest loophole that lets private equity (and other investment fund) managers pay lower tax rates than their employees:

https://twitter.com/ChuckCBPP/status/1552669041646608384

First, it's helpful to understand how private equity funds generally work. The fund is a partnership, which is a “pass-through” entity, so the fund’s profits are taxed in the hands of the owners as if the owners received the income directly.

🧵setting the record straight about a proposal to close the loophole that lets some pass-through business owners avoid both a 3.8% Medicare payroll tax AND a parallel 3.8% tax on net investment income. Closing the loophole would (1) limit inefficient gaming, (2) only affect a small share of high-income owners (and would thus be highly progressive) and (3) treat all pass-through business owners equally & improve economic efficiency.

Something any tax lawyer would tell you: many tax questions lack clear answers. In those fuzzy cases, taxpayers (aided by their tax advisors) have an incentive to place themselves on the tax-saving side of the line. That’s tax avoidance. And often the only thing keeping high-income filers from taking more and more aggressive positions – eventually crossing the line into illegal tax evasion – is IRS enforcement (or the prospect of it).

Important point from @crampell: in addition to leaving out struggling low- and middle-income families, a new capital gains tax cut would heap yet another tax break on investments that are already barely taxed washingtonpost.com/opinions/whate… -Capital gains taxes are lower than top rates on wages (20% vs. 37%)
-Investors can avoid tax until they sell
-Other loopholes (like-kind exchanges, OZs, etc.) give tax breaks even if they sell
-Income tax is forgiven if they pass on assets to heirs
cbpp.org/blog/much-of-w…

Thread: 30 million people are unemployed, 8-15 million kids aren't getting enough to eat & President Trump has - twice in 2 days - said he wants a capital gains tax cut. Regardless of the details, this would be a windfall for the wealthy. Here’s why 👇 It would do little or nothing to help “middle-income” people, let alone those who lost jobs or are struggling just to get by.

The Trump Administration is considering an executive order imposing a "payroll tax holiday.” The President has repeatedly called for a payroll tax cut in the upcoming stimulus package, but Senate Republicans rejected that for their proposal. 1/
bloomberg.com/news/articles/… The two main payroll taxes amount to 15.3% of the first $137,700 of earnings, w/7.65% paid by employees (withheld from paychecks) & 7.65% paid by the employer. The CARES Act already deferred most employer-side payroll taxes through 2021. 2/

Tax Day is a good day to remind people that, following big budget and staffing cuts since 2010, the IRS "has done less to enforce tax laws," according to CBO.
cbo.gov/system/files/2… Audit rates for millionaires have declined by 61%, much faster than for other groups.

This occurred even though the top 1% accounts for around 30% of the $441B tax gap (or even more according to other estimates).

Thread: new CBO report on the last decade of IRS budget cuts, interactions with the “tax gap,” and how increasing IRS enforcement funds could save far more in revenues than it costs.
cbo.gov/system/files/2… We’ve written (extensively) about the deep damage to IRS enforcement funding over the last decade, and how these cuts threaten the IRS’ ability to recover even a modest share of the annual $441 billion tax gap.
cbpp.org/blog/policymak…

This week – shortly after he ordered federal police to violently remove peaceful protesters of police violence against Black people – the President cited #OpportunityZones as evidence of his support for the Black community. This is outrageous and enraging in many, many ways (see thread from @Connor__Maxwell for a few of them).

https://twitter.com/Connor__Maxwell/status/1268196028341256192

But focusing specifically on the #OZ claim for a second:

Speaker Pelosi’s new #COVID19 relief bill includes a 2nd round of “recovery rebates” & fills the problematic gaps in the first round of payments (created by the #CARESAct).

THREAD: For most families w/kids or other dependents, the bill would mean larger 2nd round payments than the #CARESAct provided. Adults are still eligible for $1200, but each dependent (up to 3 dependents) would get the same $1200 amount (instead of $500). 2/

IRS now saying two groups of stimulus payment recipients should pay amounts back to the government: (i) people who are incarcerated and (ii) family members of deceased individuals. But there’s little, if any, statutory basis for either view.
irs.gov/coronavirus/ec… The law says “any individual” is eligible except (i) “nonresident alien individuals,” (ii) dependents of another taxpayer & (iii) estates/trusts. Incarcerated individuals don’t fit w/in those categories & the law doesn’t seem to otherwise exclude incarcerated people.

Thread on stimulus checks for those who receive #SocialSecurity: Treasury & IRS should make clear that seniors & people w/ disabilities who receive #SocialSecurity won’t have to file a tax return to receive their stimulus check.

Our latest: cbpp.org/blog/social-se… Why this is important: Yesterday, the IRS suggested #SocialSecurity recipients who don’t otherwise need to file a return may have to file to receive a stimulus check. irs.gov/newsroom/econo…

👇🏼Important thread from @GreensteinCBPP on major failures latest GOP plan.

https://twitter.com/GreensteinCBPP/status/1240778506746896385

On the biz tax side, they seem to be throwing everything at the wall just to see what sticks. Some things make sense, e.g., turning off TCJA changes to NOL rules (which probably shouldn’t have helped pay for corporate tax cuts in the first place).

Though it's not new or unique for companies to lobby agencies for favorable regulations, the scope & scale of the lobbying post-2017 tax law - & apparent success of that effort - is pretty striking.
nytimes.com/2019/12/30/bus… We raised this flag as Treasury enacted regulations implementing the unprecedented 20% pass-through deduction.

The tax break was one of costliest (and most tilted to the wealthy) in the law, and the Treasury regulations likely made those issues worse.
cbpp.org/blog/pass-thro…

Worth reiterating (a lot): in recent decades, income has been shifting to the wealthy and away from the working class, and the 2017 tax law exacerbated those trends by giving the largest tax cuts to the wealthy. #2YearsOfTCJA

https://twitter.com/CenterOnBudget/status/1204839013430906882

The law:
-Cut the corp rate from 35% to 21%
-Created an unprecedented 20% deduction for pass-throughs
-Doubled (to $22M) the amt that can be passed on to heirs tax-free
-Cut the top rate from 39.6% to 37%

These cuts overwhelmingly benefit the wealthy.

Had a great chat on @Marketplace yesterday with @KA_marketplace (plus Mark Mazur of @TaxPolicyCenter & @mboteach) on our paper released yesterday and ways the tax code can better advance gender and racial equity by directly addressing inequality.
marketplace.org/2019/11/13/how… First, some context. Barriers to opportunity — rooted in sexism & racism — have profoundly affected today’s income & wealth distribution, in which women of color are disproportionately represented at the bottom, while non-Hispanic white men are over-represented at the top.

More on our new paper: This graphic shows how a wealthy person can avoid income tax on a huge % of her income. cbpp.org/research/feder… But there are solutions!

Starting w/ways to tax more types of income: policymakers should repeal stepped-up basis & tax capital gains of affluent households when assets are transferred to heirs. We can do this w/o affecting the middle-class (Obama’s budget did this, for one).

Just released our new report (from @ChuckCBPP , Kathleen Bryant & me) - our contribution to the debate on how to better tax the wealthy. Thread:
cbpp.org/research/feder… There’s consensus that income & wealth inequality are large & growing (which hurts households of color the most, b/c they’re overrepresented at the low end of the income/wealth distribution).

Tax policy has contributed to these disparities, but can also push back against them.

A few thoughts on the new bill from Sen. Wyden to add reporting requirements + substantive restrictions on some of the worst abuses of #opportunityzones.
propublica.org/article/billio… We've said Congress should evaluate how OZs are working & adjust as appropriate, and it's good to see this starting to happen.
cbpp.org/blog/opportuni…

Lots of focus on abuse of the OZ designation process highlighted in this story from @JesseDrucker & @EricLiptonNYT.

I want to focus on a strategy mentioned that lets existing landowners benefit despite the law's intent that only NEW projects can qualify.
nytimes.com/2019/10/26/bus… The law says property must be purchased from an unrelated party after 12/31/17. So a property developer who owned land in an OZ before the law was passed couldn’t count that land as qualifying property & couldn’t just “sell” it to his brother to avoid the purchase requirement.

Good piece from @Pat_Garofalo on #OZs. Quick thread on why this is important. /1

https://twitter.com/Pat_Garofalo/status/1181540517705850881

It's not *necessarily* a bad thing for an area w/a sports stadium to be designated as an OZ. There could, of course, be high poverty in such areas, and those folks could benefit from government intervention. /2