Congress may look at taxing partnerships and other pass-through entities with at least $50 million a year in revenue like corporations.
Senator Max Baucus (D-Montana), head of the Senate tax-writing committee, suggested on May 4 that his committee will look at the idea. The Obama administration is reportedly working on a proposal to send Congress. Michael Graetz, a respected tax law professor, suggested such a step in testimony before the Senate tax-writing committee in March during hearings on corporate tax reform. Pamela Olson, assistant Treasury secretary for tax policy under President George W. Bush, told an American Bar Association tax section meeting in Washington in May that one problem with the last major overhaul of the US tax code in 1986 is that it has led to a gradual erosion in the US corporate income tax base as businesses convert into pass-through entities.
It is hard to tell whether the idea has life or will follow the same arc as the Donald Trump presidential bid.
Between 40% and 50% of business income is now reported by pass-through entities. According to Graetz, only 0.2% of partnerships had revenues of more than $50 million, but they account for 60% of total partnership income.
Meanwhile, the debt ceiling debate in the United States threatens to come to a head in late July or August. The US has a limit on the amount of money the government can borrow of $14.294 trillion. The government hit the limit on May 16, and will eventually need to borrow more to fund operations, including paying interest and principal on outstanding debt. Current projections show the government running out of money after August 2 unless the ceiling is increased. Republicans and some Democrats are unwilling to vote to increase the current debt ceiling unless Congress agrees at the same time on a plan to reduce massive federal budget deficits.
Evan Liddiard, a senior aide to the top Republican on the Senate tax committee, Orrin Hatch (R-Utah), said in early May that any bill to increase the debt limit may ultimately include tax increases as well as spending cuts.
Most industry groups are hunkered down hoping their programs will avoid the spotlight. Any bill that moves will take shape quickly and offer little chance for input.