Tag Archive | "legislation"

Small Firms Chafe At Senate Payroll Tax Proposal


Gabriel Durand-Hollis, owner of a San Antonio, Texas-based architecture and interior design firm, is no John Edwards. But he could nonetheless see his taxes rise as a result of a Senate measure that seeks to crack down on a technique Edwards, a former U.S. Senator from North Carolina, once used to avoid paying hundreds of thousands in payroll taxes, reported The Wall Street Journal.

The Senate provision, part of a broad bill that extends jobless benefits and renews expired tax cuts, would subject more of the profits of lawyers, accountants and other professionals to the 2.9 percent Medicare tax.

Durand-Hollis, one of two owners of a firm that employees 25, said the provision, if enacted, would boost his federal tax bill by $30,000 or more.

“If we had to send a big check like that to the IRS at the end of the year, we’d have to take a hard look at whether we can afford Christmas bonuses, or that new software purchase,” Durand-Hollis said in an interview with The Wall Street Journal.

Criticism of the Senate tax provision comes as President Barack Obama Friday sought to highlight his support for measures aimed at helping pull small firms out of the economic recession.

“Small businesses will help lead this economic recovery. And that’s why we will continue to stand by them,” Mr. Obama said.

Some small business advocates say the Senate provision does the opposite, and they have enlisted a powerful ally to fight it—Sen. Olympia Snowe (R., Maine), considered a swing-vote on the broader tax package.

Snowe on Friday called the payroll tax provision a “poison pill in this tax bill, robbing American small businesses of the capital they need to create new, good-paying jobs.”

Congressional Democrats say it targets an abusive strategy used by some owners of S corporations. Those business owners paid themselves a nominal salary, while the rest of the firm’s profits are paid through a dividend that is not subject to payroll taxes.

Edwards drew criticism during the 2004 presidential campaign for his use of the tactic. He earned $26.9 million in four years in the late 1990s while reporting only $360,000 in salary.

Durand-Hollis declined to disclose his salary, but said it is commensurate with what other architects with his experience make. His firm had gross revenue last year of about $3.5 million.

There are about 4 million S corporations in the U.S., not all of which would be subject to the new taxes. The taxes would apply only to certain professionals including doctors, lawyers, athletes, performing artists and investment advisers.

Dr. Joseph Smith, a Virginia podiatrist, said he could pay an additional $6,000 in payroll taxes as a result of the change. He paid himself a salary of $71,500 in 2009, and took an additional $48,500 as a dividend.

His accountant, Nick Potocska, said Smith’s salary is not unusual since he works almost exclusively with Medicare patients, who pay less than patients covered by private insurance.

Critics of the Senate provision say it would treat all business profits the same as wages for services rendered, while failing to distinguish the return firm owners reap for investments of time and capital to grow their business.

“This bill blurs the line between a return on your capital and your risk, and wages. It’s almost neutering the whole concept of capitalism,” Potocska said.

The Senate proposal has its defenders. James B. Davis, who heads the tax practice at the Gunster law firm, said the provision targets an area that is rife with abuse and brings the tax treatment of S corporations more in line with other types of business structures.

“All they’re doing is putting S corporations on a parallel with C corps and partnerships. They are closing what would be easily construed as a loophole,” Davis said.

Snowe’s opposition suggests that changes might be needed to the payroll tax provision to get it through the Senate.

But changes that scale back the proposal will be difficult. It is projected to raise $11.2 billion for the government over 10 years, and any scaling back of the proposal would have to be replaced with other revenues.

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Auto Dealers Win Support in Senate


WASHINGTON – Despite strong opposition from the White House, the Senate voted Monday to help auto dealers escape oversight from a new consumer watchdog agency, reported The Detroit News.

By a 60-30 vote, the Senate approved a nonbinding motion that urges Senate negotiators to exempt auto dealers from the supervision of the proposed Consumer Financial Protection Agency. The agency is a key part of the Obama administration’s overall plans to overhaul financial regulations.

Both Michigan senators, Carl Levin, D-Detroit, and Debbie Stabenow, D-Lansing, voted against the motion. But many prominent Democrats voted for it, including Senate Majority Leader Harry Reid, D-Nev., and Sen. John Kerry, D-Mass.

On Friday, the Senate approved a massive overhaul of the nation’s financial system. The overhaul creates a Consumer Financial Protection Agency, whose oversight powers would include auto lending.

Auto dealers failed to get a vote on an amendment, proposed by Sen. Sam Brownback, R-Kan., exempting them. But in exchange, the Senate agreed to a vote Monday on his request urging Senate negotiators, who will work with the House in reaching a compromise version of the financial overhaul legislation, to exempt dealers.

Auto dealers lobbied Congress for months, and more than 250 dealers were on Capitol Hill last week, attempting to convince undecided senators to exempt them from additional federal oversight.

The nation’s 18,000 dealers are one of the most politically powerful forces on Capitol Hill. Since 1990, dealers have donated $25 million to members of Congress.

A version of the House financial overhaul approved in December exempted the auto dealers. The motion approved Monday urges the Senate to go along with the House version.

Negotiators could still opt to keep the Senate language, although Monday’s vote will make it more difficult. They want to send a bill to President Barack Obama for his signature by July 4.

Sen. Chris Dodd, D-Conn., chairman of the Banking Committee, said after the vote he would oppose adding “carve-outs” and “loopholes” — a clear reference to the auto dealers provision.

Auto dealers contend they weren’t responsible for Wall Street excesses and are already heavily regulated by state and federal laws. They argue new onerous regulations could make lending more expensive and prevent some people from getting auto loans.

In a letter to the Treasury Department, Clifford Stanley, an undersecretary of Defense, raised concerns about the impact that “unscrupulous practices” of some auto dealers have on military families.

The White House says the bill is aimed at bad-apple dealers.

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Dealer Exemption in Financial Oversight Bill Altered to Address Military's Concerns


WASHINGTON – A Senate proposal to exempt car dealers from oversight by a proposed consumer protection agency has been changed to add a requirement that military families’ complaints about dealers be monitored and shared by the new agency, Automotive News reported.

Under the new proposal, filed by Sen. Sam Brownback, R-Kan., the proposed agency’s military liaison office would coordinate with the federal agencies that now oversee dealers to ensure that these complaints are addressed.

But under the Brownback plan, investigations of these complaints and the devising of rules affecting dealers would remain with the current oversight agencies — the Federal Reserve and Federal Trade Commission.

“The addition was made to address concerns raised by some military groups,” Brownback spokeswoman Becky Ogilvie said today.

Bailey Wood, a National Automobile Dealers Association spokesman, said the changes in the proposal would still “prevent a new agency from adding an additional layer of rules over dealers.”

The Military Officers Association of America, which has opposed the Brownback amendment, said it continues to do so even after the change.

“Senator Brownback’s change fails to provide any additional protections for servicemembers and their families from unscrupulous dealers and places responsibility directly onto the troop to identify fraud and avoid being taken advantage of,” said association spokesman Michael F. Hayden, a retired Air Force colonel.

The Senate vote on the amendment is expected to be close, and it is unclear how many votes will be swayed by the changes.

The U.S. Treasury Department has been leading a coalition of military, banking, consumer and civil rights groups against the Brownback amendment. The agency declined to comment today.

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Car-safety Bill May Be Tamed


WASHINGTON — Congressional Democrats may scale back some provisions of an auto-safety bill after carmakers criticized the measure for mandating rapid and costly rollouts of new technology and eliminating their right to question government-imposed vehicle recalls, The Wall Street Journal reported.

Proposals unveiled in the House and Senate this month would require fundamental changes to the design of cars in the next few years, including modifications to gas-pedal configurations and new requirements for crash-data recorders and back-up brake technology.

The bills also would remove a cap on civil fines for safety lapses by car makers and would empower the top U.S. vehicle-safety regulator to unilaterally order a vehicle recall.

Consumer advocates said those provisions were needed to prevent a repeat of the problems that led Toyota Motor Corp. to recall more than 8.5 million vehicles globally since last fall for defects related to sudden acceleration and other safety issues. Toyota also agreed to pay more than $16 million to settle charges by the Department of Transportation that it tried to hide the defects from regulators.

But industry representatives told lawmakers at a House hearing last week that the mandates for new technology came with unrealistic deadlines.

They also objected that the bills would give too much power to regulators while impinging industry’s rights to appeal decisions.

An aide to House Energy and Commerce Committee Chairman Henry Waxman (D., Calif.), a chief author of the legislation, said lawmakers are modifying the bill to reflect concerns raised by the industry and other interests. The aide said a new version would be unveiled shortly.

Dave McCurdy, president of the Alliance of Automobile Manufacturers, a trade group that includes the three Detroit car makers and Toyota, said the legislation as drafted preempted a more technical study by engineers of how technology such as event-data recorders, known as “black boxes,” and other systems might work.

The bill proposed that some new features be installed starting within three years of the bill’s passage. Auto makers are typically given at least five years to implement major changes to cars so that they can design them in to new models and avoid expensive retooling of existing vehicles.

Dan Ryan, government and safety affairs manager for Mazda Motor Corp.’s U.S. unit, said the proposal’s most troubling facet is the one calling for a pedal-placement standard to prevent obstruction of accelerator pedals by objects such as floor mats.

The Waxman bill calls for the standard to be implemented in vehicles made as early as the 2014 model year.

“Depending on how that got done, it could really mandate a complete overhaul of the foot box, where the pedals are, how things work. It’s potentially huge,” Ryan said. “This is one where you might have to redesign the whole car.”

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Bill Would Restrict Auto Regulators from Becoming Lobbyists


WASHINGTON — Legislation introduced Wednesday in Congress would make it harder for U.S. vehicle-safety regulators to become lobbyists for auto makers, a key issue raised by the Toyota Motor Corp. safety recalls, The Wall Street Journal reported.

The bill, introduced by Sen. Barbara Boxer (D., Calif.), would prohibit auto-safety regulators from working for car companies in any job that required contact with their former agency for three years after leaving their government jobs.

The proposal responds to lawmakers’ concerns that Toyota employed former auto-safety regulators who directly dealt with their previous employer, the National Highway Traffic Safety Administration, on issues relating to vehicle defects.

Transportation Department officials have said they have found no ethics violations in dealings between Toyota lobbyists and regulators relating to the company’s recall of 8 million vehicles globally for gas-pedal and sudden-acceleration issues.

But some consumer advocates, along with Transportation Secretary Ray LaHood, have said they are troubled by the prospect of a “cozy relationship” between car-industry lobbyists and their former colleagues at NHTSA, and have called for tighter ethics laws.

“I am deeply concerned about the all-too-cozy relationship between former NHTSA officials and the auto industry,” said Boxer, the Senate Environment and Public Works Committee chairwoman. “My legislation would address this ‘revolving door’ by preventing auto makers from having undue influence on agency decisions.”

Under her bill, individual violators would face fines of $55,000, and manufacturers would face a civil fine of $100,000. Those penalties are in place for current ethics laws.

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