When The Washington Post posed this question this morning on Twitter:
What do John Edwards and Newt Gingrich have in common?
I thought the answer was obvious, and shared it:
Ummm… Both won SC, but not much else?
Of course, that’s not exactly what the Post had in mind. This is what they were thinking:
Don’t be surprised if you hear the names of John Edwards and Newt Gingrich mentioned on the Senate floor this week.
Senate Democrats plan to consider a measure Tuesday that would extend lower interest rates for some federally subsidized college loans and pay for the extension by ending tax breaks for firms with three or fewer shareholders — commonly referred to as “S-corporations.”
Democrats call these types of tax breaks the “Newt Gingrich/John Edwards loophole,” because both former politicians took advantage of a federal tax law that allows those with high incomes to avoid paying Medicare payroll taxes on earnings by establishing S-corporations and treating only a portion of their total earnings as taxable wages…
Later, Cindi Scoppe (my mind is blown by the fact that Cindi is now on Twitter) weighed in with another answer, from the NYT’s Frank Bruni:
Gingrich and Edwards belong to different parties but are beholden to similar demons, and they have a whole lot more in common than a bounty of hair — white in the Republican’s case, brown in the Democrat’s. They’re the salt and pepper of outsize egos in presidential politics.
And to look at the two of them together, which their recent convergence in the news and on the map encouraged, is to confront some unsettling truths about a kind of person too frequently drawn to high-level office and about traits that often abet his rise and then seal his fall.
Beware the extreme narcissist. Although he may radiate a seductive confidence, he can justify and forgive himself for just about anything, given his belief in his own exalted purpose. He’ll lose sense of the line between boldness and recklessness. And he’ll quit the stage reluctantly, because he can’t bear not to occupy the very center of it…
So I guess the bottom line is that they have a lot in common.
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Cindi got a follow out of me.
“Senate Democrats plan to consider a measure Tuesday that would extend lower interest rates for some federally subsidized college loans and pay for the extension by ending tax breaks for firms with three or fewer shareholders — commonly referred to as “S-corporations.””
I know its not the point of the story but students that actually want to pay for college are about to get hosed in a few months. I think college is vastly overrated but its a neccessary evil to get in many fields.
If stafford loans rates are allowed to double I pity anyone trying to go to school.
As usual Congress is trying to politicize the issue by tying loans to oil subsidies and health care.
I know it will get done in the end much like the last minute budget but its still frustrating to see EVERY THING in congress degenerate into a few talking points.
I heard a neat stat today. Apparently the US Congress’s approval ratings are lower than North Korea. I’m sure its completely made up but it still got a chuckle.
Egregiously public adultery on grievously ill wives?
[say that fast, eh?]
So would this basically turn S corps into sole proprietorships for tax purposes? Treat them as pass-throughs to an individual’s income tax?
That “Newt Gingrich/John Edwards loophole” link does a poor job of describing the problem to which it provides a solution.
The link describes a problem where current law legally allows wealthy professionals to avoid paying payroll taxes on earnings. Yet later on it describes these people as “tax cheats” who should be paying these payroll taxes that they “already owe.” That’s incoherent to me. They either owe the taxes, aren’t paying them and therefore aren’t following the law or they are legally avoiding the taxes and do not owe them.
Further, their example of how the loophole works doesn’t even mention the fact that S Corporation payments that are reasonable compensation for services should be characterized as wages. Paying salary equal to one-tenth of that of similar consultants with similar earnings is almost certainly not reasonable.
The problem is largely an enforcement one and that is ignored throughout.
I thought S corps were pass-through entities. No taxation at the corporate level–that was the point. I think you can treat yourself to some nice corporate benefits, though, which is what they were doing?
My worst grade in law school was corporate tax, so….
‘Kathryn – you are correct. An S-corp is a pass-through. It’s a C-corp that is not. I miss-spoke. I guess I’m unclear then on what this bill would actually do.
Yet more evidence on the complexity of the tax code.
Ethically and morally challenged.