The Senate today will vote on a Democratic plan to prevent a scheduled increase in the interest rate on federal student loans. The bill proposes extending the current rate on student loans, and paying for the extension by closing a tax loophole that lets wealthy professionals (such as doctors and lawyers) avoid paying all of the payroll taxes they owe.

Senate Republicans, however, intend to block the proposal from moving forward:

“We’ll defeat cloture,” Kyl said, using the legislative parlance for a key procedural vote scheduled for Tuesday that requires 60 votes to succeed. If Republicans prove Democrats can’t move a bill without GOP support, “I presume leaders in the House and Senate will get together and find a way to ensure the interest rate doesn’t double,” Kyl said.

The tax loophole in question — known as the Edwards Loophole, as it was utilized by former Sen. John Edwards — hurts both taxpayers who have their payroll taxes automatically withheld by their employers and self-employed small-business owners who pay all of the payroll taxes they owe. As Center for American Progress Director of Fiscal Reform Seth Hanlon noted:

The bill takes away the opportunity to recharacterize income from a professional service business to avoid payroll taxes. That solution puts such businesses on par with other kinds of small business owners, who are required to pay self-employment taxes on all of their business income. Closing this tax loophole is a commonsense measure to make people pay what they should be paying already.

Republicans, however, would rather the bill be paid for by gutting a key health care program, making their priorities when it comes to both the social safety net and student loans abundantly clear.

GREENDALE, Wisconsin — Rep. Paul Ryan (R-WI) told students at a town hall Friday that he would not support preventing a hike in their student loan interest rates if it was paid for by closing corporate tax loopholes.

“Nope,” Ryan told Matt Kozlowski, a student at the University of Wisconsin, who had asked him if he’d support closing such loopholes to stave off an imminent rate hike:

STUDENT: My question for you would be, would you support closing corporate tax loopholes to pay for that as a revenue raiser?

RYAN: Nope. Well, I support closing tax loopholes for tax reform. [...] So that’s what we want to do with all those corporate loopholes is do that, and with the student loan bill let’s cut some spending because that’s more spending, let’s cut spending that is lower-priority spending to address this higher-priority need.

Watch a clip of Ryan’s remarks:

If Congress doesn’t act by July, student loan interest rates will double from 3.4 percent to 6.8 percent, costing needy students as much as $1,000 per year in added interest payments.

Instead of closing corporate tax loopholes, Ryan suggested paying for the bill by cutting “lower-priority spending.” House Republicans have proposed cutting preventative health care funds that would provide hundreds of thousands of breast and cervical cancer screenings for women, and using that money to prevent the interest rate hike.

Student loan debt currently tops $1 trillion, outpacing both total credit card debt and auto loan debt. The cost of college has nearly sextupled over the past 25 years, growing far quicker than general consumer items, gasoline, and even health care.

The rub is that Ryan’s budget actually aims to close corporate tax loopholes, but does so to pay for tax breaks for wealthy individuals, not students struggling with loan debt.

The 138th running of the Kentucky Derby is today, and more than 100,000 fans will pack Churchill Downs in Louisville, Kentucky to see the first leg of the Triple Crown. What they will also see is a select group of horse owners who get to pay less in taxes thanks to a hand-out from Sen. Mitch McConnell (R-KY).

In a tight race to keep his Senate seat in 2008, McConnell inserted the “Bluegrass Boondoggle” into the Farm Bill. The Boondoggle gave a special tax break to millionaire horse owners, costing the government $126 million over 10 years.

Though McConnell now decries wasteful spending, he publicly touted the millionaire-only earmark in 2008, and the GOP has done everything it can to preserve the tax break since. The House GOP budget, which gives massive tax breaks to the rich that Republicans say will be paid for by closing tax loopholes, doesn’t touch the Bluegrass Boondoggle.

That budget has wide support throughout the party and has been endorsed by presumptive Republican presidential nominee Mitt Romney, another fan of humongous, unpaid-for tax cuts for the richest Americans. (Romney is, of course, also a fan of fancy horses.)

Romney has openly touted his friendships with the owners of NASCAR and National Football League teams. Given his support for a budget that gives away tax breaks to millionaire horsemen, he may be making a few friends in the horse industry too.

For the last four years, 26 major U.S. corporations have made billions in profits but paid nothing in federal income taxes. But corporations aren’t just dodging taxes on their own behalf, they’re helping their chief executives do it too.

Major corporations like Ford, Halliburton, Kraft, and others either require or recommend that their CEOs travel on private jets, for both business and personal travel, for “security reasons.” Some corporations also pay for home security systems, 24-hour surveillance, chauffeurs, and other perks, all in the name of safety. But as New York Times DealBook columnist Steven M. Davidoff notes, the CEOs aren’t really in imminent danger. Instead, paying for security and private travel “is a common corporate tax trick“:

It’s a different case for personal travel. In those cases, chief executives are required to pay income tax on the imputed portion of the flight — that is, the amount the company paid for the flight. So a chief executive who is a frequent flier can rack up a rather large tax bill.

Luckily, the tax code offers executives a break.

If an outside security consultant determines that executives need a private jet and other services for their safety, the Internal Revenue Service cuts corporate chieftains a break. In such cases, the chief executive will pay a reduced tax bill or sometimes no tax at all.

Corporate taxes in the U.S. have fallen to a 40-year low, while the wealthiest Americans are paying historically low tax rates. And yet, both groups are finding new ways to pay even less in taxes, even if it means making actual taxpayers subsidize their travel and “security.”

Our guest blogger is Seth Hanlon, Director of Fiscal Reform at the Center for American Progress Action Fund.

One of Mitt Romney top fundraisers and fellow 1-percenter Stephen Schwarzman was recently on television questioning the civic involvement of nearly half of Americans. Asked on Bloomberg TV whether he would be willing to pay higher taxes to help solve the country’s fiscal challenges, the billionaire Schwarzman responded by pointing at the approximately 45 percent of households who will not owe income taxes this year (an abnormally high number due to the recession) and said:

You have to have skin in the game….The issue is the concept that we’re all in this together, solving problems together…. The concept that half of the public isn’t involved with the income tax system is somewhat odd, and I’m not saying how much people should do, but we should all be part of the system.

This “skin in the game” myth, which implies that people who don’t owe federal income tax in a given year don’t contribute to the public good, is both factually misleading and fundamentally insulting. And it’s particularly offensive coming from a guy who’s been the most zealous defender of a loophole that allows billionaires like him to pay a lower federal tax rate than many middle-class workers.

First, all Americans pay taxes. The “tax system” Schwarzman refers to includes federal payroll taxes and state and local sales taxes, which claim a bigger share of income from those in the middle and bottom than from those at the top. All told, even the very poorest quintile pays about a sixth of their modest incomes in taxes. These other, more regressive taxes may not be noticeable to billionaires like Schwarzman, but the fact that everyone pays them shows that we are all already “part of the system.”

Moreover, it’s likely that many families won’t owe federal income tax this year precisely because they have too much skin in the game. Among the major reasons a household might not owe income taxes:

– They worked (paying both income and payroll taxes) for years or even decades but lost their jobs in the Great Recession and saw their incomes fall under the low thresholds where the income tax kicks in.

– They worked their whole lives (again, paying taxes on their wages) but are now retired and rely principally on Social Security benefits, which are mostly untaxed.

– They are students and their income-earning years are mostly ahead of them.

– They work at low-paying jobs while raising children, and qualify for the Earned Income Tax Credit. (Tax data shows that most EITC recipients only claim the credit for short periods; on net, recipients pay hundreds of billions in federal income tax over time.)

What’s particularly galling is to hear Schwarzman, of all people, sermonize about how low-income people need to pay higher income taxes to prove that they have skin in the game. Schwarzman, co-founder of the Blackstone Group private equity firm, is the most zealous defender — and probably one of the biggest beneficiaries — of the “carried interest” tax loophole. Read more

There is currently a special loophole in the tax codes of most states that allows online retailers like Amazon.com and Overstock.com to avoid charging the very same sales tax that brick-and-mortar stores are required to collect from customers. This loophole denies states billions of dollars of tax revenue. For example, in “2011 alone, Wisconsin will lose an estimated $127 million in uncollected sales tax on purchases made online.”

Yesterday, the Daytona Beach News-Journal asked Florida Gov. Rick Scott (R) about this loophole. Scott admitted that the loophole is “not fair” to bricks-and-mortar stores, but then said he does not advocate closing it anyway because he doesn’t want to raise taxes:

Q: Today is Cyber Monday and thousands, if not millions, of Floridians will go online to make holiday purchases without paying the sales taxes they face in downtown shops. Bricks-and-mortar retailers not only provide jobs in our communities, but they pay property taxes that help fund services and education. What should the Legislature do to level the economic playing field?

SCOTT: It’s not fair. You shouldn’t be treated differently, whether you’re selling online or in bricks-and-mortar. That’s not fair. But, at the same time, my focus is not to do it where we raise taxes. I don’t want to take money out of the private sector. Is it raising taxes to have a mechanism that helps Florida collect the sales taxes we’re already supposed to pay? If it’s out of your pocket, that’s a tax.

Scott’s answer is disappointing, given how states ranging from California to Connecticut have moved to close this revenue-draining loophole.

Online sales yesterday hit a new record for “Cyber Monday,” the Monday following Thanksgiving when online retailers have, in recent years, been boosting their efforts to take a larger chunk of the post-Thanksgiving shopping binge. According to data from Coremetrics, online sales yesterday were up 33 percent over 2010, and more than $1 billion in merchandise was sold. The average online order value was $198.26.

While this may be good news for retailers, it’s bad news for state budgets. As Matthew Gardner of the Institute on Taxation and Economic Policy noted yesterday, many online retailers are able to use a tax loophole to avoid collecting sales taxes, depriving states of badly needed revenue:

The National Retail Federation predicts this holiday season, 36 percent of all purchases will be made online. But too many of these purchases will be tax-free, due to an unfortunate loophole allowing e-retailers to shirk their role in helping states collect sales taxes — which cost states $10 billion last year alone, according to researchers at the University of Tennessee.

More tax-free sales mean fewer tax dollars for states — not to mention the consumer dollars that won’t circulate in our local economies because the current system rewards online shopping with out-of-state businesses.

The Supreme Court has ruled that retailers only have to collect sales tax in states where they have a physical presence. That ruling was handed down in 1992, before the rise of e-retailers, yet has allowed companies like Amazon.com to undercut competitors by not collecting sales tax. When lawmakers attempt, as many have, to close this loophole and force Amazon to collect sales tax, Amazon has threatened to simply leave those states.

According to the latest Fiscal Survey of States by the National Governors Association and the National Association of State Budget Officers, state budgets have improved slightly since the beginning of the Great Recession, but states “still face a dire fiscal situation.” The revenue generated from online sales could certainly help, but a pernicious tax loophole with no public policy purpose is depriving states of those dollars, forcing them to cut ever deeper into programs upon which people depend.