Tax Break

Essential tax and accounting reading: Pushing a U.S. tax overhaul, Germans volunteering to sort out Greek taxes, Santorum’s plan, and more

February 27, 2012

U.S. Republican presidential candidate Rick Santorum addresses supporters during a campaign stop in Michigan. REUTERS/Rebecca Cook

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

* Tangled tax code primed for pruning. John McKinnon – The Wall Street Journal. President Barack Obama’s business-tax-overhaul plan underscores the growing likelihood of a serious effort to revamp the nation’s much-criticized tax system, no matter who wins the White House. The question now isn’t whether a tax rewrite will happen, but how far it will go, and whether it will stop at business rules or also extend to individuals. Increasingly the answer appears to be that the entire tax code, all 70,000 pages, could be in play. Powerful dynamics are reducing the significance of partisan differences. One is the expiration of Bush tax breaks at the end of 2012. A broad tax overhaul could give each party a way to break the cycle of short-term tax extensions that is frustrating businesses and individuals. Another is the government’s grim fiscal situation. Many Democrats and even some Republicans see a streamlined tax system as a way to generate more revenue. Link

* Plans for US manufacturing may yield more votes than jobs. Andy Sullivan – Reuters. U.S. factories are hiring again, and Democratic President Barack Obama and some of his Republican rivals are pitching tax breaks to fuel a rebound in manufacturing and help rebuild a battered middle class. Economists on the left and the right say promises to bring back factory work may yield more votes than jobs. Industry experts say the United States is long past the days when steel mills, auto plants and machine shops boosted millions of unskilled Americans into the middle class. Economists say the middle class would benefit more from efforts to boost the economy as a whole, rather than a particular sector such as manufacturing. Link 

* Germans volunteer for Greek tax mission. Chris Bryant and Kerin Hope – The Financial Times. German tax collection experts have volunteered to go to Greece to help combat widespread evasion, in a move that risks reigniting tensions between Berlin and Athens. Germany’s federal states have recruited about 160 experts to serve under a European Union and International Monetary Fund initiative to improve tax administration in Greece. Link

* My economic reform plan. Rick Santorum – The Wall Street Journal opinion. Attempting to distract from his record of tax and fee increases as governor of Massachusetts, Mitt Romney says he wants to follow my lead and lower individual as well as corporate marginal tax rates. I’ll submit to Congress comprehensive tax policies to strengthen opportunity in our country, with only two income tax rates of 10 percent and 28 percent. To help families, I’ll triple the personal deduction for children and eliminate the marriage tax penalty. The corporate tax rate should be halved, to a flat rate of 17.5 percent. Corporations should be allowed to expense all business equipment and investment. Taxes on corporate earnings repatriated from overseas should be eliminated to bring home manufacturing. Link 

* Time nears for an American tax overhaul. Lawrence Summers – Reuters opinion. However the U.S. presidential election turns out, the trifecta of the Bush tax cut expiration, the debt limit ceiling on the horizon once again, and the Congressionally mandated sequesters will force the president and Congress to wrestle with fiscal issues either in a lame duck session after the election or in early 2013. The United States will need to mobilize more tax revenue. This year the federal government will collect less than 16 percent of GDP in taxes—far below the post World War II average. The current tax system is, in certain ways, manifestly unfair at a time of rising inequality. As is well recognized, America’s rich have gotten richer with the top 1 percent’s income share rising from the 10 percent range to the 20 percent range over the last generation, while middle class incomes have stagnated or worse. Link

* A chance for corporate tax reform. The Washington Post editorial. President Barack Obama’s plan to reform America’s corporate tax system begins with a succinct and accurate summary of its flaws. The top rate, 35 percent, is among the world’s highest, putting the United States at a competitive disadvantage abroad. Myriad loopholes and subsidies result in misallocation of capital and wasteful complexity. Obama does not go as far in manufacturing tax breaks as a Republican opponent, former Pennsylvania senator Rick Santorum, who wants manufacturers to pay zero percent. And Obama offered more details than former Massachusetts governor Mitt Romney, who said on Friday that he wanted to lower the corporate rate to 25 percent, but did not identify offsetting reductions in loopholes. Link

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