Tax Break

Essential tax and accounting reading: Santorum’s tax returns, progress on payroll taxes, Wegelin, and more

February 16, 2012

Republican presidential candidate Rick Santorum speaking at a rally in Tacoma, Washington REUTERS/Anthony Bolante

The top tax and accounting headlines from Reuters and other sources.

* Santorum reports four years of tax returns. Samuel Jacobs – Reuters. Republican U.S. presidential candidate Rick Santorum released tax returns on Wednesday showing he and his wife earned around $1 million annually in the last few years. Santorum issued returns for the last four years, the most of the current Republican candidates who have tried to outdo each other in showing transparency about their taxes. The former Pennsylvania senator and his wife earned $659,000 in 2007, $952,000 in 2008, $1.1 million in 2009 and about $923,000 in 2010, according to the tax returns posted online by the Politico news organization. Link

* Lawmakers finalize payroll-tax agreement. Naftali Bendavid and Siobhan Hughes – The Wall Street Journal. Congressional negotiators working on a deal to extend jobless benefits and a payroll-tax cut say they have come to a deal, paving the way for a vote before the policies expire at the end of the month. A tentative deal outlined earlier this week would extend the tax break, which reduces workers’ payroll taxes to 4.2 percent from 6.2 percent, until year-end. It would also renew expiring jobless benefits but cut the maximum number of weeks. And it would adjust the Medicare payment system to avoid a 27 percent drop in physicians’ fees. Under a last-minute deal, only new government employees will be subject to pension-contribution increases. The Senate’s three Republican negotiators will not back the package, a Senate aide said. That does not undermine the agreement, but it could potentially pose complications for House Republicans, who will take a tough vote without the backing of some key counterparts in the Senate. Rank-and-file GOP lawmakers already dislike the package because lawmakers did not find a way to offset the cost of extending cuts to the payroll tax. Link

* Oldest Swiss private bank is newest U.S. target. Martin de sa’Pinto and Lynnley Browning – Reuters. On the morning of Jan. 27, Konrad Hummler, Wegelin leading partner, announced the bank had sold most of its assets to another Swiss bank. According to a person familiar with the matter, Hummler called it a last-ditch effort to preserve employees’ jobs amid withdrawals of assets by investors who were increasingly worried about a growing problem: a U.S. federal investigation into Wegelin’s sale of tax-evasion services to wealthy Americans. The dark-suited bankers and conservatively dressed office clerks, said the person, were in shock and tears. Wegelin, Switzerland’s oldest private bank, was indicted by the U.S. Justice Department on charges of enabling wealthy Americans to evade taxes on at least $1.2 billion from 2002 through last year. Link

* Japan to submit bill to double sales tax. George Nishiyama – The Wall Street Journal. Japanese Prime Minister Yoshihiko Noda’s cabinet is set to endorse a plan to double the national sales tax in three years, in a sign of the leader’s determination to push ahead with fiscal reform as focus turns to the country’s massive borrowing. The move will open the way for Noda to submit related bills to the parliament, but their passage is far from certain with the opposition controlling one of the two chambers and resistance to the tax increase even among the ruling party. Faced with outstanding public debt more than twice the size of its economy — the highest among rich nations — Noda wants to raise the current 5 percent sales tax to 8 percent in April 2014 and then to 10 percent by October 2015 to fund social-welfare spending. Link

* Video games sector pleads for tax breaks. Maija Palmer – The Financial Times. The UK’s computer games industry, whose hits include Grand Theft Auto, has appealed for government help to defend its market position amid a wave of bankruptcies in the sector. British games makers are lobbying George Osborne for a tax break, similar to those given to the film industry, in the chancellor’s budget next month to arrest decline in their global competitiveness. Since 2006, the UK has fallen from being the world’s third largest games maker to sixth place in 2011, losing out to countries such as Canada, which offer generous tax incentives to developers. Link

* Payroll progress. The Wall Street Journal editorial. The political class seems to have decided by acclamation that the GOP is “caving” or “backing down” on the payroll tax holiday, so permit a polite dissent. The new plan looks like the first rumblings in months of a realistic political strategy. Under the House plan, announced Monday, Republicans will extend President Barack Obama’s two-percentage-point suspension of the Social Security levy through the end of the year. For most of the last year the party has been insisting on offsetting the $100 billion or so that the government would otherwise collect with cuts in other programs. Now a stand-alone bill will merely add to the deficit. Obviously it would be better to reduce spending overall—or simply to let the payroll holiday expire altogether. Temporary tax breaks don’t change the permanent incentives for individuals or employers, which is why the holiday has done little to lift the economy. About the best that can be said is that some 160 million people will spend the money better than Obama would. Link
($1 = 0.6372 British pounds)

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