Friday, March 20, 2009

A Review of Reagan Farr's Report

Reagan Farr's report on the FONCE exemption can be found here. It continues the wealth-envy game I first noticed in this article that also tries to turn the exemption repeal into a morality play. Farr's report basically tries to frame the issue to address three issues "the wealthy", "fundamental fairness" and "reasonable[ness]." He probably should just say "the evil rich are taking advantage of the tax law to their benefit." Of course all taxpayers do that. There are plenty of people who are not rich who utilize the FONCE exemption. The fact is, Farr has no way of knowing the financial position of the owners of the entities. He merely assumes they are wealthy in order to set up an easier target to attack (because the Democrats have trained us for years that the rich are evil and must be stopped at all costs).

He further assumes that ending the FONCE exemption will result in more people paying the tax. That may be true in the short term, but he believes that those who do not pay the tax will opt to become "exempt obligated member entities." For those of you who don't know, that is another franchise & excise tax exemption where the members of the entity opt out of limited liability protection. They continue to pay the $300 per year to Tennessee to keep their entity in place. Farr is crazy if he thinks they will keep the entity in place using the other exemption. That exemption will work for only those entities who hold non-liability producing investments (such as stocks) or those who have the entity in place for estate planning purposes. That is likely relatively few of the entities that collect "rent" as it is currently defined.

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