There are five basic legal forms of business structures found in the United States: C corporations, S corporations, sole proprietorships, partnerships, and Limited Liability Companies (LLCs). In order to understand...
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- Nixon Treasury Originally Opposed AMT
Nixon Treasury Originally Opposed AMT
As we wrote two days ago, the late Robert F. Kennedy was one of the early proponents of the concept of a minimum tax, which today is the alternative minimum tax. It was put forth by the Johnson Administration in its last hours of existence (late 1968 and Jan. 1969). But the Treasury Department of the Nixon Administration originally opposed such a concept.
A New York Times article published on April 13, 1969 titled "How 381 Super-Rich Americans Managed Not to Pay a Cent in Taxes Last Year," explains the problem in-depth and discusses the solutions that had been proposed. It describes the situation at that time (April 1969) as follows:
One proposal for ending total tax avoidance, favored by the late Robert Kennedy and espoused by officials of the outgoing Johnson Administration, would impose a minimum tax on the well-to-do, applicable to their total income, that total to include the now-excluded half of capital gains, state and local bond interest, the special oil-depletion deductions and the presently untaxed increase in the value of gifts to charity.
The suggestion has been criticized from all sides. It is strongly opposed by the new Nixon team in the Treasury Department on the ground that it would not accomplish the objective of taxing all wealthy persons. The Nixon tax experts are said to be looking for better ways of ending inequities in the tax system.
The minimum-tax idea as proposed by the Treasury also draws criticism from tax reformers. Former Internal Revenue Commissioner Mortimer Caplin points out that it leaves two escape routes unaffected - the "intangible" oil deduction and the "fast writeoff" on buildings. Unless these routes are closed, Caplin says, there might still be 21 untaxed multimillionaires.
More generally, tax reform purists do not like the blanket approach embodied in the proposal; they are critical of the Treasury's failure to tackle head-on the specific loopholes. Those who had high hopes in 1961, when the leading exponent of tax reform, Harvard Law Professor Stanley Surrey, took over the Treasury's tax affairs, are puzzled as to why, after eight years of Surrey's administration, the Treasury remains silent on, or is still "studying" these long-standing, costly, well-known favors.
Today, the Tax Foundation and other tax groups and scholars on both the right and the left would be called tax reform purists, suggesting that the root of the current AMT problem is the deductions and loopholes that make a parallel tax system necessary in the first place. Unfortunately, with respect to tax policy, the more things change, the more they stay the same, as is indicated later in this article. You would think it was written in today's newspaper rather than 38 years ago.
Why has tax reform fared so abysmally? The answer boils down to this simple fact: those who benefit from a given tax favor are generally cohesive, well organized, superbly financed and endowed with all the energy and zeal that the threat of losing tens, if not hundreds, of millions of dollars can provide. By contrast, those who favor closing a given loophole are usually diffuse, unorganized, largely inarticulate - and perhaps fearful of pressing too hard for reforms lest Congress being to frown on their own particular tax preferences. The loophole-closing efforts of most labor unions (whose members enjoy tax-free treatment of billions in medical, pension and other fringe benefits) have been less than zealous, although logically the unions should be the leading opponents of tax favors to the rich. A few days ago, the A.F.L.-C.I.O. did call on Congress to impose higher taxes on "the loophole set"; yet a few weeks earlier, the huge union rebuffed a group of reform-minded Congressmen and refused to put up a penny to organize a citizens' tax-protest movement.
The end of the article includes a quote from then-Chairman of the House Ways and Means Committee, Arkansas Democrat Wilbur Mills. How many times since then have we heard this?
"The need for a thorough overhauling of our tax system...is one of our most pressing national problems. We can no longer afford to defer serious, large-scale efforts to revise our Federal tax system."
The article's take on the quote is "timeless":
Each of those statements has a contemporary ring. The first was made in 1943; the second in 1958. But the sweeping tax reform of which they spoke in such urgent terms is still a thing of the future.
And unfortunately it is still a thing of the future.
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