Law Maker Introduces Bill Essay

350 WordsMar 14, 20122 Pages
Lawmaker Introduces Bill to Close Newt Gingrich Medicare Tax ‘Loophole’ Washington, D.C. (January 31, 2012) By Michael Cohn, Accounting Today A new bill was introduced by Pete Stark that would close the medical tax loophole former House Speaker Newt Gingrich exploited. The bill which is set up to close off a wrinkle in the Tax Code that would allow self employed individuals to lower their Medicare payroll tax liability by classifying earnings as profits or dividends instead of wages The bill would help save the American people some 11.2 billion dollars over 10 years. Gingrich classified some 2.4 million in profits or dividends and avoided paying some 69,000 in Medicare taxes. By taking advantage of the tax loophole often used by wealthy self-employed lawyers and lobbyists to slash their tax liability, The Newt Act would expand the income categories that are subject to Medicare payroll taxes so employee shareholders of S Corporations would not be able to avoid paying taxes by falsifying wage income and correspondingly higher dividends or profits. This would mean that employee-shareholders of S corporations would have to calculate their Medicare payroll tax obligation based on their share of the S corporation’s profits or dividends not just wages. The NEWT Act targets the S corporations that have been the most likely to abuse the system. These are the professional service businesses engaged in the field of health, lobbying, law, engineering, architecture, accounting and numerous others to paying fields of work. Medicare payroll taxes are imposed at a rate of 2.9 percent on all wages income. S corporations do not pay income taxes. Income of gain and loss of S Corporation flow through to shareholders individual tax return. There may be a temptation under present law to lie about wages earned. Honesty is the key in any corporation or business.

More about Law Maker Introduces Bill Essay

Open Document