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Wyden Unveils Tax Proposal to Build a Fairer System
Wyden’s Tax Reform Discussion Draft Stops Privileged Few from Using Complex Financial Tools to Avoid Paying Taxes
WASHINGTON – Senate Finance Committee Ranking Member Ron Wyden, D-Ore., today released a legislative discussion draft that simplifies how derivatives are taxed so that the privileged few follow the same set of rules as hard working Americans. The proposal is a critical piece of Wyden’s efforts to end the “Tale of Two Tax Codes” and lay the groundwork for tax reform.
Derivatives -- which are essentially a financial bet that a stock or other investment is going to go up or down in value – have legitimate uses, however tax avoidance is not one of them. Currently sophisticated taxpayers are able to exploit a complex array of tax rules to make financial bets relatively risk free by delaying, minimizing or even avoiding taxes in ways that typical working Americans who collect a paycheck cannot do.
“The privileged few use expensive accountants and lawyers to shield their wealth so they can pay what they want, when they want,” said Wyden. “Meanwhile hard working Americans have taxes pulled from their salaries every month – no questions asked. This proposal will help end the ‘Tale of Two Tax Codes’ and create one fair system with simple and straightforward rules that apply to everyone.”
Wyden’s proposal offers one set of clear rules for taxing derivatives by requiring the recognition of gains each year (“mark to market”) and applying ordinary tax treatment to these gains, shutting down sophisticated tax games in the process. The draft would repeal nine tax code sections and wipe out hundreds of pages of unnecessary regulations.
This proposal delivers on recommendations made in a report that Wyden called for last year identifying major tax avoidance strategies. That report, which provides examples of how derivatives can be used for tax dodging, can be found here.
The discussion draft is a detailed, but not final, document that outlines principles and concepts. It is being circulated to stakeholders, members of Congress, federal officials and others for review and comment. The responses will be reviewed and, if appropriate, incorporated into legislation. Please email comments on the proposal to Financial_Products@finance.senate.gov.
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