Tax Break

Essential reading: Tax tension in Washington, and more

May 17, 2012

U.S. President Barack Obama (L) shakes hands with House Speaker John Boehner, (R-OH), after Obama's January 2012 State of the Union address. REUTERS/Larry Downing

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

* Obama, Boehner united on sandwiches, still split on deficit. Jared Favole and Siobhan Hughes – The Wall Street Journal. House Speaker John Boehner asked President Barack Obama if he wanted Congress to extend the debt limit without spending cuts and was told “yes,” an aide to the speaker said. The speaker told the president “as long as I’m around here, I’m not going to allow a debt ceiling increase without doing something serious about the debt,” according to the aide. The U.S. faces a similar scenario, as a series of tax cuts are set to expire at the end of the year and the government is scheduled to reach its debt limit either just after the November elections or early next year. Link

* Taxes lurk behind court test of Obama health law. Kim Dixon – Reuters. While Supreme Court watchers focus on the controversial insurance requirement in President Barack Obama’s healthcare law, lesser known is that the court’s ruling next month will also decide the fate of billions of dollars in new taxes. Set to take effect in 2013, the two tax increases have been called into question by the court case, which also has clouded the outlook for new provisions already in effect, such as a small business tax credit and a tax on tanning salons. Link

* Avoiding a year-end fiscal cliff. Donna Smith – Reuters. The Nov. 6 elections are less than six months away, but lawmakers and Washington insiders already are trying to figure out what Congress will do in a post-election session to avoid what is being described as a Jan. 1 “fiscal cliff.” That refers to a series of decisions on budget and tax matters President Barack Obama and Congress will have to negotiate in November and December. If handled poorly, the economic recovery could be threatened, economists fear. Link

* Romney ally urges temporary tax fix. Robin Harding and Richard McGregor – The Financial Times. A temporary extension of today’s tax rates to buy time for a full reform would be an orderly way to avoid an end-of-year “fiscal cliff” that could plunge the US back into recession, said a leading economic adviser to Mitt Romney. The comments from Glenn Hubbard, dean of Columbia Business School, hint at how Romney might tackle an urgent economic problem should he win the White House in November. Link

* Alabama lawmakers spurn jobs tax for bankrupt county. Melinda Dickinson – Reuters. Alabama state lawmakers on Wednesday spurned a bid by bankrupt Jefferson County to restore a local jobs tax that county leaders say is needed to pay Wall Street banks that are owed $4.23 billion. The jobs tax is estimated to bring about $60 million in yearly revenue to Alabama’s most populous county, which in 2011 filed the largest U.S. municipal bankruptcy case. Without the revenue, Jefferson County officials may have to cut more government staff and default on a $10 million general-obligation warrant payment due Oct. 1. Link

* Asia’s lighter taxes provide a lure. Shibani Mahtani – The Wall Street Journal. Facebook co-founder Eduardo Saverin’s recent decision to give up his U.S. citizenship in favor of long-term residence in Singapore has drawn fresh attention to the appeal of residing and investing in the wealthy city-state and other parts of Asia, where tax burdens are significantly lighter than in many Western countries. Although the number of Americans throwing away their passports remains small, the trend has accelerated over the past two years — especially in Asian financial centers. Some 100 Americans opted out of U.S. citizenship in Singapore last year. Link

* A Facebook co-founder reflects on the path forward. Quentin Hardy – The New York Times. Reports last week that Eduardo Saverin had renounced the American citizenship he gained as a teenager led to considerable criticism that he was skipping out to avoid taxes. Saverin said he was misunderstood. He first filed to give up American citizenship in January 2011. It became official last September, and the government published the news at the end of April as part of a routine filing. Link 

* Obama: broken promises on taxes and healthcare? Glenn Kessler – The Washington Post. The Washington Post’s “fact checker” explores a new Crossroads GPS ad criticizing Obama’s tax record. Obama has cut taxes, including payroll taxes, so most Americans so far have seen a tax decrease under Obama, not a tax increase. The ad mentions the 18 taxes. It flashes the words “$503B between 2010 and 2019,” citing a Jan. 20, 2011, report by the Heritage Foundation. The clear implication is that all of these taxes hit Americans making less than $250,000. Link 

* To bin or not ‘Tobin’ tax. Vladimir Guevarra – The Wall Street Journal. Just a day after Francois Hollande was sworn in as France’s president, one chief executive from across the English Channel welcomed the new leader with a less-than-cordial riposte on the controversial Tobin Tax. “I endorse his effort to use the Tobin Tax upon his own nation, said Michael Spencer, CEO of FTSE100 interdealer broker ICAP and former treasurer of British Prime Minister David Cameron’s Conservative Party. “However, his effort to stuff the Tobin Tax down British throats will fail and quite properly fail,” Spencer said. Link

* GOP vs. GOP in Kansas tax row. Stephen Moore – The Wall Street Journal opinion. Republicans run Kansas but there is a divide between moderates and conservatives. And for at least the past decade, the moderate Republicans in the Senate have ruled the roost. The GOP has a 31-9 advantage over the Democrats in the Senate but has been highly skeptical of tax cuts. And in an effort to embarrass the governor and House Republicans, the Senate passed a giant income tax cut that it believed the House couldn’t afford to pay for. Link

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