Biden saved big bucks using payroll tax loophole
Former President Barack Obama tried to eliminate the so-called Gingrich-Edwards loophole
Presumptive Democratic presidential nominee Joe Biden used a tax strategy to evade paying hundreds of thousands of dollars in payroll taxes, as he criticizes President Trump’s plan for a payroll tax deferral.
Biden released tax returns last year revealing that he and his wife funneled profits from their books and speeches through S corporations. The controversial tax savings strategy – which former President Barack Obama tried to close – saved the couple as much as $500,000, as first noted by The Wall Street Journal.
The loophole is known as the Gingrich-Edwards loophole, and Obama had called for its end as part of one of his budgets. It essentially allows self-employed people to set up an S corporation in order to avoid payroll taxes – including Social Security and Medicare taxes.
The strategy is legal, and allows people to treat income as company profits instead of a salary. According to research conducted in 2009, closing the loophole would raise $11.2 billion in revenue over the course of the decade.
The payroll tax is paid separately from federal income taxes and funds Social Security and Medicare. Employers and employees each pay 6.2 percent for Social Security and 1.45 percent for Medicare, and an additional 0.9 percent is levied on the highest earners.
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Meanwhile, after Trump said he is considering using executive action to implement a payroll tax deferral, Biden issued a statement criticizing the president for “putting Social Security at grave risk.”
“Trump specifically stated today that if reelected, he plans to undermine the entire financial footing of Social Security,” Biden’s statement read. “He is laying out his roadmap to cutting Social Security. Our seniors and millions of Americans with disabilities are under enough stress without Trump putting their hard-earned Social Security benefits in doubt.”
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The Treasury Department estimated that loopholes allowing people to evade Medicare and Social Security taxes have cost about $25 billion each year, as reported by The New York Times.
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Former presidential candidates Newt Gingrich and John Edwards drew scrutiny for using the loophole, hence its name.
A spokesperson for Biden’s campaign did not immediately return FOX Business’ request for comment on Tuesday.