Flow-Throughs Are the Answer

The Proskauer Tax Blog has a great write up on the potential effects of the House Bill. Aside from the great analysis of planning around these new rules, I want to highlight the lack of technical skill and competence that the GOP is throwing at these bills:

“But the bills were drafted quickly…some of the “pay-fors” – the increased taxes that generate revenue to pay for the corporate tax reduction and capital-investing incentives – are completely avoidable through the use of pass-throughs.  In fact, a drafting glitch may provide pass-through hedge fund investors with an inadvertent tax reduction.”

“An unusual set of drafting glitches appears to qualify the flow-through investors in hedge funds that elect to be taxed on a mark-to-market basis for the reduced blended rate of 35.22% under the House bill, or the 17.4% deduction under the Senate bill, in respect of their gains. This result appears entirely unintended.”

“rather than a reduced rate and limits the deduction to ’50 percent of the W-2 wages of the taxpayer’. I assume that the drafters meant ‘50% of the W-2 wages of the flow-through‘”.

This kind of approach is not an issue of partisan politics, it is an issue of basic ability to run the country. Whether or not you want to see tax rates go up or down, I don’t think anyone wants to see the treasury plundered because of a drafting glitch or unintended consequences that were only half thought through. Even thieves need a getaway plan.

John Frank

Trying to put knowledge into practice

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