Tax Break

Essential reading: Fat tax proposed in the UK, and more

May 16, 2012

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

* ‘Fat tax’ proposed to cut obesity. Andrew Stack – The Financial Times. The UK needs to impose a “fat tax” of at least 20 per cent on unhealthy foods to have any significant impact on rising levels of obesity. A report published in the British Medical Journal drawing on obesity research from around the world argues that taxing a wide range of foods and subsidizing healthier options was likely to have the greatest effect. Link

* Boehner draws line in sand on debt. Damian Paletta – The Wall Street Journal. House Speaker John Boehner said Tuesday that any increase in the government’s borrowing limit must be accompanied by spending cuts and other budget savings of greater value, and he rejected tax increases as part of any deal to reduce the federal deficit. Democrats have called for a mix of tax increases and spending cuts to reduce the deficit and Republicans have called for spending cuts and overhauls of entitlement programs like Medicare. Link

* Higher taxes on wealthy unite Democrats. Paul Kane – The Washington Post. Even with signs of an economic recovery feeding optimism about President Barack Obama’s reelection chances, congressional Democrats continue to run highly individual reelection campaigns independent of the president’s record and agenda. Except on the issue of higher taxes for the wealthy, where they appear solidly unified across the political spectrum. Link

* State income up in April, but may not be enough. Lisa Lambert and Karen Pierog – Reuters. Personal income tax collections in states in April might have grown an average of more than 7 percent, but for some the increase may not be enough to ease budget crises. Reuters found that the average increase of personal income tax collections in April 2012 from April 2011 for the 20 states for which data are available was 7.3 percent. A handful of states that were lulled into a false sense of security from last year’s surge in collections, when the average April increase was 18.5 percent, are now wondering if revenue is growing enough to cover their spending plans. Link

* Tax increase would spare California of cuts. Jim Carlton – The Wall Street Journal. California Gov. Jerry Brown said the state’s projected budget deficit widened to $16 billion from about $9 billion, and he warned that the state would need deeper cuts to services such as education if voters don’t pass a tax-increase measure he is championing. The Democratic governor on Monday is set to release his revised 2012-13 budget. That measure would temporarily raise sales taxes, to 7.5 percent from 7.25 percent for four years, and it would boost income taxes by as much as three percentage points for seven years on individuals making more than $250,000 a year or households making more than $500,000. Link

* Firms urge delay in IRS offshore tax dodger rules. Patrick Temple-West – Reuters. Financial institutions from around the world called for delay and changes to soften proposed U.S. rules to combat offshore tax evasion at an Internal Revenue Service hearing on Tuesday. Government tax officials gave no indication about how they would respond to the businesses’ requests and said the final rules were on track to be ready within three to four months. With just months to go before implementation of the Foreign Account Tax Compliance Act, representatives from a range of businesses complained that FATCA’s rules would cause confusion and reporting errors that could destabilize markets. Link

* Allstate agent group seeks audit after pay errors. Erik Holm – The Wall Street Journal. An association of insurance agents is calling on Allstate Corp’s board to hire outside auditors to examine accounting procedures after the company admitted to errors in compensation reports and tax forms earlier this year. The error in the tax documents affected about half of the company’s agents. The other two errors were caught before payments were sent to agents, but set off an uproar among Allstate’s sales force, where some agents were already up in arms about plans to cut their base pay. Link

* When a spending cut can be like a tax increase. Casey Mulligan – The New York Times opinion. Sometimes Republicans and Democrats are like Coke and Pepsi: a lot more different in marketing than they are in substance. Both Republicans and Democrats cut net benefits (or raise net taxes) more for higher-income beneficiaries than for low-income beneficiaries. Putting more of the burden on higher-income beneficiaries is sometimes described as fair or equitable, but it also adds to the penalty for having a high income and, equivalently, subtracts from the burden of having a low income. That results in more people with low incomes, because incomes are determined in part by effort, which is affected by costs and benefits. Link

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