Strange bedfellows. Last week the Senate voted to end US tax breaks for the ethanol industry. Then Grover Norquist, long time anti tax activist popped up and complained that closing this tax loophole was actually a tax hike and he opposed it. Norquist does his homework, and has persuaded most congressional republicans to sign his no-tax pledge. So he is hard to ignore.
Then Obama came out four square for tax changes to cut the budget deficit. He wants to close a loophole for corporate jets, another he claims is for the oil industry but is actually available to all US manufacturers, and a tax break he says applies to hedge fund managers.
So are these tax hikes or loophole closings? And is this real money or chickenfeed? The corporate jet loophole actually applies to all new aircraft, and Obama hasn't said what he is proposing, killing it for all aircraft, changing it to exclude small jets, or to exclude all light aircraft.
The oil industry is taking advantage of the 8% US manufacturing tax credit which was passed in 2004. Oil drilling counts as manufacturing.
The hedge fund tax break is "carried interest", IRS jargon meaning the right to treat manager's bonuses as capital gains. Managers get a bonus based upon how much the funds assets appreciate, and the IRS allows this to be taxed at the 15% capital gains rate rather than the 35% ordinary interest rate. The democrats tried to make this law last year but failed. This one is probably real money, the other two are chicken feed.
So what we have here is probably loophole closing, but the Republicans are properly rejecting it as tax hikes, because you don't want to give Obama anything on the revenue side until you have pinned him down on spending cuts.
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