Dear Senator:
On behalf of the 362,000 members of the National Taxpayers Union (NTU), I urge you to fight to protect American taxpayers and oppose H.R. 4213, the misnamed “American Jobs, Closing Tax Loopholes and Preventing Outsourcing Act.” This legislation extends numerous expiring provisions of the Tax Code that reduce burdens on American families and businesses, such as the state and local sales tax deduction and the research and development tax credit. Unfortunately, the total package embodied in H.R. 4213 immediately counteracts that temporary relief by entrenching several new tax hikes into permanent law; subsequent attempts to fix these problems have failed so far and are not likely to succeed in the future. The following provisions represent a mere snapshot of the harmful tax increases proposed in H.R. 4213:
Elimination of punitive damages tax deduction – Last week, the Senate voted 60-37 for Majority Leader Reid's amendment to deny businesses a previously available tax deduction for punitive damages resulting from a lawsuit. This will disproportionally benefit trial lawyers by giving them more leverage in pre-trial settings – many businesses will be compelled to settle frivolous lawsuits rather than risk the double-loss of a damage judgment and a bigger tax bill. This will only worsen the prospects for a long-term private-sector recovery that can sustain job creation.
Tax on Carried Interest – If imposed through H.R. 4213, investment managers will be prohibited from paying capital gains tax rates on services income received as carried interest. While the adverse impact of the tax as found in the House-passed bill has been scaled back, it still serves as an unnecessary weight on investors that will stifle the entrepreneurial spirit we need in this dismal economic climate.
Tax on "S Corporations" – The most current version of H.R. 4213 contains a $9 billion tax on professional services firms organized as S Corporations, which could create a myriad of unintended consequences for those who receive this form of small business income.
To those in the Senate who believe these damaging tax hikes are the price that must be paid to win temporary continuation of popular tax relief provisions, we say, there's a better way. While attempts have been made to balance parts of H.R. 4213 with spending reductions or restraint, the legislation remains inadequate in its existing form. Rather than engaging in yet another exercise of rob-Peter-to-pay-Paul, Congress should redouble efforts to identify and enact program terminations or cuts.
Roll call votes on H.R. 4213, the "American Jobs, Closing Tax Loopholes and Preventing Outsourcing Act," will be significantly weighted in our annual Rating of Congress.
Sincerely,
Pete Sepp
Executive Vice President