Biden Pockets $500k Using the Same Loophole Obama Tried To Close
Libertarian humorist P.J. O’Rourke once joked in the forward to his book “Republican Party Reptiles” that his type of conservative was opposed to “taxation without tax loopholes.”
If Joe Biden manages to bumble his way to the nomination, we’ve found an issue Republicans and Democrats can agree on in 2020.
Just don’t tell that to his old boss.
According to a Wall Street Journal report Wednesday, the former vice president’s tax returns indicate he and his wife saved over $500,000 using a loophole in tax law that former President Barack Obama tried to close in his final budget.
The rule is colloquially known as the Gingrich-Edwards tax loophole because two of its most famous adopters were former House Speaker Newt Gingrich and former Sen. John Edwards, the Democrats’ vice-presidential candidate in 2004.
Essentially, it allows earners to funnel money obtained by self-employment into entities known as “S corporations,” which in turn pay them back. The money is treated like corporate profits, which allows those who use it to escape the 3.8 percent self-employment tax they would have incurred had they been paid directly.
And that’s exactly what Biden and his wife, Jill, did with their money from books and speeches.
“There’s no reason for these to be in an S corp — none, other than to save on self-employment tax,” Tony Nitti, an accountant from RubinBrown LLP that The Journal had review the returns, told the newspaper.
There are obvious problems with this, starting with the fact that Biden has fashioned himself as a taxation hawk during this campaign season, at least in the progressive sense.
For instance, Biden has said that the tax code is “wildly skewed toward taking care of those at the very top.”
“My economics teacher at the University of Delaware taught me that the reason for a tax expenditure is [either] to promote a social good, generate people taking risk [or] increase productivity,” Biden said during a 2018 speech.
“Raise your hand if you think one-trillion, three-hundred-billion plus dollars in tax expenditures, whether even half of it — well, two-thirds of it — meets that criteria.”
“Tax expenditures,” of course, include deductions. If the former vice president will please guide me to which part of his moral polestar on the tax code that meets, I’ll be more than happy to forget about his use of S corporations.
Biden also got into a Twitter war with Amazon in June after he said the company should pay more in taxes since it was “pulling in billions of dollars in profits.”
I have nothing against Amazon, but no company pulling in billions of dollars of profits should pay a lower tax rate than firefighters and teachers. We need to reward work, not just wealth. https://t.co/R6xaN3vXGT
— Joe Biden (@JoeBiden) June 13, 2019
Which prompted this rejoinder from Amazon:
We’ve paid $2.6B in corporate taxes since 2016. We pay every penny we owe. Congress designed tax laws to encourage companies to reinvest in the American economy. We have. $200B in investments since 2011 & 300K US jobs. Assume VP Biden’s complaint is w/ the tax code, not Amazon. https://t.co/uPUv1Tzlma
— Amazon News (@amazonnews) June 13, 2019
Yes, that Amazon money went toward reinvestment, which actually meets that moral criteria bequeathed to Biden by his economics professor. As for Biden’s tax breaks, perhaps not so much.
Of course, he wants to raise your taxes: “First thing I’d do is repeal those Trump tax cuts” in the name of “fairness,” Biden said in an interview last month.
These are the Trump tax cuts that have lowered the tax burden for 64.8 percent of Americans, most of whom don’t use S corporations to avoid half a million dollars in self-employment taxes. Hate to beat the dead horse again, but — well, there it is.
Biden doesn’t necessarily see it that way, of course: “As demonstrated by their effective federal tax rate in 2017 and 2018 — which exceeded 33% —the Bidens are committed to ensuring that all Americans pay their fair share,” his campaign said in a statement on Wednesday.
However, what’s a bit more if you truly believe the tax code is skewed toward those at the top — you know, people like you?
This wasn’t a minor thing, mind you.
The Obama administration pushed aggressively to end this loophole, which a report said would result in $11.2 billion in extra federal revenue over the period of a decade, according to Fox Business News.
If Biden’s going to use “Barack and I” as a kind of campaign mantra to dispel any doubts he’s unsuitably hidebound for the modern Democrat Party, he should probably adhere to the policies of the former administration, particularly when he didn’t voice any concern at the time said policies were being pursued.
Until then, I’ll just assume that — at least in one critical way — the Democrat front-runner is P.J. O’Rourke’s kind of conservative. Not that the Democrats will mind or anything.
I’m sure this won’t come up in the debates at all.
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