From Ohio CPA Dana Stahl:

Subject: Rangel’s bill?

Mr Guru – I was at a conference this week. In a discussion I had with another CPA about my audit that you & I talked about last time, the fellow said that Charlie Rangel, the Chairman of House W&M, has put in a bill that will force S Corps to pay SE tax on their profits. I hadn’t heard of this, but the fellow says that you can read the bill on the internet. Were you aware of this? Perhaps you mentioned it in your blog, but if so, I missed it.

The thing is: if this bill passes, can the same provision for LLC’s be far behind?

Perhaps you can discuss this on the blog.

Later,

My Reply:

Dana:

You need to understand that Rangel always has at least a dozen or two tax raising bills in the works. As Rush constantly points out, Rangel’s motto is something like “Gimme all your money” and he is somewhat of a joke in regard to the sheer volume of his wacky tax raising schemes.

It’s the same kind of waste of time getting all freaked out about every one of Rangel’s hare-brained tax hike plans as it is to panic over each example of the drive-by media’s pro Dem bias.

Raising taxes on S corps and LLCs are obviously among those tax increases that Rangel would love to see in his 100% tax rate utopia. However, until he gets a lot of support from others in Congress for this, I’m not going to panic.

If we were to take seriously each of the tax hike ideas and assume that they will be here soon, we would literally be paralyzed in our ability to set up any kinds of plans for our clients.

If such a plan were to ever make it into a tax bill and be signed into law, it will obviously not be retroactive and will thus require modifications of tax savings plans that relied on the ability to avoid SE tax. Such modifications of tax savings plans have always been part of the environment and always will be, since we all know that our rulers in DC will never stop tinkering with the tax code. Devising a tax saving plan that will last intact forever is an impossibility because of the certainty of changes in the future.

Kerry