Thursday, October 18, 2007
Rahmbo Takes On Tax Shelters
Congressman Rahm Emanuel (D - Il) might just be planning to mail a dead fish to offshore tax shelters. Reuters reports that Sen. John Kerry and Rep. Rahm Emanuel introduced the bill and called for more parity between tax-deferral schemes for average workers and the rich, such as hedge fund managers. "Middle-class taxpayers that are saving for college or their retirement can't avoid paying taxes by deferring millions offshore," said Emanuel...In a statement, Kerry and Emanuel specifically targeted a handful of super-rich hedge fund managers who reportedly shelter billions of dollars in deferred income offshore.
According to the press release, the Offshore Deferred Compensation Reform Act of 2007, H.R. 3923 introduced in the House by U.S. Representative Rahm Emanuel and in the Senate by Senator John Kerry, "Creates a new Section 457A of the Internal Revenue Code that eliminates the ability of U.S. taxpayers to defer nonqualified deferred compensation in offshore tax havens. Offshore nonqualified deferred compensation paid by a foreign corporation will be taxable income when there is no substantial risk of forfeiture to the compensation"
For the record, this is not just something which Emanuel picked out of thin air, trying to introduce legislation on something which is a hot issue. He was an investment banker and Emanuel has had his sights on offshore tax shelters for quite some time now. Quote by Emanuel in USAToday, two years ago, on Oct 3rd 2005, "I think we should be the party of tax reform, massive tax reform, because the code is skewed to those who have lawyers, accountants, and people who can think of schemes," he says. "I know of no middle-class family that sets up a shelter in Bermuda to pay for college education for the kids."
Staement for a hearing in Feb 2004 by the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, "I also believe it is critical to address the role of attorneys in the creation, marketing and implementation of abusive tax shelters for corporations and wealthy individuals that are depriving the U.S. Treasury of billions in revenue each year. "
The Hill thinks he's taking on more than he can chew, "Hedge funds must set up corporations offshore so that their tax-exempt investors, such as pension funds and endowments, don’t get hit with the income tax on their earnings....Last month, Emanuel said he would propose legislation to cap the compensation hedge-fund managers could defer to $19,500, but he then decided to take a broader approach that does not target any one industry.....However, the broader approach could attract more opposition to the bill. “We are concerned about provisions that limit or reduce incentives to save and invest for retirement,” Scott Talbott, senior vice president for government relations at the Financial Services Roundtable, said."
Even so, the interesting thing here is not the bill, but the people who introduced the bill. Senator John Kerry has nothing to lose and no constituency to pander, but lots of political capital leftover from his Presidential run, not to mention a 3 million strong mailing list. Rep. Rahm Emanuel is defined by one word - Winning. Put these two together, with a bill which likely has broad public support fueled by volatile markets, and there's a very good chance that this is not something which is going to be swept away by a coalition of lobbyists or back room deals in New York and Washington.
According to the press release, the Offshore Deferred Compensation Reform Act of 2007, H.R. 3923 introduced in the House by U.S. Representative Rahm Emanuel and in the Senate by Senator John Kerry, "Creates a new Section 457A of the Internal Revenue Code that eliminates the ability of U.S. taxpayers to defer nonqualified deferred compensation in offshore tax havens. Offshore nonqualified deferred compensation paid by a foreign corporation will be taxable income when there is no substantial risk of forfeiture to the compensation"
For the record, this is not just something which Emanuel picked out of thin air, trying to introduce legislation on something which is a hot issue. He was an investment banker and Emanuel has had his sights on offshore tax shelters for quite some time now. Quote by Emanuel in USAToday, two years ago, on Oct 3rd 2005, "I think we should be the party of tax reform, massive tax reform, because the code is skewed to those who have lawyers, accountants, and people who can think of schemes," he says. "I know of no middle-class family that sets up a shelter in Bermuda to pay for college education for the kids."
Staement for a hearing in Feb 2004 by the House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, "I also believe it is critical to address the role of attorneys in the creation, marketing and implementation of abusive tax shelters for corporations and wealthy individuals that are depriving the U.S. Treasury of billions in revenue each year. "
The Hill thinks he's taking on more than he can chew, "Hedge funds must set up corporations offshore so that their tax-exempt investors, such as pension funds and endowments, don’t get hit with the income tax on their earnings....Last month, Emanuel said he would propose legislation to cap the compensation hedge-fund managers could defer to $19,500, but he then decided to take a broader approach that does not target any one industry.....However, the broader approach could attract more opposition to the bill. “We are concerned about provisions that limit or reduce incentives to save and invest for retirement,” Scott Talbott, senior vice president for government relations at the Financial Services Roundtable, said."
Even so, the interesting thing here is not the bill, but the people who introduced the bill. Senator John Kerry has nothing to lose and no constituency to pander, but lots of political capital leftover from his Presidential run, not to mention a 3 million strong mailing list. Rep. Rahm Emanuel is defined by one word - Winning. Put these two together, with a bill which likely has broad public support fueled by volatile markets, and there's a very good chance that this is not something which is going to be swept away by a coalition of lobbyists or back room deals in New York and Washington.
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