Tax Break

Essential reading: payroll tax talks, state income tax cuts and a Swiss bank fine

February 7, 2012

Swiss bank Julius Baer, Bahnhofstrasse, Zurich. REUTERS/Arnd Wiegmann

Welcome to the top tax and accounting headlines from Reuters and other sources.  

* Payroll tax negotiations heat up again. Rosalind Helderman – The Washington Post.

U.S. House and Senate negotiators appointed to reach a compromise over how to pay for extending the expiring payroll tax cut hold a key meeting early on Tuesday. Ongoing discussions between the 20-member conference committee, as well as House and Senate leaders, will make clear whether Democrats and Republicans will reach a quick deal by Feb. 17 to extend the tax cut for the remainder of the year. Democrats and Republicans remain split on how to pay to extend the tax cut. Link.  

* Julius Baer expects fine in tax probe. Anita Greil – The Wall Street Journal.

Julius Baer Group said it expects to pay a fine as a result of a U.S. campaign to track down Americans with assets hidden overseas, as it reported a decline in full-year net profit. Anxious to end pressure from Washington, the Swiss government has been negotiating a sweeping settlement covering all Swiss banks that may have helped Americans evade taxes. But Bern and Washington have been wrangling over details such as the size of any fine and an agreement to hand over thousands of names of secret account holders. Without an agreement, U.S. authorities have gone on investigating 11 Swiss banks, including Julius Baer, Switzerland’s largest private bank, and Credit Suisse Group AG. UBS AG reached a settlement over the tax matter in 2009, paying a fine of $780 million, handing over the names of nearly 4,500 clients and admitting to wrongdoing. Link.

 * Budget plan has familiar ring. Laura Meckler – The Wall Street Journal.

President Barack Obama will release his budget plan next week, calling for $3 trillion in deficit reductions over 10 years, including $1.5 trillion in tax increases to fall mostly on the wealthiest Americans. The president essentially laid out his budget plan in September, following a failed bipartisan deficit-reduction deal. Obama’s plan for fiscal year 2013, which starts on Oct. 1, will mirror the September proposal, senior administration officials said. On taxes, about half the $1.5 trillion in revenue comes from ending Bush-era tax cuts for families earning more than $250,000 a year. Much of the rest comes from additional tax increases on families earning over $1 million a year, by taking away popular deductions and mandating a minimum 30 percent effective tax rate. Obama would end certain tax breaks for corporations, including breaks for oil and gas companies, as well as benefits for those who use corporate jets. Link

* Drawing fire, deal gives New York agency staff power to see state workers’ tax files. Thomas Kaplan – The New York Times.

Lawmakers and labor unions on Monday pointedly criticized a secret decision by New York Gov. Andrew Cuomo’s administration to greatly expand the state inspector general’s access to tax returns filed by state employees. The State Department of Taxation and Finance signed an agreement last month with the inspector general’s office to allow dozens of people to look at the records, as part of investigations, without needing approval from the tax department or a court. While only a small number of investigators had previously been able to see the tax filings, the agreement, which was made public on Monday, extended clearance to 63 employees of the inspector general’s office, including several low-level aides and its press spokesman. Link

* Oklahoma governor plans to cut state income taxes. Steve Olafson – Reuters.

Oklahoma’s Republican Governor Mary Fallin announced a plan on Monday to dramatically cut state income tax rates and eventually do away with them altogether, and said the state would pay for the cuts by closing “loopholes.” Fallin’s proposal would simplify Oklahoma’s tax structure, reducing the number of tax brackets from seven to three, she said. Oklahoma’s state income tax rate now ranges from a low 0.50 to 5.25 percent, depending on income levels. Under her proposal, the high-end rate would be 3.5 percent and the low rate would be 2.25 percent, beginning in 2013. Link

* The heartland tax rebellion. The Wall Street Journal editorial.

Oklahoma Governor Mary Fallin is starting to feel surrounded. On her state’s southern border, Texas has no income tax. Now two of its other neighbors, Missouri and Kansas, are considering plans to cut and eventually abolish their income taxes. “Oklahoma doesn’t want to end up an income-tax sandwich,” she quips. In Kansas, Republican Governor Sam Brownback is also proposing to cut income taxes this year to 4.9 percent from 6.45 percent, offset by a slight increase in the sales tax rate and a broadening of the tax base. He also wants a 10-year phaseout. In Missouri, a voter initiative that is expected to qualify for the November ballot would abolish the income tax and shift toward greater reliance on sales taxes. South Carolina Governor Nikki Haley wants to abolish her state’s corporate income tax. Link 

* The payroll tax fight. The New York Times editorial.

Republicans in Congress seem to have forgotten the embarrassment they suffered late last year for trying to block a payroll tax cut for millions of wage-earners. The two-month extension they reluctantly approved will run out in three weeks, yet, again, they are stalling a full-year’s tax cut with extraneous issues and political ploys. Republicans are only interested in extending the tax benefits for working Americans if they can punish other groups. Republicans seem no more serious about cutting the tax and stimulating the economy than they were in December. They may be furious that President Barack Obama is campaigning against a do-nothing Congress, but they don’t seem as if they’re planning to actually do something. Link.

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