John Edwards Tax Out, Steve Schwarzman Tax Still In

Max Baucus, Senate Finance Committee Chairman, has revised a previously proposed bill designed in order to provide tax breaks in research and development as well as sales for businesses. The new version only taxes the carried interest from S corp top salaries, instead of including higher social security and medicare taxes as well. In the past, the carried interest was taxed at the corporate gains rate of 15%, with Baucus' proposal, this rate will increase to the ordinary income rate of 35%. The problem with this proposal is that the owners of the S corps can somewhat avoid this carried interest tax rate by claiming their income as profits. in 1998, Senator John Edwards claimed $360,000 of income and $5 million in profits from his S corp. The trend of smaller S corp owner salaries is predicted to become more propular in the future. In 2013, the new health reform law will increase the medicare surtax 0.9% on the amount of income exceeding $250,000, which will only motivate more people to falsely claim smaller incomes.

In my opinion, this proposal by Max Baucus relies too much on the honesty of S corp owners reporting their income andprofits, which in the world of business, is a lot to ask.