February 20, 2004

The Politics of Tax Policy

David Cay Johnston writes today in the New York Times that a federal grand jury in Manhattan is investigating the sale of tax shelters by KPMG, the big accounting firm, to corporations and wealthy individuals who used them to escape at least $1.4 billion in federal taxes.

I sent this email to letters@nytimes.com today:

Good Morning:

I am writing in response to your periodic coverage of "abusive" tax shelters.

http://www.nytimes.com/2004/02/20/business/20kpmg.html

I believe articles such as this would better serve your readers if they included references to the mess that is the US Tax Code (David Cay Johnston's book includes many useful references). The code is ripe for all sorts of strategies and tactics, many that I'm sure remain to be discovered and exploited.

One of the worst examples, I believe, is the deductibility of vehicles over 6000lbs - which has lead many independent and small business owners who formerly drove sedans to purchase very large, gas guzzling vehicles, simply for tax reasons. What has this policy cost the treasury?

This Edmunds article mentions $17billion over 10 years.

How about ethanol?

Yet another example:
Prior to a 1986 Tax Law change, real estate partnerships (among other examples) were created for the purpose of generating tax losses. Partnerships were created for the sole purpose of selling tax losses.

I find the political grandstanding on this issue absurd. Does Senator Levin disapprove of the massive SUV tax subsidies?

Why has this issue been attractive to some politicians, vs other tax matters? Is there another agenda? Who benefits if the accounting firms are largely taken out of the tax shelter game? Do law firms and investment banks continue to do their deals?

Best wishes -


Jim Zellmer

You can watch, and view transcripts of the Senate Committee on Governmental Affairs November, 2003 hearings on this matter here [Day 1 | Day 2]

Posted by Jim at February 20, 2004 08:36 AM | TrackBack
Posted to Business | Elections | Politics

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