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This report was written by Jordan Howell<\/em><\/p>\n\n\n\n This week, Sen. Joe Manchin, D-W.Va<\/a>., signaled his resistance to President Joe Biden\u2019s plan to raise the corporate tax rate from 21 percent to 28 percent to fund infrastructure investments \u2014 and his intransigence could protect numerous private equity donors<\/a> who bankrolled his 2018 reelection campaign. <\/p>\n\n\n\n Further review of Manchin\u2019s campaign contributions reveals his stance on tax reform could also protect lucrative tax benefits obtained by many of his biggest campaign benefactors in the legal industry as part of President Donald Trump\u2019s 2017 tax law<\/a>. That legislation included a special tax cut for certain types of incorporated law firms.<\/p>\n\n\n\n Unlike Manchin\u2019s private equity donors, which include familiar names like Ares Management, the attorneys and lawyers who have filled the senator\u2019s his campaign war chest mostly belong to the inscrutable name-soup of billboard regional law firms unknown to most voters, such as the West Virginia firm of Bailey, Javins & Carter, whose lawyers donated $6,400 to Manchin\u2019s 2018 reelection campaign. <\/p>\n\n\n\n But those donations have added up. Since 2015, Manchin has received nearly 800 contributions averaging slightly less than $1,000 from lawyers in 31 states, according to data available through the Federal Elections Commission<\/a>. <\/p>\n\n\n\n In total, lawyers and law firms represent the second largest source of donations to Manchin\u2019s campaign committee and leadership PAC after securities and investment businesses, totaling more than $822,000 in contributions since 2015, according to data compiled by OpenSecrets<\/a>. <\/p>\n\n\n\n Donors from Manchin\u2019s largest individual source of law firm cash, Steptoe & Johnson, delivered $23,100 to his 2018 reelection campaign, and the American Association for Justice PAC, which advocates for trial lawyers and opposes tort reform, contributed $10,000.<\/p>\n\n\n\n And all of these lawyers have a major stake in what happens with Biden\u2019s new tax plan.<\/p>\n\n\n\n The Trump tax cuts provided a financial windfall for lawyers. Prior to 2017, many law firms were taxed at a flat rate of 35 percent<\/a> as \u201cpersonal service corporations,\u201d a common incorporation setup for smaller practices. In addition to providing significant reductions in marginal tax rates for individual filers, the GOP tax law eliminated the flat rate for professional service corporations, allowing those firms to be taxed at the new and reduced corporate tax rate of 21 percent. <\/p>\n\n\n\n For law firms organized as personal service corporations, the Trump tax cuts have been lucrative. Changes to the tax code lowered the corporate tax rate paid by firms below the individual tax rate paid by the partners. The shift was convenient, because the revised tax code allowed members of a law firm various opportunities to shield income that would otherwise be taxed at a higher rate. They could now deduct fringe benefits and bonuses as expenses<\/a>, and any cash not paid out in salaries could remain in the corporation to be reinvested however the firm decides.<\/p>\n\n\n\n In 2017, as Congress debated tax legislation, top lobbyists for the legal industry threw more money behind Republicans<\/a>, and the industry as a whole spent more than $16 million<\/a> on lobbying that year, the most since 2011.<\/p>\n\n\n\n When it comes to tax reform, the fates of law firms and their corporate clients are intertwined, as changes to the tax code advocated by corporations and their lobbyists at corporate law firms benefit everyone involved. The lower corporate tax rates instituted by the GOP tax law provided a windfall to both big businesses and incorporated law firms. <\/p>\n\n\n\n At the same time, the new law\u2019s lower marginal tax rates benefited partners at law firms organized as limited liability partnerships (LLPs) the same way they helped wealthy executives. That\u2019s because both LLPs and LLCs operate as pass-through entities, which means that each member\u2019s salary and bonuses are separated from the business and taxed as personal income. <\/p>\n\n\n\n Biden\u2019s new tax proposal would undo the Republican tax breaks \u2014 at least partially. The plan would raise the corporate rate to 28 percent, but it appears the other fringe benefits enabled by the GOP\u2019s tax code would remain in place. Compared to Obama-era rates, many firms would still enjoy a significant tax break, and for lawyers earning more than $163,000, the corporate tax rate will remain much lower than the marginal tax rate. <\/p>\n\n\n\n But even this limited attempt to undo the Trump tax breaks could fail if Manchin succeeds in his opposition \u2014 a development that would benefit the lawyers and law firms that have bankrolled his campaign. <\/p>\n\n\n\n Manchin has signaled that he\u2019s not alone in his disapproval of the new tax plan, indicating that there are potentially \u201csix or seven\u201d<\/a> other Democrats who have so far privately objected to Biden\u2019s proposal. And he is far from the only Democrat to have his campaign coffers filled by lawyers. <\/p>\n\n\n\n The legal services industry has become one of the top contributors<\/a> to Democratic lawmakers and candidates, especially in 2020 as lawyers abandoned the Republican Party<\/a>. President Biden received more than $57 million from the industry in 2020<\/a>. Thirteen Senate Democrats, including former presidential candidates Elizabeth Warren and Bernie Sanders, each received more than $1 million<\/a> that same year, and the top 20 recipients of law firm cash in the House are currently all Democrats. <\/p>\n\n\n\n That group includes Rep. Josh Gottheimer, D-N.J., a conservative Democrat who has sided with Manchin in opposition to Biden\u2019s tax overhaul, tellingAxios<\/a><\/em>, \u201cWe need to be careful not to do anything that’s too big or too much in the middle of a pandemic and an economic crisis.\u201d <\/p>\n\n\n\n Since being elected to Congress in 2017, Gottheimer has received more than $1.5 million<\/a> in contributions from lawyers and law firms, more than almost any other member of the House. <\/p>\n\n\n\n When Biden was asked Wednesday about his plan to raise the corporate tax rate to 28 percent, he said<\/a> Congress must figure out how to fund his infrastructure plan, but he also said he is \u201cwilling to negotiate.\u201d <\/p>\n\n\n\n Democrats\u2019 reliance on campaign cash from the legal services industry underscores a larger problem facing the left on tax reform: How far can they raise taxes to fund progressive priorities, when many of their largest donors did so well thanks to Trump\u2019s tax cuts?<\/p>\n\n\n\n This newsletter relies on readers pitching in to support it. If you like what you just read and want to help expand this kind of journalism, consider becoming a paid subscriber by clicking this link<\/a>.<\/strong><\/em><\/p>\n\n\n\n Got this email from a friend? Click here to subscribe.<\/strong><\/em><\/p>\n\n\n\n Subscribe now<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" The senator\u2019s opposition to increasing the corporate tax rate could benefit an industry that bankrolled his election bids. Jordan Howell April 10, 2021 (The Daily Poster) Photo credit: Jim Watson\/Getty Images This report was written by Jordan Howell This week, Sen. Joe Manchin, D-W.Va., signaled his resistance to President Joe Biden\u2019s… Continue reading A Tax Gift From Trump<\/strong><\/h4>\n\n\n\n
Dems\u2019 Growing Ties To The Legal Industry<\/strong><\/h4>\n\n\n\n
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