And you thought the day would never come: earlier this week, President Bush signed into law a bill that (gasp) increases federal taxes. The bill, HR 6081, known as the "Heroes Earnings Assistance and Relief Tax Act," creates or extends a host of special tax breaks for military members and their families, which in itself is a move no sane member of Congress would oppose. But heretically, the bill pays for its tax cuts by closing an existing tax loophole.
The tax break in question, which Talking Taxes discussed in detail a few months back, allowed KBR, a former subsidiary of the Halliburton company, to avoid hundreds of millions of dollars in federal Social Security and Medicare taxes by pretending its Iraq-based employees were working for a Cayman-Islands based "shell company."
Just as tax breaks for the military have no enemies (the House voted unanimously on this one), the KBR payroll tax dodge had no friends. So for any head of state not guided by the "no new taxes" mantra, signing this bill would be a no-brainer. But in this case, we'll call it a pleasant surprise.
Now, as the NWLC's Joan Entmacher asks, why can't we get Congress and the President to apply the same logic to the egregious "carried interest" tax break for hedge fund millionaires?