House Democrat Jared Polis was one of three Democrats to vote against the House health reform bill in his committee. In the video, he explains his vote.
If I understand his concern, it’s that he can’t vote for health care reform because the US tax system might tax owners of S-Corporations at a higher rate than other corporations.
So we can’t pass health reform until we fix the tax system. Is that it, Mr. Polis?
Using that argument, we should also abolish the US Senate, because it doesn’t work well either and is bottling up health care reform and threatening the entire economy.
What he appears to be saying:
The nominal US corporate tax rate is 35 percent. [Of course, virtually no large corporation actually pays 35 percent, but never mind that exacerbating fact.]
In contrast, if you own a family business and structure it so that you take its profits as personal income, then the tax rate is whatever your individual tax rate is. That rate may become higher than the nominal corporate tax rate if you are very wealthy — a millionaire.
For example, if your family-owned business earned $1 million this year in net profits (net after paying all expenses, like wages and health care costs, etc) and that $1 million became your personal income, you’d be taxed at the individual rate applicable to a millionaire.
Today, the marginal tax rate (MARGINAL, not the average) for the wealthiest people is 35 percent. When the Bush tax cuts for the wealthiest expire next year the marginal tax rates returns to 39.4 percent — what it was when Bush was first elected. [Historically, the highest marginal tax rate was once 90 percent, and still about 60-70 percent back before the Reagan era, during a period of strong economic growth and rising wealth for the middle class, but never mind these troublesome facts.]
Now put the House proposed surtax on top of the highest rate after Bush cuts expire: the highest surcharge — 5.4 percent – kicks in at incomes above $1 million/year. So for our hypothetical millionaire, that would make the marginal tax rate 39.6 plus 5.4 = 45 percent. And when you add state and local taxes, you can, in some states, get marginal (not average) tax rates over 50 percent.
At this point, Republicans and frightened Democrats go into hyperventilation, even though such rates are well below what they used to be and well below what other advanced economies handle — you know, the ones with universal health care at lower costs per capita than our system.
So what Polis appears to be concerned about is that very successful "small business" owners who are also millionaires and who pay taxes at individual rates could face 45 percent (or higher) tax rates, whereas ordinary businesses would face only the nominal 35 percent corporate rate. MacDonalds would, he argues, get an advantage over your family-owned restaurant chain. [Assumes you ignore that corporate profits would be taxed twice -- h/t wigwam]
But so what? This disparity, given the real, effective tax rate on corporations, is already present between different types of companies, and the disparity will become slightly worse with the expiration of the Bush tax cuts, independent of health care reform. Does he opposed the expiration of the Bush cuts that created massive deficits?
And is Jared Polis really saying he can’t support health care reform unless we fix the entire tax code as it relates to corporate taxation?
Because I want to know how Jared Polis is going to explain that condition to the 30-40 million Americans that could remain uninsured because he’s worried about very successful millionaire family business owners.
And if he doesn’t want to tax millionaire business owners, who else does he have in mind? The middle class? Medicaid recipients? Or to frame it differently, since Polis supports single payer, whom would he tax to pay for it?
Update, via slinkerwink: Well, this is interesting. In the video, you’ll see/hear Polis making sure we know he voted for Kucinich’ single payer opt out amendment for states. He’s also a sponsor of HR 676, a single payer bill. So how would that bill pay for itself?
• Maintain current federal and state funding for existing health care programs
• Establish employer/employee payroll tax of 4.75% (includes present 1.45% Medicare tax)
• Establish a 5% health tax on the top 5% of income earners, 10% tax on top 1% of wage earners
• ¼ of 1% stock transaction tax
• Close corporate tax loopholes
• Repeal the Bush tax cuts for the highest income
Huh. Why do I feel the man owes us a better explanation?





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And if he doesn’t want to tax millionaire business owners, who else does he have in mind? The middle class? Medicaid recipients?
DING!
I think this is really strange. Polis was one of a small group of Coloradans who decided that real issues were being ignored by the repub culture warriors. They set out to get rid of the Colorado Springs crowd and replace them with democrats. One of his issues was supposed to be health care, according to Robert Frank in Richistan. Apparently, his parents raised him in the tradition of good liberals, and he made a fortune in computer businesses. Frank calls him a Lear Jet Liberal.
I can’t quite shake a feeling that he doesn’t want to pay more taxes himself.
Here’s the surtax on the wealthy in H.R. 676, which Polis is a co-sponsor of. Hypocrite, much?
• Maintain current federal and state funding for existing health care programs
• Establish employer/employee payroll tax of 4.75% (includes present 1.45% Medicare tax)
• Establish a 5% health tax on the top 5% of income earners, 10% tax on top 1% of wage earners
• ¼ of 1% stock transaction tax
• Close corporate tax loopholes
• Repeal the Bush tax cuts for the highest income earners
Amazing. Anyone think Mr. Polis owes us a better explanation?
That just may be the explanation. That he doesn’t want to pay more taxes to help out the constituents in his district.
This one certainly doesn’t wash.
A few threads back someone tried to talk up a consumption tax on bad behaviors I assume smoking, drinking, fast food.
If the GOP is desperate their priority is to protect the rich from taxes.
A Sin/Consumption tax might be their last card to play short of actual revolt?
If we don’t tax more the debt goes up which in the long run leads to higher taxes and a weaker dollar. Did any Blue Dog or GOPer for that matter pass basic econ?
Yes I’m starting to think Plant myself.
There may well be more efficient and equitable ways to impose/raise taxes. Consumption and/or “sin” taxes are interesting, but I’m not sure they actually have that much effect on behavior at the levels being discussed, and they certainly aren’t “progressive.”
I don’t see how you can do much better than the progressive income tax for now, and if that creates/exacerbates anomalies in corporate tax laws and that problem is serious, then fix that independently, if they can. But don’t hold up health care reforms until we resolve all of the problems of representative government and how it’s funded.
If I understand correctly, the dividends payed by a normal corporation get taxed twice: once as corporate profits and again as ordinary income to the stock holders. By contrast, the profits of subchapter-S corporations and LLCs are taxed only once, namely as ordinary income to the stockholder — but, in such cases, the stockholder is liable for those taxes, whether or not the profits are distributed.
What bothers me is that he willingly gave that interview, put this concept of unfairness out there, and then basically withheld from the interview critical facts about his other positions.
There’s a scene in The Fugutive, where the US Marshall says, “Dr. ___ lied to me; go find him.”
Yep, but somehow, that didn’t enter the conversations either.
I myself am all for taxing the rich a consumption tax when the economy is bad will hurt poor people.
I think it’s time for another interview with Rep. Polis about the blatant hypocrisy given that the single-payer bill he supports also levies a tax on the wealthy. It’d be interesting to see what he has to say to that.
I don’t think that they know what Econ. is. Hell, Krugman continually makes Mankiw(who was Chief Econ. man under W. for a while) look like an idiot.
Citizen Scarecrow:
“Why do I feel the man owes us a better explanation/”
Maybe a quick look at the good congressman’s list of contributors and a glance at his investment portfolio would clear up your confusion, Brother Scarecrow.
A real “sin” tax would tax the corporations or criminals like Goldman Sachs that paid 1% corporate tax last year.
P.S. Since the congressman knew single payer would never see the light of day he has it on his resume now for re-election and will try and use that to fend off criticism for his failure to support real reform.
Thanks Scare, lucid, accessible analysis, as per usual.
IIRC, Polis was one of the few Dems to vote AGAINST the War Supplemental. When I talked to his office, they claimed he was particularly concerned about the impact on small business. I’m worried we may lose some who voted against the War Supplemental as they “take turns” being progressive.
I’m with the other folks here – if Rep. Polis took an economics class, it was certainly much different than any economics class I’ve ever heard of.
I’m frustrated with the whole system – I know this isn’t a quick fix thing, but considering I’m one of the individuals who is looking at losing their health insurance soon and being saddled with even more debt on top of the debt I’ve run up with insurance I’m rapidly running out of patience for people like Polis who claim to be on “our side” and then don’t actually do anything for it.
Then again, my Rep is a dyed-in-the-wool Neo-con so good luck getting through to him.
Do we know if the amendment Polis introduced (”about data gathering” he said) was passed? Did he vote against the bill even with his own amendment?
Looks to me like voted against the bill knowing it would pass anyway as a “See? I’m pulling for ya’” message to one or more key constituents. I agree with scarecrow et al. that this is just a weird issue to buck the party on. Slinkerwink’s identification of the HR 676 tax structure is a real find. I look forward to a follow-up interview.
Any small business owner who is taking his/her company’s profits as personal income, rather than incorporating and paying him/herself a salary, is so stupid as to deserve to pay a higher marginal tax rate.
I worked at a subchapter-S family-owned corp. I had the impression, listening to the part-time accounting guy who shared our space, that they were doing some tricky accounting stuff on the taxes. Also that there might have been some cash-flow problems (which have probably been magnified by the collapse of the real-estate market in the areas where they do most of their business).
Mr. Polis is saying he wants his patrons to pay little tax, but to have the benefits of a healthy, organized, peaceful, educated, safe and productive society. Everything for me, and nothing for thee.
One suggestion that might ease Mr. Polis’ concerns is to abolish entrepreneur friendly subchapter S of the tax code and tax corporations based on their profitability, and tax owners and employees separately on theirs. Which is what happens to GM and its staff and shareholders now.
Mr. Polis wouldn’t like that either, claiming it’s a “double tax”. That argument falls down most obviously because two separate legal persons – the inhuman corporation and the human owner/employee – are each paying a single tax based on their separate earnings.
Mr. Polis is using excuses to keep things the way they are. It’s what he’s paid to do. But it’s not what the people elected and hired him to do. He’s just a public employee, like all the rest. He’s lucky he’s not a teacher or fireman or librarian or street worker or city clerk. Many of them will be out of a job long before his fellow citizens terminate his employment contract by electing somebody who will do the job he was hired to do.
If the business makes three million dollars and it is a restaurant business; and, if they don’t provide health insurance to their employees, they’ll pay an 8% penalty tax on total payroll above 400,000 dollars of payroll and a smaller percentage on amounts of payroll between 250K and 400K. In addition, they pay a surtax of varying percentages on income above setpoints. He is probably bargaining for small businesses to have a higher penalty exclusion threshold especially in labor intensive restaurant and construction firms.
His Single-payer adulations seem to be smoke as other commenters have stated. Basically, rich people are expressing their entitlement sentiments and are being really selfish. This is just anecdotal but, I hear that a million dollars a year is ‘poverty’ for some of them.
Exactly. So, Sub-chapter S small businesses could always convert to C Corporation status and then their profits would be double-taxed. Somehow I think they’ll prefer the individual-only income tax. When can we get a party of real Democrats again? One big problem with our politics is that the wingnuts have driven most centrist Republicans out of the party and now they call themselves “Blue Dogs” and CovservaDems. A prime example is Senator Mark Warner of Virginia. Back in the 1960s he would have been squarely in the Rockefeller/Eisenhower wing of the Republican Party. Now he’s Democrat.
Nit: Not “payed”, “paid”.
Are you sure dividends are taxed twice? I can’t see why a distributed dividend would be taxed as corporate profit.
I can see that S corp profits are taxed in either instance since the corp is essentially just another pocket of the one person who would be taxed if they were distributed.
Still, it might be interesting to consider the effects of changing S corp taxation to allow profits to remain with the corp untaxed until distributed (maybe within some time period of their having been earned). Shifting all incentives slightly toward keeping monies invested in corp activity and only taxing individuals when those profits are distributed could really stimulate economic activity as more people prefer untaxed monies in their investments to taxed monies in their pockets.
Yes, precisely! They can be for single-payer knowing full well it will never pass. Perfect political fence-sitting.
That’s one reason single-payer was off the table this time around. Nobody could use that ploy.
If someone has a proposal like that then they should make it and have it scored by the CBO. There’s certainly a lot of give & take on legislation of this size and scope. So, I don’t see why any rep shouldn’t speak up. If someone has a valuable contribution to make to avoid having the legislation harm people, then they should rush to help.
Repeal the tax exempt status of corporations within the health services. Use the tax code and tax incentives as a mechanism to control healthcare costs. Instead of using the tax code as a weapon to compel the people to purchase insurance they already cannot afford (a corporate wet dream} utilize tax incentives towards “tax exempt corporations” who have insulated themselves from change (via exempt tax status) unlike the burdensome tax liabilities incentives and disincentives we all endure???? A sin tax on cancer sticks. Taxes at gas pumps. Taxes everywhere for the average American. but yet we permit corporations to operate without tax status, meanwhile these same corporations, claim to relieve burdens of government, by denying coverage, practicing legalized discrimination, lobbying for laws that subject the American people to servitude to corporations under the color of law!!!
How many corporations within the health services are tax exempt?????????
It is lack of tax liabilities ie lack of tax status within the health services, which permits these corporations to operate tax free and without a cost control mechanism!!
HETA HEALTH ENTITIES TAX ACT
(use tax liabilities to create greater efficiencies in a archaic system!)
HSSA HEALTH STANDARDIZATION AND SIMPLIFICATION ACT
Why is it that tax incentives work well to formulate policies towards dealing with the American People, but tax incentives cannot be used as mechanism to control anything, when corporations operate tax free listed as public charities, while bankrupting American families?????????????
Lessening the burdens of government…………… my ass!!!!!!!!!!!!!
The liberty to pay for all of this has been wasted out our tailpipes. When 70 % of the potential energy from a gallon of gas is wasted in the form of heat energy. This means .70 cents on every dollar of fuel is wasted. $850 billion on just gas last year??? Do the math and realize the vast fortunes wasted………….. Liberty lost to energy purveyors and insurance/ health corporations operating tax exempt while raping America!
Two archaic systems, with wastes and inefficiencies! Lets protect their business interests over the self interests of the
governedAmericans delivered into corporate servitude by mandated healthcare, the new disgusting unprecedented….. AMERICAN LIFE Tax IMPOSED ON THE PEOPLE BOUGHT AND PAID FOR BY CORPORATE LOBBYIST???NEEDS INSTILLED, BY CORPORATE DESIGN, NEEDS THAT WHERE NOT REAL AT ALL…….. JUST BRAINWASHED MINDS!
Hey Scarecrow, why not blow the lid off of this corrupted leveraged system extracting vast amounts of liberty, under the color of law fro m every American. Corporate servitude is slavery and is the enemy from within as Jefferson warned. We are deaf dumb and blinded, by absurd blinders…………….
…as for…. for profit health/insurance corporations. At least they have tax liabilities. This does not mean however, that they pay their fair share to maintain the “promote the general welfare” of this republic. Funny, anything designated for the “people” is called welfare by opponents, but when we go to war to secure access to a vast Jurassic oil slick beneath Al Anbar in Iraq and Americans die in the process, we call that duty, to protect the business interests of corporation, instead of corporate welfare?
http://en.wikipedia.org/wiki/C…..ood_debate
“The history of corporate law in the United States can be directly tied to the ebb and flow of the debate first enunciated between Alexander Hamilton and Thomas Jefferson over how centralized the government of the United States should be, how much power the member states should have over their own affairs, and how much say citizens and citizen organizations should have in public affairs.”
>At a million dollars in Adjusted Gross Income, there would be a 5.4 per cent surtax: 9,000 dollars. (This would be 1,500 for 1.0 per cent of income between 350K and 500K; added to 7,500 dollars or 1.5% of income between 500K and one million dollars.) I am not an accountant and I am working from a graphic from the NYTs, but I assume that 3 million in income would result in a health care surtax of 9000 dollars for the first million and then 5.4 percent for the remaining two million dollars or 108,000 dollars which together would look like 117000 dollars.
In addition, the penalty stated in the House draft bill for not providing insurance would be 8% of payroll if the company has payroll greater than 400K dollars per year. Let’s say that payroll for this company is a million dollars: Then the penalty tax would be 80,000 dollars. Let’s put this together with the surtax on their total income of 3 million. This would equal 188,000 dollars. If they have 20 employees, they really have not contributed that much toward their healthcare costs.
I have ragged on this forever, so it’s nice to be able to say they finally seem to be doing something about it.
IRS Gets Tougher on Offshore Tax Evaders
By LAURA SAUNDERS
“The Internal Revenue Service has stepped up scrutiny of offshore accounts and foreign income, an enforcement campaign that could sweep up tens of thousands of taxpayers.
“The push to recover some of the billions of dollars lost each year to offshore tax evasion goes beyond the government’s high-profile effort to force Swiss bank UBS AG to release the names of 52,000 American account holders in order to nab tax evaders.
“The IRS is using a once-obscure tax form called the Foreign Bank Account Report, or FBAR, to force taxpayers to provide information on income they earn or bank accounts they hold overseas. It is threatening tough action against taxpayers who don’t file the form and has greatly broadened those subject to filings beyond direct owners of offshore accounts. The requirement applies to U.S. citizens and residents who have offshore accounts totaling $10,000 at any point during the year.”
Link.