Tax Break

Essential reading: Who will fill Geithner’s shoes at Treasury? and more

May 23, 2012

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

* Guessing game begins over next Treasury chief. Glenn Somerville – Reuters. With new partisan showdowns likely to flare up next year over taxes, spending cuts and the nation’s debt limit, interest in the next Treasury boss is even greater than usual given the high economic stakes. Lots of names are making the rounds. Among Democrats, they include finance leaders like Larry Fink of asset management firm BlackRock and politically connected Washington insiders like fiscal expert Erskine Bowles. If the White House goes to the Republicans, Glenn Hubbard, a top Romney adviser, is considered a front-runner, as is Robert Zoellick, the outgoing World Bank chief who boasts Wall Street experience and a contact list that spans the globe. Link

* Altria to pay $500 mln to settle US tax dispute. Reuters. Altria Group Inc, the tobacco company, on Tuesday said it expects to pay $500 million to resolve a long-running dispute with the Internal Revenue Service over its tax treatment of leveraged lease transactions. The parent of Philip Morris USA said the payment includes $450 million of federal income taxes and interest for the 2000 through 2010 tax years, plus $50 million of state income taxes and interest. Link

* Case against chairman of Banco Santander is dropped. Raphael Minder – The New York Times. Spain’s national court on Tuesday closed a tax fraud investigation focusing on Emilio Botín, the chairman of Banco Santander, and 11 of his relatives. The court said the case was abandoned, without any charges being brought, because the Botín family had straightened out its tax problems before June 2011. Link

* CBO sees 2013 recession risk. Damian Paletta – The Wall Street Journal. The U.S. economy will likely fall into recession in the first half of 2013 if large tax increases and scheduled government spending cuts are allowed to go into effect in January, the Congressional Budget Office said Tuesday. The nonpartisan agency’s finding could ramp up pressure on policy makers to reach a broad budget deal later this year to avoid such an outcome. Link

* Kansas governor signs tax-cut bill. Mark Peters – The Wall Street Journal.
Kansas Gov. Sam Brownback signed into law Tuesday a tax-cut measure that had divided GOP lawmakers in one of the country’s most fiscally conservative states, pitting tea-party advocates who argued it would spur economic growth against some fellow Republicans who worried the cuts go too far. The tax plan, which was the subject of weeks of intense debate and political maneuvering in the legislature, will reduce the top individual state income-tax rate to 4.9 percent from 6.45 percent in 2013. Link

* Japan debt rating under pressure even if tax hiked-Fitch. Reuters. Prime Minister Yoshihiko Noda’s plan to double Japan’s sales tax rate would not be enough to stabilizes the country’s public finance and its credit rating will remain under pressure even if he can pass the tax hike through the parliament, Fitch Ratings said on Wednesday. Link

* How to make old tax debt disappear. Amy Feldman – Reuters.
The U.S. Internal Revenue Service is facing a growing backlog of requests for the “offer in compromise” tax-relief procedure for delinquent taxpayers, according to a Treasury Department report released last month. At the same time, tax attorneys say more Americans are trying to find solutions of all types to their tax debts at both the federal and state levels. Link

* Do tax credits encourage work? Casey Mulligan – The New York Times opinion. The earned-income tax credit is often said to encourage work, but it may do just the opposite. It is more common for families to be on the part of the earned-income tax credit where it acts as a tax, rather than a reward to additional work. Link

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