William: As the U.S.
House of representatives
prepares to cast the final vote
on the Democrats sweeping
climate and health care bill
tomorrow, Lisa Desjardins takes
a look at how the measure would
change the nation's tax laws.
Lisa: William, few things in
congress directly influence our
own bank accounts, and who is
rich and who is poor, as much as
tax policy.
And the changes here are
significant.
Here's what it will do.
First it will create a 15%
minimum tax on large
corporations.
Exempt from that would be some
hedge fund and investment firms.
Also new a 1% tax on stock
buybacks, which companies use to
increase their stock price.
What will all that mean in
reality?
For more I'm joined by Michael
, Graetz professor of tax law at
Columbia university and
co-author of the wolf at the
door: The menace of economic
insecurity and how to fight it.
Let's talk about the corporate
tax change.
Here's what we know about it.
This 15% minimum tax would be
for businesses and can over $1
billion a year on an average
over three years.
The joint committee on taxation
says that will affect about 150
companies and raise well over
$200 billion.
That's a lot of numbers.
How significant do you think
this is?
>> Well, in some sense it is
important.
It is not earthshaking, this
minimum tax raises about the
same amount of money is raising
the corporate rate from 21% to
23%.
So it is less than many people
had heard, although as you know,
Kyrsten Sinema was not prepared
to raise the corporate rate at
all.
The problem here is there are
many companies that have very
large earnings they are
reporting to their shareholders
and they are paying no tax.
This minimum tax is directed at
addressing that profit.
So the revenue it raises is only
for large corporations who have
large amounts of income that are
paying taxes that are less than
15% of the income they are
reporting to their shareholders.
Lisa: What are the chances they
will find a different way around
this tax?
How do you read this new law,
how strong is it?
>> I think it is quite strong
because corporate managers are
quite anxious not to reduce the
amount of earnings they report
to shareholders.
If you look at the history of
tax shelters in the corporate
sector in the United States, one
common feature of those tax
shelters is when they reduce
taxes but they did not reduce
the earnings reported to
shareholders on their books.
Lisa: You mentioned senator
Kyrsten Sinema.
One of the groups that did well
in this bill is hedge fund and
equity managers who she
protected a couple of different
times from getting larger tax
hits from this bill.
When I asked, sources close to
her, that she was concerned that
raising taxes on hedge fund
angers would affect investment
in her state.
I wonder what you made from that
argument and what do we know
about taxable occasions for
these hedge fund managers?
>> This has been an issue for
more than a decade that there
have been major efforts to
change these taxes so that these
managers pay the normal rates
that you and I pay ourselves.
Private equity groups in
particular, hedge fund managers
as well, have been very affected
, and going back over a decade,
it turns out that Kyrsten Sinema
was taking heat for this because
she was the only Democrat in the
senate that was prepared to say
let's not do this, but they've
been very effective.
They spent moving dollars in
lobbying, tens of millions if
not more in campaign
contributions, and every time
this comes up, they seem to win.
Lisa: I want to ask about the
stock buybacks, the new 1% tax
on that, the idea that they
buybacks talks to increase the
value for them and their
shareholders.
Judy woodruff asked chuck
Schumer about the idea that this
bill does help the wealthy.
Here was his response.
>> We're putting a 1% tax on
stock buybacks.
These stock buybacks also help
the corporate billionaires and
the big, big hedge fund holders
and things like that, because,
and they do no benefit for
people.
They just make the stock price
go up by having fewer shares.
So, that brought in $70 billion
against the very wealthy.
Lisa: Stock buybacks, companies
use those to increase their
value for them and their
shareholders.
Is what leader Schumer said
accurate?
>> Well, he is right that they
use stock buybacks which have
some tax advantage over paying
dividends.
The stock buybacks do tend to
raise the prices of their
shares.
The real question here is
whether this 1% tax on stock
buybacks is going to change any
behavior of corporate managers
at all.
I would predict not, if you look
at the revenue the joint
committee believes this
provision will bring in, I think
they are basically assuming
stock buybacks will continue at
a high rate.
I don't think it's going to
influence corporate haver and I
don't think it's likely to
affect millionaires and
billionaires that senator
Schumer was referring to.
Lisa: Over all of this is
growing disparity in this
country.
I want to ask a big picture
question.
Do you think these tax changes
will have any effect on the rich
and poor gap that has been
growing in this country?
>> I think not, I'm sorry to
say.
There are no taxes on wealthy
individuals, Joe Biden is
president proposed $365 billion
of increased taxes on the
wealthy in his budget proposals
this year, and in this bill
there are zero.
So there are many -- basically
this bill has decided that the
only taxes that will be raised
here mainly our large
corporations.
Those taxes are small enough
that I don't think it's going to
have any noticeable effect on
distribution of wealth or income
in this country.
The division between the rich
and everybody else is going to
continue.
Lisa: Michael from Columbia
university, thank you so much