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War on Business

• April 24, 2012 9:31 am

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Democrats’ next target in the war on the wealthy: private corporations and their owners, according to the Las Vegas Sun.

The paper reports that Democrats are now considering tax hikes on privately held corporations and the people who own them:

Democrats are considering trying to make it harder for owners of so-called S corporations to avoid paying Social Security and Medicare payroll taxes on some of their earnings, said a Senate Democratic aide speaking on condition of anonymity to reveal an emerging party strategy.

Though decisions have not been finalized, the proposal would affect such companies with earnings of at least $250,000 annually and would raise roughly $5 billion to $6 billion over the coming decade, the aide said. Democrats might use it to help pay for an upcoming effort being pushed by President Barack Obama to keep college students' loan rates from doubling this summer, to finance another initiative or for deficit reduction.

This Democratic plan—which has been under discussion among congressional and Obama administration aides—would tighten the definition of S corporation income on which payroll taxes must be paid. The idea is likely to face strong Republican opposition in the Senate, but Democrats believe there would be political value in simply forcing GOP senators to vote on the measure, win or lose.

S corporations are a commonly used method of creating a business. Many medical and law practices and construction, retail, and real estate companies use the "S" subchapter of the tax code to form their companies. More than four million companies in the U.S. today are categorized at S corporations.