GOP Rep. Open To Closing Loopholes To Avoid Defense Cuts

Virginia Rep. Scott Rigell (R) would consider raising new revenue through the closure of tax loopholes in order to avoid part of the automatic budget cuts that will take effect March 1, he said Thursday. Rigell was among the Republicans who hinted at support for ending the Bush tax cuts for the wealthy during debate over the so-called “fiscal cliff,” when a last-minute deal raised tax rates on Americans making more than $450,000 but pushed sequestration off until March.

Now, Rigell is again calling for talks about revenues to avoid defense cuts that would hit his district, the Wall Street Journal reports:

Rep. Scott Rigell (R., Va.), whose Hampton Roads district is home to the largest naval base in the world and relies heavily on Pentagon spending, said he is reaching the point where he will consider whatever Senate Democrats offer up, even if that includes closing tax loopholes.

“I want our leadership to consider it and not reject it outright,” he said.

With a week to go before the cuts begin, President Obama reached out to Republican leaders to negotiate a replacement for the sequester. Obama has proposed raising revenue through the closure of tax loopholes, a position many Republicans support, but Democrats want to put new revenues toward deficit reduction. Republicans prefer to use revenue gained from loopholes to lower current tax rates.

Other Republicans, including Sens. John McCain (R-AZ) and Lindsey Graham (R-SC), have previously indicated that they would consider raising revenues to avoid defense cuts.

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50 Years Ago Today, JFK Called For Closing A Giant Tax Loophole…But It Still Exists

Our guest blogger is Seth Hanlon, Director of Fiscal Reform at the Center for American Progress Action Fund.

On January 24, 1963, exactly half a century ago, President John F. Kennedy called on Congress to enact a broad overhaul of the tax code. One of JFK’s boldest proposals was to close a giant tax loophole that allows wealthy people to escape taxes on capital gains — the appreciation in value of stocks, businesses, or other investments — by holding onto assets until death and passing them onto heirs.

Though JFK’s successor, Lyndon Johnson, pushed through much of the Kennedy tax program in 1964, the tax break on inherited capital gains survived. It exists to this day as one of the largest loopholes in the tax code.

The provision is sometimes called the “angel of death loophole” or, in tax-speak, the “stepup in basis at death.” Here is how it works: Let’s say an investor buys stock for $1,000 and over time it shoots up in value to $100,000. If the investor sells that stock, he’ll owe capital gains taxes on the amount it has gone up.

But if the investor holds onto the stock his whole life and bequeaths it to his heirs, the $99,000 of gain is never subject to capital gains tax. The heirs inherit the stock with what’s called a “stepped-up basis,” which means that if they sell the stock at some point, they’ll only owe capital gains tax on any gain above $100,000.

The inherited capital gains loophole has major effects on the budget, on the economy, and on tax fairness. It results in about half of all capital gains going permanently untaxed. It costs the U.S. Treasury an estimated $50 billion per year (perhaps more). It encourages people to hold onto assets even when they would otherwise want to sell them. And since capital gains are highly concentrated at the top end of the income scale, it undermines progressivity.

One of the arguments for maintaining the inherited capital gains tax break is that the estate tax provides a backstop, ensuring that large inheritances are taxed. But that argument holds less water now that the estate tax has been largely eviscerated.

In submitting his tax reform proposal to Congress, Kennedy emphasized that eliminating “the ability to avoid all capital gains taxed on assets held until death” would mean that more investors would choose “the most desirable investment[s],” not the most tax-favored ones. JFK’s proposal included a number of exceptions to address practical issues, including exempting the vast majority of people with only modest amounts of capital gains. Unfortunately, however, Congress left the loophole untouched, and subsequent efforts to address it have also come up short.

Fifty years later, Congress is again discussing tax reform, and though the inherited capital gains loophole is one of the largest tax breaks, it is rarely debated. But if Congress is committed to a balanced approach to our fiscal challenges, and serious about “base broadening” tax reform, it should revisit a half-century-old proposal that is more relevant than ever.

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Executive Order-- Closing of Executive Departments and Agencies of the Federal Government on Monday, December 24, 2012

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For Immediate Release December 21, 2012 Executive Order-- Closing of Executive Departments and Agencies of the Federal Government on Monday, December 24, 2012

 

EXECUTIVE ORDER - - - - - - - CLOSING OF EXECUTIVE DEPARTMENTS AND AGENCIES OF THE FEDERAL GOVERNMENT ON MONDAY, DECEMBER 24, 2012 By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows: Section 1. All executive branch departments and agencies of the Federal Government shall be closed and their employees excused from duty on Monday, December 24, 2012, the day before Christmas Day, except as provided in section 2 of this order. Sec. 2. The heads of executive branch departments and agencies may determine that certain offices and installations of their organizations, or parts thereof, must remain open and that certain employees must report for duty on December 24, 2012, for reasons of national security, defense, or other public need. Sec. 3. Monday, December 24, 2012, shall be considered as falling within the scope of Executive Order 11582 of February 11, 1971, and of 5 U.S.C. 5546 and 6103(b) and other similar statutes insofar as they relate to the pay and leave of employees of the United States. Sec. 4. The Director of the Office of Personnel Management shall take such actions as may be necessary to implement this order. Sec. 5. General Provisions. (a) This order shall be implemented consistent with applicable law and subject to the availability of appropriations. (b) Nothing in this order shall be construed to impair or otherwise affect: (i) the authority granted by law to an executive department or agency, or the head thereof; or (ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals. (c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.  BARACK OBAMA

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The Energy Department's Los Alamos National Lab is using state-of-the-art technology to track Santa Claus as he circles the globe the night before Christmas.

December 24, 2012 7:59 AM ESTWhite House Holiday Social in Pictures

Some of our followers on Pinterest joined us at the White House for a holiday social. Take a look at their experience.

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