As Democrats finally discovered reality and got some legislation moving, some mighty spurious arguments over the climate and energy bill emerged on both sides of the aisle.
Exhibit A was the idea that a beefed-up Internal Revenue Service should only audit people above a certain income level. That was floated by some of the same Republicans who have rightly lambasted progressive prosecutors for failing to protect America’s cities from the prevalence of repeat offenders who were sent back out on the streets.
Saying the IRS should only go after the really rich is akin to saying that how you are punished for a felony should be based on your income level. What nonsense. Equal justice for all.
Let’s review. We must all pay taxes. Some of us cannot be trusted and thus the IRS must have the power to verify self-reported income and expenses on a reasonably expansive basis.
Certainly, the IRS must conduct itself ethically and not hound taxpayers unfairly. It makes sense for it to use the majority of its resources on returns that give the government the most bang for the buck. But honesty should be demanded of everybody; tax cheats cost all taxpayers money.
As unpleasant as it may be, tax compliance is part of the compact of a functioning democracy. Everyone should be held accountable to the same degree. Let the IRS be efficient, well funded and capable of ensuring that all Americans pay their fair share (and capable of answering its own phones).
Which bring us to private equity, a sector seemingly beloved by Sen. Kyrsten Sinema of Arizona, who appears to have successfully negotiated the continuance of a tax loophole so egregious it even irritated Donald Trump and many tax-despising Republicans.
Sinema, it seems, single-handedly nixed the nixing of the so-called carried-interest provision in the bill. In simple terms, this perk allows the hardworking Americans who toil in the sweaty fields of private equity to pay their taxes at the lower rates that apply to capital gains, rather than the higher earned-income rate that we hourly and salaried stiffs must endure.
The industry and its powerful lobbyists and apologists on editorial boards and the like have argued that this loophole (which, by the way, is paid for by all of us) is justified because in essence, this income represents “risk capital.”
What balderdash.
Is not taking a job also a form of putting your personal capital at risk? Is not working hard in a factory all your life putting your most important asset at risk? Darn right.
Worse, some in the private-equity industry have argued for their notorious little carve-out based on the notion that they are the “backbone” of the economy and thus so important to the rest of us as to be deserving of special treatment.
Opinion varies as what makes up the backbone of America but if you asked people on a Chicago street for candidates, we bet you’d hear about first responders, cops, teachers, plumbers, health care professionals and other such taxpayers. Private equity would not be anywhere near the top of that list.
Let’s be clear: We appreciate those who provide funding for many entrepreneurial activities in this nation and wish them success. We just think they should pay taxes at the same rates as everyone else.
This is what Sinema wanted taken out to benefit her pals? A measure with at least tacit Republican support? Something that would have reduced the cost of the Democrats’ costly bill and decreased the palpable risk of it making inflation worse?
On the other hand, we’d say that after Democrats and the party’s media lackeys spent months demonizing West Virginia Sen. Joe Manchin, he negotiated a deal with Sen. Charles Schumer that got the bill toward the finish line by taming some of its costly excesses.
As it turned out, Manchin did President Joe Biden a favor by slashing what would have been a $3.5 trillion bill that would have thrown gasoline on the roaring fire of inflation. In the end, we got something a lot more reasonable.
Manchin got rid of many of the socialist-style provisions that would have limited business growth and, from a branding point of view, wisely nixed the divisive “Build Back Better” moniker. He helped finally get something done about climate change. He also helped shape the reality that when America does something about climate change it must do so without massively increasing tax burdens or undermining the free market system of government that has served this nation so well.
In essence, Manchin negotiated a soft landing for domestic fossil fuel production, even as America finally makes a crucial and long-delayed investment in alleviating climate change by encouraging clean sources of energy. Incremental change is the only change that works in a divided nation and carrots work better than sticks in this, as in so many other arenas.
Manchin understood the country had to shore up its domestic energy provision because many of the currently utilized sources of old-school energy come from nations that have proved to be fully capable of bad actions. This is not the moment for unilateral energy disarmament and Manchin knows it, even if most of his detractors claim he is motivated only by the interests of West Virginia — which is populated by the voters Manchin has sworn to represent.
In so doing, he’s come out on top with a pretty decent Biden bill, all things considered.
