Tax Break

Do you support a “Buffett tax” on the wealthy?

Warren Buffett (C), chairman and CEO of Berkshire Hathaway, sells jewelry at Borsheims jewelry store in Omaha, Nebraska, May 1, 2011 as part of his annual shareholders' meeting. Buffett supports higher taxes on the wealthy. REUTERS/Nati Harnik/Pool

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.

Legislation has been filed by Democrats in Congress to enact the tax into law, but it was widely expected to languish this year with the U.S. House of Representatives under the control of Republicans who are opposed to tax increases of any kind.

The U.S. government’s budget deficit is expected to swell to $1.17 trillion in the 2012 fiscal year ending in September. The U.S. tax code has not been overhauled in 25 years. Since then it has become riddled with deductions, exemptions and other special provisions that deprive the government of more than $1 trillion a year.

Essential tax and accounting reading: UK tax probe of eBay sellers, Swiss advisers, public transit subsidy, and more

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

* Senate backs return of higher transit subsidy. Eric Yoder – The Washington Post. The maximum tax-free subsidy that employers can pay for their workers to use public transit in their commuting would nearly double to $240 a month under a provision in the transportation bill the Senate passed Wednesday. The maximum had been $230 a month in 2009-2011 under a series of temporary laws, but when a further extension wasn’t passed by the end of last year, the amount reverted to its previous level of $125 a month. Meanwhile, a subsidy for parking at commuter lots to take public transportation rose from $230 to $240 a month due to an inflation adjustment. Link

* Two Swiss financial advisers accused of helping U.S. taxpayers hide money. Lynnley Browning – Reuters. Prosecutors in New York on Wednesday indicted two Swiss financial advisers, one a former private banker at financial giant UBS AG, on charges of conspiring to help wealthy Americans hide $267 million in secret bank accounts. In separate indictments, one of them alleging that a child was used to carry cash to a client, charges were brought against Hans Thomann, 61, and Josef Beck, 46. Both live in Switzerland, but they worked separately from each other. Link  

* Tax probe on eBay sellers comes under fire. Vanessa Houlder – The Financial Times. The UK revenue agency’s approach to tackling evasion risks “missing the bigger picture,” advisers said on Wednesday after it launched a targeted campaign aimed at eBay traders. Gary Ashford of the Chartered Institute of Taxation, a professional body, said launching campaigns aimed at specific groups every few weeks was confusing and risked diluting the anti-evasion message. The institute called on Inland Revenue to focus its efforts on a one-off national campaign open to all taxpayers whose affairs were not up to date. Link  

Small business taxes: the most overlooked deductions

New York City's main post office, tax day 2003. Today many small businesses file taxes electronically, and will be including a new form 1099-K. REUTERS/Chip East

Small business owners face a tax challenge this year. Form 1099-K is an attempt to help close the tax gap — the $385 billion difference between what the IRS thinks it should be collecting and what it actually collects — by making sales and other commercial transactions on the Internet harder to hide.

The forms are being sent to business owners by credit card companies and online payment processors including eBay, PayPal and Amazon. The 1099-Ks list all 2011 transactions processed for sellers with more than 200 transactions and $20,000 in annual gross receipts, according to this helpful Q&A on Bloomberg BusinessWeek’s small business site.

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

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  

The five most common taxpayer questions answered

Filling out the 1040, New York City post office, April 15, 2010 REUTERS/Mike Segar

You’ve got a month left before the tax deadline — April 17 this year — and have you filed your taxes?

If typical patterns hold, more than one in four of us has yet to sign on the bottom line.  IRS numbers show more than 32 million individual income tax returns arrived after April 9 last year.

David Cay Johnston dissects the manufacturing tax proposal

Reuters columnist David Cay Johnston has zeroed in this week on President Obama’s proposal to apply a lower tax rate to manufacturers.  It’s an idea that may sound appealing at first glance, but will, Johnston predicts, end up more about defining the word “manufacturing” than supporting true manufacturing and manufacturing jobs.

In the video below Johnston explains his thesis. His full argument can be found in this column . And over at Double Taxation, Toni Nitti  lends his support to the argument, writing :
“even code reform based on good intentions comes with the price of complexity and confusion.” YouTube Preview Image

Tax clips from the Web: Kanye’s charity blunders, D.C. lobbyists and identity fraud

A Federal Trade Commission report listed identity theft as the top complaint from consumers in 2011 – for the 12th year in a row. Of those 280,000 complaints, about 24% were tax or wage-related. This is something of a stark wake-up call to the perils of our electronic lives, which can be hacked without our knowledge, right up until we hit the send buttons on our electronic tax returns, says Jonnelle Marte for Smart Money’s tax blog: “For some victims, the fraud isn’t discovered until they hit the send button on their electronic tax returns — and get a rejection note from the IRS. Other times it takes a little longer to know something is wrong, such as not receiving a refund check.”

If you have been unlucky enough to be hacked, correcting the error could take the IRS from 6-12 months, according to Marte.

Home on the range

Here is a quote from the author of the Tax Foundation’s annual rating of the states with the best tax climates -“The lesson is simple,” wrote study author Mark Robyn, “A state that raises sufficient revenue without one of the major taxes, all things being equal, has an advantage over those states that levy every tax in the state tax collector’s arsenal.”

Essential tax and accounting reading: AIG tax break draws fire, Amazon’s New Jersey tax holiday, wealth tax debated, and more

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

* Crisis-era tax benefit for bailed-out firms draws fire. Erik Holm – The Wall Street Journal. Former members of a congressional panel that oversaw federal bailout spending decried on Monday a years-old Treasury Department determination that allows American International Group Inc. and other companies to avoid paying billions of dollars in taxes. The benefits at issue were accrued by AIG as it amassed record losses amid the financial crisis; the U.S. tax code allows businesses to “carry forward” such net operating losses to offset future tax obligations, in effect saving on future tax bills. The criticism of the Treasury decision comes weeks after AIG reported a $19.8 billion fourth-quarter profit that was fueled by a $17.7 billion accounting gain from the tax benefits.Link

* Brazil extends tax on foreign loans. Samantha Pearson – The Financial Times. Brazil has stepped up its “currency war” in an effort to revive its shrinking domestic industry by extending a tax on foreign loans. In its third measure this month, on Monday Brazil’s government broadened the so-called IOF transactions tax on foreign borrowing to cover any debt maturing in up to five years. The 6 percent tax had originally only applied to foreign loans of two years or shorter and was extended at the start of March to maturities of up to three years. Link

* State tax holiday a step closer for Amazon. Barney Jonson – The Financial Times. Amazon has moved closer to securing a deal that would give it a sales tax holiday in New Jersey in return for jobs and capital investment, underlining its growing economic clout and the sensitivity of tax issues. The world’s biggest online retailer has sparked a political storm by not collecting sales tax in some US states, where bricks-and-mortar retailers complain it is exploiting a tax loophole that is unfair and makes it impossible for them to match Amazon prices. In Washington a bipartisan group of senators has introduced a bill which Amazon supports that would help states collect sales tax from online retailers, but New Jersey is the latest state in which Amazon has sought an extended tax exemption for its customers. Despite fierce opposition from bricks-and-mortar retailers, a New Jersey assembly committee on Monday approved a bill that would exempt Amazon from collecting sales tax until July 1 next year if it invests $130 million in the state and creates 1,500 full-time jobs. Link

IRS budget: IT a priority, enforcement funding down

Commissioner of Internal Revenue Doug Shulman REUTERS/Hyungwon Kang

Remember the budget? Not the one President Barack Obama introduced last month. But the budget for fiscal 2012 – the year we’re in right now?

Don’t feel bad if you forgot. Obama signed the bill two days before Christmas, the same day that he signed the highly-politicized, media-frenzied payroll tax cut extension.

On March 6, the Congressional Research Service published a nice coda report detailing where the money will be spent through Sept. 30 2012.

Essential tax and accounting reading: European carbon and tycoon taxes face headwinds, better outlook for Japanese sales tax, audit red flags, and more

Japan's Mount Fuji REUTERS/Toru Hanai

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

* Whistleblower Joseph Insinga suing IRS for not being paid a reward. Lisa Rein – The Washington Post. Joseph A. Insinga was the ultimate whistleblower. The former executive with a Dutch bank says he divulged to the Internal Revenue Service details about how for years his employer helped U.S. companies dodge taxes. Now Insinga is taking tax authorities to court for failing to give him a reward that he says he is owed by the federal government. Insinga filed a whistleblower claim with the IRS in 2007, a year after Congress passed a law to help the government uncover tax cheats by encouraging informants to come forward. Those with inside information could receive up to 15 to 30 percent of any taxes, fines, penalties and interest the IRS collected from a taxpayer who was illegally sheltering taxes, usually a corporation. Insinga says he is entitled to a portion of the money the IRS collected from the taxpayers he exposed. He’s confident that at least one company, and maybe more, was forced to pay taxes based on his information. He had alleged that Rabobank Group, where he worked as an executive for more than a decade, helped seven companies avoid hundreds of millions of dollars in taxes through offshore partnerships and other corporate schemes. Link

* Delay EU carbon levy, says air industry. Peter Marsh, Joshua Chaffin and Simon Rabinovitch – The Financial Times. Seven of Europe’s leading aviation companies have joined forces to warn that the European Union’s plans to charge for carbon pollution are jeopardizing 2,000 jobs and billions of dollars of orders from China. Airbus and six large European airlines said the plan to bring global airlines into the EU emissions trading scheme for carbon dioxide, which the industry has steadfastly opposed, is creating an “intolerable” threat to the European aviation industry by opening up the possibility of trade battles with China, the US and Russia. The EU’s plan to regulate the output of carbon dioxide, as part of the effort to combat global warming, has stirred concern in the European aviation industry. Airbus – which employs more than 50,000 people across Europe – argues the proposals will damage competitiveness at a time of economic weakness, wants the EU to “put on hold” the extension of the scheme to airlines until a global plan for regulating carbon emissions by airlines can be agreed. Link

* Clegg forced to go soft on ‘tycoon tax’ Kiran Stacey, Helen Warrell and Vanessa Houlder – The Financial Times. Nick Clegg has been forced to soften proposals for a “tycoon tax” less than 48 hours after announcing it as a flagship policy at his Liberal Democrat party’s spring conference. The deputy prime minister said on Saturday that he wanted to set a minimum effective tax rate, making sure high earners did not use various loopholes to pay less than 20 per cent of their income in tax. The Treasury was surprised by Mr Clegg’s explicit mention of a minimum tax rate, as they had expected his speech to focus on general anti-avoidance measures. People close to George Osborne, the chancellor, told the Financial Times a minimum rate was not being considered. Link