Tax Break

Essential reading: H&R Block cuts back, Supreme Court restrains IRS, and more

April 26, 2012

U.S. Supreme Court building in Washington, D.C. REUTERS/Molly Riley

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

* H&R Block to close stores, cut jobs. Jochelle Mendonca – Reuters. H&R Block said the head of its U.S. retail tax services unit resigned, and the top U.S. tax preparer announced another round of store closures and job cuts, as it realigns its business to focus on the fast-growing digital tax market. Separately, the company said the number of tax filings it prepared through April 18, grew 4.5 percent to 22.2 million. Link

* Supreme Court restrains IRS in tax shelter case. Patrick Temple-West – Reuters. The Supreme Court ruled on Wednesday that the Internal Revenue Service took too much time to try to collect back taxes from a business in a tax shelter case, a decision with wider impact for dozens of related cases. The high court said the agency could not use an extended, six-year statute of limitations period. The IRS had said the extended period, an exception from the normal three-year limit, was justified in the case. But the court disagreed with the tax-collecting agency in a 5-4 decision in United States v. Home Concrete & Supply LLC. Link

* French front-runner says he’d seek to renegotiate fiscal treaty if elected. Steven Erlanger and Nicholas Kulish – The New York Times. The front-runner for the French presidency, the Socialist candidate François Hollande, said on Wednesday that if elected he would ask other European leaders to renegotiate a fiscal treaty in order to promote growth. He said he would also call for a financial transaction tax, as his rival, President Nicolas Sarkozy has done. Link

* Bernanke warns lawmakers on ‘fiscal cliff’ Kristina Peterson – The Wall Street Journal. Federal Reserve Chairman Ben Bernanke delivered his strongest warning yet to lawmakers, who appear likely to put off until after the November elections any decisions on what to do about the year-end expiration of the Bush-era tax cuts and a payroll-tax break as well as $1.2 trillion in automatic spending cuts that are scheduled to kick in at the start of 2013. If lawmakers allow the tax cuts to expire and the spending cuts to take effect, “there is absolutely no chance that the Federal Reserve would be able to have the ability whatsoever to offset that effect on the economy,” Bernanke said at a news conference Wednesday. Link

* Real wages tumble in developed countries as taxes rise. Paul Hannon – The Wall Street Journal. Governments in developed economies raised income taxes last year in an effort to cut their budget deficits, reversing a decade-long decline in the share of labor costs accounted for by the state, the Organization for Economic Cooperation and Development said Wednesday. In its annual Taxing Wages report, the OECD said the tax wedge rose in 26 of its 34 members during 2011, and fell in seven. The tax wedge is the proportion of labor costs accounted for by the state in the form of income taxes and social security contributions from both employers and workers. Link

* The Swedish model for economic recovery. Robert Samuelson – The Washington Post opinion. Conservatives can take heart that many post-crisis policies came right from Sweden’s playbook. Sweden’s income tax base was broadened and tax rates were sharply reduced. (In 1996, the average marginal rate — the rate on the last bit of income — was 46 percent; in 2010, it was 33 percent.) To reduce income tax rates, the government raised other taxes. Gasoline and cigarette taxes were increased; so were taxes on dividends and capital gains, hitting the rich. Link

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