Democrats Push Out a Tax Reform Overview; A Section-by-Section Translation Into Plain English

The Congressional Ways & Means Committee recently pinched-off a steaming pile of Schiff entitled, “Subtitle I – Responsibly Funding Our Priorities.” This neatly-coiled, eighteen page overview of the Democrat’s tax plan shouldn’t be confused with the multi-trillion dollar “infastructure bill” which Nancy Pelosi is currently laboring to pass through the House right now. No, no… this movement will be expelled from the bowels of Congress, infastructure or not.

Congressional Democrats attempt to push through thier tax reform policies this week

You may not know this about me, but before I was a “domestic extremist,” I was an attorney. Accordingly, I’m fluent in jargon-laden legalese. You can view the original Congressional document here, but I’ve taken the liberty of copying each section (the majority of the document) and immediately following each section with a translation into plain English.

Please remember to wash your hands thouroughly after reading.

Original Document

Sec. 138512. Extension of Credit for Portion of Employer Social Security Taxes Paid with
Respect to Employee Tips to Beauty Service Establishments

In general, section 45B defines the employer social security credit as an amount equal to the
employer social security tax paid with respect to employee tips. Previously, the credit was only
applied with respect to tips received in connection with providing or delivering food or
beverages. This provision extends the credit to tips received for providing beauty services to a
client or customer. The amendments made by this section apply to taxable years beginning after
December 31, 2021.

Translation

Tax on Barbers and Hair Dressers and anyone else working in a Beauty Salon

The owners of barber shops and beauty salons will get a nice little tax credit if they snitch their employees out to the IRS. This is already happening in the restaurant and food delivery industries. The IRS has always had a hard time proving how much a bartender or hair stylist makes in tips, so they are incentivizing the bar/salon owners to do their dirty work for them but shtupping them a little tax break for every dollar of YOUR money they report.

This will disproportionately affect people of color and those making under $400,000 per year.


Original Document

Sec. 138517. Payroll Credit for Compensation of Local News Journalists.
This provision allows an employment tax credit for each calendar quarter wages, not to exceed
$12,500, paid to local news journalists by an eligible local newspaper publisher. The credit for
each calendar quarter may not exceed total amount of employment taxes paid by such publisher
with respect to all employees. Any excess is treated as overpayment, and allowed as refund.
The credit amount is equal to 50% of wages for each of the first 4 calendar quarters, and 30% of
wages for each calendar quarter thereafter. Eligible local newspaper publisher is any employer
that is in the trade or business of publishing a local newspaper that serves the needs of a regional
or local community and who employs no more than 750 employees. This section applies to
calendar quarters during the first 5 calendar years beginning after the date of enactment.

Translation

Broke 20-somethings working as “freelance journalists” are going to have to start paying taxes

Too many small-time newspapers are using “freelance journalists” for local news stories. A freelance journalist is an independent contractor who is responsible for withholding his/her own taxes; consequently, the IRS doesn’t make as much money off them compared to a traditional w-2 employee. So here, the IRS is incentivizing small news outlets to put those “freelancers” on the payroll, effectively increasing their taxes, and, saving the IRS from having to chase them down because those taxes will now automatically be withheld and remitted by the employer.

Also, these smaller publications tend to be conservative. Notice how large national (mainstream) publications are exempt? Yeah, well those big papers aren’t conservative. Just sayin’.

This will disproportionately affect those making under $400,000 per year.


Original Document

Sec. 138519. Credit for Qualified Access Technology for the Blind.

Beginning in 2022, this provision establishes a nonrefundable credit of up to $2,000 in any 3-
consecutive year taxable period for amounts paid or incurred for qualified access technology for
use by a qualified blind individual—either the taxpayer or the taxpayer’s spouse or dependent.
“Qualified access technology” consists of hardware, software, or other information technology
designed to convert or adapt information visually represented into forms or formats usable by
blind individuals. No double benefits are permitted, and expenses compensated by insurance are
ineligible for the credit. The credit is indexed and expires after 2026.

Translation

Blind People Will Be Used as a Tool to Facilitate Kickbacks to Big Tech

This is actually quite clever. Silicon Valley is about to drop some new gadgets which could conceivably help blind people. Unfortunately, those gadgets have a very steep price tag and blind people tend to suck at making money. So the IRS will give them a credit (not a deduction, an outright CREDIT) so they can buy a pair of talking sunglasses on your dime. That revenue helps lubricate the Democrat propaganda machine in Silicon Valley, and, as a cherry on top, Dems get to pretend they give a sh*t about blind people! …sorry, is it the alternatively visioned now?


Original Document

TitSec. 138144. Rents from Prison Facilities not Treated as Qualified Income for Purposes of
REIT Income Tests.le

This provision amends section 856 to provide that income received with respect to property
primarily used as a prison or other detention facility does not qualify for the purpose of REIT
income tests. The amendments made by this section apply to taxable years beginning after
December 31, 2021.

Translation

The Niche Area of ‘Prison REITs’ is sooooo Passé

The IRS requires REITs (Real Estate Investment Trusts) to pass an “income test” to continue to qualify for favorable tax treatment (generally 75% or more of their income must come from rents). This will essentially force the remaining handful of REITs specializing in private prison properties to liquidate and invest their assets in other types of REITs, like the commercial property REITs owned by the Pelosi family.


Original Document

Sec. 138151. Constructive Sales.

This provision includes digital assets in the constructive sale rules, anti-abuse rules previously
applicable to other financial assets. The constructive sale rules in section 1259 treat the adoption
of certain offsetting positions to previously owned positions as sales of the previously owned
position. These rules prevent taxpayers from locking in investment gains without realizing
taxable gain. The amendments made by this section apply to taxable years beginning after
December 31, 2021.

Translation

“Bitcoin Bros” are Going to Start Paying Taxes

When you trade one crytocurrency for another (like Bitcoin for Etherium) that’s now a potentially taxable transaction. Remember, Congress has ratcheted up the reporting requirements for cryptocurrency trading platforms like Coinbase, Kraken and Gemini. Also, Democrats are trying to pass legislation allowing them to monitor the transactions in private bank accounts worth more than $600 (see WSJ article here). This fits into the IRS’ broader initiative to start generating some serious revenue out of the crytocurrency sector.

This MIGHT disproportionately affect those making under $400,000 per year.


Original Document

Sec. 138152. Rules Relating to Common Control

The tax code aggregates certain business entities in order to apply various limitations (e.g., the
gross receipts limitation in the use of the cash method of accounting under section 448(c), the
exemption from interest deductibility limitations under section 163(j)). Section 52(a) addresses
corporate entities and section 52(b) provides similar rules for corporate and non-corporate
entities. Section 52(b) refers to “trades or business (whether or not incorporated)” and the
treatment of certain for-profit activity is unclear. The provision would provide that a taxpayer engaged in any activity in connection with a trade or business or any for-profit activity is subject to the aggregation rules under section 52(b). The provision would be effective on the date of enactment.

Translation

The Feds are Cracking Down on Small-Businessmen, Who Live in the “Cash Economy”

The accounting rules for larger businesses ‘(accrual accounting’ versus ‘cash accounting’) will be forced upon small businesses. Instead of looking at each individual business to determine if it’s too big for “cash accounting,” they will look at the totality of each individual’s activities, whether they are incorporated or not. Example: A guy who owns a 1/3 share in a restaurant, does construction during the day and teaches karate on Monday nights is essentially involved in 3 small businesses (even if they are not incorporated). If the total amount of money between all three puts him over the threshold, they will treat him as essentially one large business.

This will disproportionately affect those making under $400,000 per year.


Original Document

Sec. 138153 Wash Sales

This section includes commodities, currencies, and digital assets in the wash sale rule, an anti-
abuse rule previously applicable to stock and other securities. The wash sale rule in section 1091
prevents taxpayers from claiming tax losses while retaining an interest in the loss asset. The
amendments made by this section apply to taxable years beginning after December 31, 2021.

Translation

More Crytocurrency (Bitcoin) Regualtion

The text of the document is actually pretty clear here… they are treating cryptocurrency more and more like stock (less and less like actual currency) because they are better equipped to monitor that type of asset. Nevermind that it’s nothing like stock at all.


Original Document

Sec. 138201. Increase in Top Marginal Individual Income Tax Rate

The provision increases the top marginal individual income tax rate in section 1(j)(2) to 39.6%.
This marginal rate applies to married individuals filing jointly with taxable income over
$450,000, to heads of households with taxable income over $425,000, to unmarried individuals
with taxable income over $400,000, to married individuals filing separate returns with taxable
income over $225,000, and to estates and trusts with taxable income over $12,500. The
amendments made by this section apply to taxable years beginning after December 31, 2021.

Translation

Top Tax Rate is Up To 39.6%

Married Couples with combimed income of 450k+ will pay a top marginal tax rate of 39.6%.


Original Document

Sec. 138202. Increase in Capital Gains Rate for Certain High Income Individuals

The provision increases the capital gains rate in section 1(h)(1)(D) to 25%. The amendments
made by this section apply to taxable years ending after the date of introduction of this Act. A
transition rule provides that the preexisting statutory rate of 20% continues to apply to gains and
losses for the portion of the taxable year prior to the date of introduction. Gains recognized later
in the same taxable year that arise from transactions entered into before the date of introduction
pursuant to a written binding contract are treated as occurring prior to the date of introduction.

Translation

Capital Gains Tax is going from 20% to 25%

(Self-explainatory)


Original Document

Sec. 138205. Limitations on Excess Business Losses of Noncorporate Taxpayers

This provision amends section 461(l) to permanently disallow excess business losses (i.e., net
business deductions in excess of business income) for non-corporate taxpayers. The provision
allows taxpayers whose losses are disallowed to carry those losses forward to the next
succeeding taxable year. The amendments made by this section apply to taxable years beginning
after December 31, 2021.

Translation

We’re Going to Make “Main Street” Businesses a Lot riskier – Just go get a Corporate Job!

Small Business Owners and Independent Contractors (“non-corporate” taxpayers) can no longer write off business expenses that amount to more than the revenue for a given year. In other words, if the business is not profitable (as most are for the first few years), you’re f*cked! It goes on to say that you can “carry those losses forward” to subsequent years, but there likely wont be subsequent years if you’re running at a loss for any length of time. At the end of the day, it’ll be much riskier to set up shop in the “small town” cash economy… which is exactly the point. Just go get a job at the Amazon fulfillment center or Walmart – they will make sure the IRS gets every cent of tax that is due before you even see a your paycheck.

This will disproportionately affect those making under $400,000 per year.


Original Document

Sec. 138313. Statute of Limitations with Respect to IRA Noncompliance

The bill expands the statute of limitations for IRA noncompliance related to valuation-related
misreporting and prohibited transactions from 3 years to 6 years to help IRS pursue these
violations that may have originated outside the current statute’s 3-year window. This provision
applies to taxes to which the current 3-year period ends after December 31, 2021

Translation

We Need Money Now! Time to go Fishing

It’s pretty self-explanatory – the IRS is retroactively expanding the Statute of Limitations so they can fish for missed opportunities. I would imagine the retroactive component of this will be challenged in court, but either way, it’s no secret that the IRS is going to be coming out, guns blazin’ next year… see the next section…


Original Document

Sec. 138401. Funding of the Internal Revenue Service

This provision appropriates $78,935,000,000 for necessary expenses for the IRS for
strengthening tax enforcement activities and increasing voluntary compliance, and modernizing
information technology to effectively support enforcement activities. No use of these funds is
intended to increase taxes on any taxpayer with taxable income below $400,000. Further,
$410,000,000 is appropriated for necessary expenses for the Treasury Inspector General for Tax
Administration to provide oversight of the IRS. Finally, $157,000,000 is appropriated for the Tax

Court for adjudicating tax disputes. These appropriated funds are to remain available until
September 30, 2031.

Translation

We’re Gonna Spend $80 Billion (Which We Don’t Have) So We Can Squeeze Every Last Drop Out of Your Sorry Ass

Imagine your local town or city government took out a $50,000 loan in your name, to pay a guy to follow you around and issue fines every time you break a rule.

33mph in a 30mph zone?… $75 ticket. You left your garbage can out on a non-garbage day?… $25 fine. Did you just J-walk?… $45 fine.

Oh and by the way, tomorrow is the first of the month… the first payment on that 50k loan is due.

This will disproportionately affect those making under $400,000 per year.


Original Document

Sec. 138402. Backup Withholding and Third Party Network Transactions

This provision amends section 3406(b) to add to the list of reportable payments any payments in
settlement of third party network transactions, but only if the aggregate annual payment made by
the third party settlement organization to the payee equals or exceeds $600, the third party
settlement organization was required under section 6050W to file a return for the preceding year
with respect to the payee, or if during the preceding calendar year the payment organization
made reportable payments to the payee with respect to which amounts were required to be
deducted and withheld under 3406(a). A transition rule for 2022 adds the requirement that the
aggregate number of annual transactions between the third party settlement organization and the
payee exceeds 200.

Translation

People with “Gig-Ecomony” Jobs Are Not Going to Be Able to Skate by Anymore

Paypal, Venmo, Zelle and all the other “Third Party Networks” that people use to facilitate get paid for gigs as Uber Drivers, Babysitters, Dogwalkers, etc., etc., now have to report all of your activity to the IRS if you use that service for $600 or more in a year.

This will disproportionately affect people of color and those making under $400,000 per year.


Original Document

Sec. 138504. Increase in Tax on Certain Tobacco Products and Imposition of Tax on Nicotine.

This provision doubles the current rate of excise taxes on cigarettes, small cigars, and roll-your-
own tobacco. The provision changes the tax on large cigars from an ad valorem basis to a
weight basis at the rate of $49.56 per pound, but not less than 10.06 cents per cigar. The
provision provides larger increases in tax on smokeless tobacco (i.e., snuff, chewing tobacco, and
pipe tobacco) and a new tax on discrete single-use units at the rate of $100 per thousand. The
definition of roll-your-own tobacco is expanded to include certain processed tobacco. Finally,
the provision imposes excise taxes on “taxable nicotine”, which is any nicotine (other than
nicotine used in listed tobacco products) that has been extracted, concentrated, or synthesized.
The level of tax on “taxable nicotine” is equivalent to the rate for cigarettes per 1,810 milligrams
of nicotine. Taxable nicotine is treated as a tobacco product and the tax rates for tobacco
products are adjusted for inflation after 2022. The provision imposes a floor stocks tax on
cigarettes and small cigars, with a de minimis exemption amount of $1,000. The effective date
for cigarettes, small cigars, and smokeless tobacco is calendar quarters beginning after the date
of enactment of this Act. The effective date for large cigars, discrete single-use units, and
taxable nicotine is calendar quarters beginning 180 days after the date of enactment of this Act.

Translation

The Cost of a Pack of Smokes is Going to Double

Everyone who still smokes either doesn’t vote or voted for Trump, so………. F*ck ’em!

By the way, when the Biden Administration claims that their infrastructure bill pays “pays for itself,” one of the MANY disingenuous assumptions they make is that the exact same number of cigarettes will be sold when they cost $16 per pack as opposed to $8, which is absurd. That sort of nonsense is repeated over and over in other areas to justify that claim.

This will disproportionately affect people of color and those making under $400,000 per year.


Original Document

Sec. 138508. Access to Self-Employment Income Information for Paid Leave Administration

This provision amends section 6103 of the Code so as to authorize disclosures of certain self-
employment income to employees within the Treasury department for purposes of administering
the paid family and medical leave program established under Subtitle A of the Budget
Recommendations.

Translation

Some Phoney-Baloney Bureaucratic Agency Now Has the Authority to Subpeona Small-Businessmen for Self-Employment Income Records

This is simply an excuse to demand records about your financial transactions. Statistics show that once you’ve submitted records to the government, you are much less likely to lie about the underlying transactions contained in those records – even if you sent them to an agency that is isn’t the IRS.

(Pssst – they all share your records with the IRS)

This will disproportionately affect those making under $400,000 per year.


Original Document

Sec. 138510. Treatment of Certain Qualified Sound Recording Productions

This provision amends section 181 to permit taxpayers to treat as currently deductible expenses
the cost of qualified sound recording productions not exceeding $150,000 in a taxable year. The
bill defines qualified sound recording production as certain sound recordings produced and
recorded in the United States. The provision expires on December 31, 2025 (the current section
181 termination date).

Translation

This is a Favor to Some A**hole In Hollywood That Doinated Big Bucks

Notice how it’s vaguely worded so that it will be interpreted to mean $150k per production, rather than per year! Ah, you thought maybe this was a break for the “little guy,” right? Ha!


Original Document

Sec. 138511. Payment to Certain Individuals Who Dye Fuel

In general, under section 4081, tax is imposed upon the removal of taxable fuel (including diesel
fuel and kerosene) from a terminal. Under section 4081(e), if tax is paid and reported to the
government on more than one taxable event for a taxable fuel under section 4081, the person
paying the “second tax” on such fuel may claim a refund (without interest) of that second tax if
certain conditions and reporting requirements are met. However, if the fuel is dyed at removal
from the second terminal, there is no second tax paid on the fuel and refund relief is not available
under section 4081(e) for the dyed fuel. This provision creates a new refund mechanism for
taxpayers who remove eligible indelibly dyed diesel fuel or kerosene from a terminal for
nontaxable use, and establishes to the satisfaction of the Secretary that tax for such fuel under
section 4081 has already been paid.

Translation

This is Another Favor to a Large Donor… Who The Hell Knows Who

Somebody’s Brother-in-law is in the home heating oil business I guess.


Remember: We’re about five years out from a “cashless economy.” The federal government is getting its ducks in a row. And by the way, forcing ALL financial transaction to run through regulated digital systems isn’t just about maximizing tax revenue… it enables the government to just “shut you off” with the flip off a switch. If you can’t pay your bills or buy food, you’ll tend to be a bit more compliant. Just ask the nurses, cops and other working people who are losing their jobs this month because they insist on being “uppity” with their bodily autonomy and basic human dignity.

Good Luck America

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