Tax Break

Essential tax and accounting reading: taxing the rich, MF Global accounting under review, Simpson-Bowles cuts get a vote, tax hike helps New York budget, and more

March 28, 2012

Fiscal Commission co-chairs Alan Simpson (L) and Erskine Bowles April 14, 2011. REUTERS/Kevin Lamarque

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

* The case for raising top tax rates. Eduardo Porter – The New York Times. The wealthy are feeling defensive about their taxes. Most Americans may think the rich pay too little but, not surprisingly, only 30 percent of the rich agree. More than two-thirds of families earning a quarter of a million dollars a year or more tell Gallup’s pollsters that their taxes are too high. It is true that high-income Americans carry the biggest tax burden. While fewer than 1 in 20 families make more than $200,000, they pay almost half of all federal taxes. However they feel about the tax man, there is a case to be made that they can pay much more. The reason has nothing to do with fairness, justice or ideology. It is about economics and math. Link

* US FASB weighs reform to accounting used by MF Global. Sarah Lynch – Reuters. The U.S. accounting standard-setting board could this year revamp the accounting treatment that MF Global used to mask risky European sovereign debt exposure, an official at the board will tell lawmakers on Wednesday. “Moving forward with this project will involve a series of public education and decision-making meetings and the exposure of a proposed standard for public comment,” said Financial Accounting Standards Board Technical Director Susan Cosper in prepared testimony. Cosper noted that while historically most repo-to-maturity transactions have involved U.S. Treasury securities, the range of instruments involved has broadened over the years to include other debt instruments such as those seen in the MF Global case. Link

* House could vote this week on budget pan modeled on Bowles-Simpson ideas. Rosalind Helderman – The Washington Post. The House of Representatives could vote for the first time this week on a bipartisan deficit-cutting plan, modeled on the suggestions of a presidential commission chaired by officials Alan Simpson and Erskine Bowles, that calls for both spending cuts and new tax revenue. Presented as an alternative to a GOP budget blueprint authored by Rep. Paul Ryan, it is expected to lose to Ryan’s plan. Any support for a proposal calling for $1.2 trillion in new revenues, particularly from tax-increase-adverse Republicans, could signal new hope for efforts in the coming year to get the kind of grand deficit-reduction bargain that eluded Obama and House Speaker John Boehner in talks over raising the debt ceiling last summer. Link

* U.S. airlines seek action on EU carbon tax. Doug Cameron – The Wall Street Journal. The trade group representing the largest U.S. airlines has called on the Obama administration to take action against the European Union in a bid to end the bloc’s carbon-trading market. The Airlines for America lobbying group dropped its own lawsuit against the EU and called on the administration to bring a case through the International Civil Aviation Organization, a branch of the United Nations. Link

* Osborne seeks to weigh impact of tax changes. George Parker, Sarah O’Connor and Chris Giles – The Financial Times. George Osborne has ordered the UK Treasury to work up new “dynamic” models to measure the impact of tax changes, a move which could provide him with ammunition to justify abolition of the new 45 percent top rate of income tax. Osborne believes that more sophisticated models would also support his claim that cuts in corporation tax – the latest of which will bring the rate down from 26 percent to 24 percent – has a much greater impact on Britain’s growth potential than official forecasts suggest. Link

* With battles over, state budget set. Jacob Gershman and Lisa Fleisher – The Wall Street Journal. On Tuesday, New York Gov. Andrew Cuomo and state lawmakers were in a mellow mood, having finally agreed on a state budget. The final spending plan came in at $132.6 billion, including federal dollars, about $135 million less than what was spent last year. If passed, it would mark the second straight year the state’s budget is on-time and cuts spending—although expenditures excluding federal money went up 2 percent. The governor and lawmakers solved many of its budget problems in December by raising an additional $1.5 billion in tax revenue from wealthier earners. Lawmakers are expected to pass the last of the budget bills by Friday, two days before the statutory deadline. Link

* Switzerland nears German, U.S. offshore account deals-papers. Katharina Bart – Reuters. Switzerland is nearing deals with Germany and the United States over hidden offshore accounts, including paying U.S. officials 5 billion Swiss francs ($5.5 billion) to settle allegations of aiding tax evasion, according to reports on Wednesday. Tensions in Switzerland’s talks with the United States have eased after the U.S. Department of Justice shifted prosecutors away from the crackdown on Swiss banks, Tages-Anzeiger said, citing undisclosed sources. Link

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