Anatomy of a Brutal Tax Beating

Based on the title of this column, you may think I ’m going to write aboutoppressive IRS behavior orpunitive tax policy.Those are good guesses, but today ’s “brutal tax beating” is about what happens when a left-leaning journalist writes a sophomoric column about tax policy and then gets corrected by an expert from the Tax Foundation.The topic is the tax treatment of executive compensation, which is somewhat of a mess because part ofBill Clinton ’s 1993 tax hike was a provision to bar companies from deducting executive compensation above $1 million when compiling their tax returns (which meant, for all intents and purposes, an additional back-door 35-percent tax penalty on salaries paid to CEO types). But to minimize the damaging impact of this discriminatory penalty, particularly on start-up firms, this extra tax didn ’t apply to performance-based compensation such as stock options.In agood and simple tax system, which taxes income only one time (includingbusiness income), the entire provision would be repealed.But when Alvin Chang, a graphics reporter fromVox, wrotea column on this topic, he made the remarkable claim that somehow taxpayers are subsidizing big banks because the aforementioned penalty does not apply to performance-based compensation.…the government doesn’t tax performance-based pay for…any…top bank executive in America. Unlike regular salaries — where the government takes out taxes to pay for Medicare, Social Security, and all other sort...

Source: Cato-at-liberty - September 8, 2016 Category: American Health Authors: Daniel J. Mitchell Source Type: blogs