government
NEWT Act would close Medicare tax loophole
NEWS IN BRIEF — Posted Feb. 13, 2012
Rep. Pete Stark (D, Calif.) has proposed legislation to close a tax loophole that would yield billions of dollars to the Medicare program.
The Narrowing Exceptions for Withholding Taxes Act would target self-employed individuals who use S corporations to avoid paying the 2.9% Medicare payroll tax, Stark said. He named the act after Republican presidential candidate and former House Speaker Newt Gingrich, whose 2010 tax returns showed he used S corporations in a way that decreased his taxes by $69,000. Gingrich had earned $444,327 in wages but reported $2.4 million in profits and dividends to his corporations.
A message requesting comment from the Gingrich campaign was not returned by this article's deadline.
Stark said Gingrich is not the only politician to exploit the loophole. For instance, former Sen. John Edwards (D, N.C.) had reported earning $26.9 million as a trial lawyer in 1995. Edwards paid himself a salary of $360,000 for four years and reported the rest as profits and dividends through an S corporation. The move saved Edwards nearly $600,000 in Medicare taxes over four years, Stark said.
A previous version of the legislation passed the House in 2009. At the time, federal estimates showed that closing the loophole would save the government $11 billion over 10 years.
Note: This item originally appeared at http://www.ama-assn.org/amednews/2012/02/13/gvbf0213.htm.
