Tax Break

Essential tax and accounting reading: defending big oil’s taxes, taxing the rich, risky deductions, and the payroll tax cut’s impact

March 14, 2012

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

* Big oil, bigger taxes. The Wall Street Journal editorial. President Obama says he wants to end subsidies for what he calls “the fuel of the past,” but lucky for him oil and gas will be the fuels of the future too. His budget-deficit blowout would be so much worse without Big Oil, because the truth is that this industry is subsidizing the government. Much, much worse, actually. The federal Energy Information Administration reports that the industry paid some $35.7 billion in corporate income taxes in 2009, the latest year for which data are available. That alone is about 10 percent of non-defense discretionary spending—and it would cover a lot of Solyndras. That figure also doesn’t count excise taxes, state taxes and rents, royalties, fees and bonus payments. All told, the government rakes in $86 million from oil and gas every day—far more than from any other business. Link

* Most Americans back “Buffett tax”:Reuters/Ipsos. Kevin Drawbaugh – Reuters. Nearly two-thirds of Americans support imposing a minimum tax rate of 30 percent on those who earn $1 million or more a year, according to Reuters/Ipsos poll results released on Tuesday. The poll showed that 64 percent of those surveyed favored a “Buffett tax” as proposed by the Obama administration and named for multibillionaire investor Warren Buffett, who backs it. The poll said that support for the Buffett tax was strongest among Democrats, at 76 percent, but also significant among Republicans, with 49 percent of them viewing it favorably. Link  

* Senate defeats tax break for natural gas trucks. Roberta Rampton – Reuters. A bipartisan proposal to provide tax incentives for natural gas vehicles was defeated in a Senate vote on Tuesday, but a key backer of the bill said it will be revised and reintroduced to address concerns from industry. The five-year plan was designed to spur purchases of long-haul trucks and commercial vehicles that can run on cheap and abundant U.S. natural gas. The amendment to the Senate’s highway bill needed 60 votes to pass, but was rejected in a 51-47 vote after conservative groups panned it as an unnecessary subsidy. Link  

* A nation with too many tax breaks. Eduardo Porter – The New York Times. President Obama’s insistence that the rich must pay more to preserve programs that help the poor and middle class has crashed against the Republican claim that the president’s Robin Hood policies amount to class warfare. Whatever their merits, both arguments rely on an assumption that is at best overstated: that the government uses resources from those who are richer to pay for programs that mostly benefit the less fortunate. Link  

* Romney vs. Obama on Corporate tax reform. Kevin Hassett and Glenn Hubbard – The Wall Street Journal opinion. The one thing on which our political leaders seem to agree is the need for corporate tax reform. President Barack Obama and Mitt Romney unveiled new proposals on the same day last month, with Obama cutting the top corporate tax rate to 28 percent and Romney reducing it to 25 percent. Obama, ignoring the second reality, would also raise taxes on noncorporate business, in the interest of requiring the “rich” to pay for the “privilege” of being an American, to paraphrase a recent statement by Treasury Secretary Tim Geithner. Link 

* Scrap the 50 percent tax rate. The Wall Street Journal editorial. George Osborne’s 2012 budget announcement is a week away, and one of the hottest questions being debated within the Conservative-Liberal Democrat coalition is what to do with the new 50 percent top marginal tax rate introduced in the last days of the previous Labor government. Liberal Democrat Business Secretary Vince Cable acknowledged last week that the fate of the 50 percent rate was under discussion, but insisted that it should be scrapped only if replaced by some other form of wealth tax—either a mansion tax or some other type of upper-income property tax increase. Link  

* Risky tax deductions. Michelle Singletary – The Washington Post opinion. For the second year, the Minnesota Society of Certified Public Accountants has surveyed its members to come up with a list of the most outrageous tax deductions people fearlessly try to claim that were smacked down by their accountants. One woman wanted to claim her unborn infant for the months she was pregnant last year even though she gave up the newborn for adoption. Another taxpayer wanted to claim an elected official because he “pays his salary.” Link  

* How is the payroll tax cut doing? Casey Mulligan – The New York Times opinion. The payroll tax cut is having the expected labor market effects, but those effects will reverse themselves when the cuts inevitably expire. This mini-recovery may not last, because the payroll tax cut will eventually expire. When that happens, the payroll tax rate increase by itself will tend to reduce employment by about a million, so that employment can increase further only if population or other sources of economic growth are enough to offset tax-cut expiration. Link

($1 = 0.6355 British pounds) 

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