Poll: Does Stark Hit Or Miss The Mark On NEWT-hole?

Congressman Pete Stark targets a Medicare 'loophole' used by Newt Gingrich, but does he hit small to mid-sized businesses as well as 'lobbyists, lawyers and investment managers?'

Congressman Pete Stark (D-Fremont) introduced a bill Tuesday dubbed the Narrowing Exceptions for Withholding Taxes or NEWT Act to close what he called a tax loophole that could cost Medicare $11.2 billion over the next 10 years.

Stark, whose district currently includes San Leandro and Castro Valley, chose the bill's acronym to link it to Republican presidential candidate Newt Gingrich who, the congressman said, had availed himself of this "loophole" on his 2010 tax returns.

Stark said current law allows self-employed individuals -- whom he described in an e-mail to constituents as "typically lobbyists, lawyers and investment managers" -- to avoid paying Medicare payroll taxes.

How? By routing their earnings through an S corporation and classifying them as profits or dividends, instead of as wages.

Stark cited news reports that Gingrich avoided paying an estimated $69,000 in Medicare taxes by classifying $2.4 million in proceeds from his Gingrich Holdings, Inc. and Gingrich Productions as profits or dividends instead of wages.

A report on NEWT -- the act not the candidate -- by AccountingToday.com talked about the estimated $11.2 billion that Medicare could recapture if Stark's bill passes, and listed some of its supporters.

Stark says he is standing up for "teachers, firefighters and nurses" who can't restructure their income to avoid Medicare taxes.

But of an estimated 4 million S corporations (according to AccountingToday) how many are "lobbyists, lawyers and investment managers" versus small to mid-sized companies that would be negatively affected by the bill?

Sound off in the comments and vote in the Patch poll.

Cliff Greenberg February 02, 2012 at 05:49 PM
@David: the "teaccers and firefighters" and other gov't employees are not "stiffing" Social Security: they don't get to collect from it when they retire. My wife retired from city gov't and is ineligible to collect on the SS Taxes she has paid: they are "stiffing" her. Regardless of Stark's examples, in general people should not be collecting from Medicare if they did not pay in to it, a relatively simple calculation. Those who do pay get to collect.
Larry Smith February 02, 2012 at 06:27 PM
What a novel idea collecting Social Security benefits and not paying into it! Aren't about 35 million drug abusers, people with mysterious maladies that quack doctors swear to, and foreigners collecting Social Security now? Why isn't Pete going after them? Most teachers, firefighters and cops have never paid into the system. Is he saying that we should give them Social Security benefits on top of their lucrative retirement plans? Why isn't he targeting the same dirt-bag lobbyists, and lawyers, and investment managers who are parading into his office, instead of 'all' S-corporations that also includes many small businesses worthy of this status. I used to be a big Stark fan, but he, Nancy Pelosi, Diane Feinstein, and Barbara Boxer, and all the other "professional Congressional scumbags have come to represent a class of corporate citizen of which I and all other living and breathing citizens (real people) are not a part. They deserve any comeuppance that befalls them. And we the people of this great country deserve a system of governance devoid of political 'professionals'. In other words, we need Congressional term limits and representatives that are subject to the same laws and benefits that are applicable to all.
Michael Austin February 02, 2012 at 06:50 PM
I paid into Social Security for fifty-years and I paid into Medicare for forty-five years. In retirement it is necessary that I purchase medicare supplemental insurance, dental insurance, vision insurance. If I could have kept the dollars I paid in every year for social security and medicare I could take care of myself, my family for the next twenty-five years or longer.
David February 02, 2012 at 09:51 PM
I'd love to keep my Soc Sec. taxes. But, more to the point. You don't "pay into" social security or Medicare. They are simply taxes that go to the federal budget and are paid out to current retirees. The overall tax rate and collection are what matter. And, often "teachers and firefighters" do collect social security. If they work a different job fro 10 years (particularly easy for firemen who can retire at 50), they get Social Security, and the lion's share of Social Security benefits accrue at lower levels of "average income" etc.
Nadja Adolf February 03, 2012 at 06:28 AM
A lot of "S Corporations" are consultants who are not particularly wealthy as a result of their work. Think self-employed civil engineers who act as consultants to homeowners in improving drainage or perform surveying. This is just more Pete Stark stealing from those who work to give to illegal aliens, criminals, and overpaid civil servants who can retire young with enormous pensions and benefits. Think police and fire. Or Congress.


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