American Business Conference

In a recent appearance on CNBC, Secretary of the Treasury Timothy Geithner said that the Obama Administration would support taxing long term capital gains and dividends at a top rate of twenty percent.

If Congress does nothing and the Bush tax cuts of earlier this decade  expire on schedule, the long term capital gains rate will revert automatically to 20 percent at the end of the year (from the current 15 percent) while dividends would be taxed at income tax rates, perhaps as high as 39.5 percent by 2011 assuming the upper income Bush tax cuts are allowed to expire, which is a pretty safe bet.

 Even this understates the case because of the recently enacted 3.8 percent Medicare tax on “unearned income” of so-called upper income taxpayers (above $250k) that will come into effect in 2013.  Geithner did not include this in his remarks but in fact it means that, absent legislative action, by 2013 long term capital gains could be taxed at 23.8% and dividends above 40%. (more…)

Ever wonder why entrepreneurs feel so abandoned by Washington?  Take a look, if you can find it, at Section 9006 of the new health care bill.  This particular flat tire would pile an enormous paperwork burden on business – particularly smaller businesses – and it passed without a whisper of debate or communication with the business community.  Standard operating procedure nowadays.

Section 9006 would make virtually all business-to-business transactions reportable to the IRS, resulting in a paperwork nightmare for the private sector.  Every business would have to send a Form 1099 to every vendor to which the business had paid more than $600 a year.  And before the 1099s can be sent out, a business would first have to send a Form W9 to those vendors in order to obtain their tax identification numbers. 

This absurd paper chase is being sold as an effort to close the so-called “tax gap” – that is, underreporting of tax liabilities.  The “tax gap” is real enough, but this mandate, if its meant to be a cure, is as bad as the disease.

Fortunately, there is an effort to repeal Section 9006 before it comes into effect in 2012.  The effort is being led by Rep.Dan Lungren (R, CA).  ABC’s letter of support to Mr. Lungren can be found here.

What should a company contemplating opening an office in Washington consider as part of its decision-making process?  It is a hot issue given the rapid expansion of the federal government into every aspect of business affairs.

Recently, ABC’s president, John Endean, gave a talk at Wharton about effective business representation in Washington.  A summary of his remarks were published in Directors and Boards and can be found here.