Tax Break

Essential reading: Pressure on Romney ramps up from both sides, and more

July 18, 2012

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

* With or without tax return release, pressure on Romney ramps up from both sides. Felicia Sonmez and Philip Rucker – The Washington Post. The political pressure on Mitt Romney to release more of his personal income tax returns is causing some divisions inside the GOP presidential candidate’s camp, according to a Republican strategist close to the campaign. Although some advisers are arguing privately that Romney needs to release additional filings to curb the political fallout, others are resisting that suggestion, reflecting the candidate’s longtime reluctance to publicly disclose information about his personal finances. Link

* Romney explains Cayman Island investments. John McKinnon – The Wall Street Journal. Mitt Romney, in an interview with the National Review, improved greatly on his campaign’s halting explanation of why he has held investments in the Cayman Islands, a Caribbean tax haven. Romney suggested that his Cayman Islands investments are basically standard-issue private equity partnerships, not tax shelters. Cayman Islands is a favorite destination for private equity managers to locate new partnerships, mostly because foreign investors can participate while avoiding some U.S. tax entanglements. The same often goes for U.S. tax-exempt entities such as pension funds. Link

* Romney’s secrecy becomes focus of Obama’s attack strategy. Jeff Mason – Reuters. Mitt Romney has secrets. Lots of them, perhaps. That provocative claim is at the core of President Barack Obama’s latest attacks on his Republican rival, a strategy that is dominating the narrative of the presidential campaign and leading anxious Republicans to question Romney’s tactics. Unlike most politicians seeking national office, Romney initially declined to release any of his tax returns. In January, under pressure from his opponents in the Republican primaries, he released his 2010 return and an estimate for 2011. Link

* Coalition urges tax hikes, entitlement cuts to tame national debt. Lori Montgomery – The Washington Post. A coalition of business leaders, budget experts and former politicians launched a $25 million campaign Tuesday to build political support for a far-reaching plan to raise taxes, cut popular retirement programs and tame the national debt. With anxiety rising over a major budget mess looming in January, the campaign — dubbed “Fix the Debt” — is founded on the notion that the moment is finally at hand when policymakers will be forced to compromise on an ambitious debt-reduction strategy. Link

* Democrats propose plan to sidestep GOP anti-tax pledge. Jonathan Weisman – The New York Times. Senate Democrats are proposing a novel way to circumvent the Republican pledge not to vote for any tax increase: Allow all the tax cuts to expire Jan. 1, then vote on a tax cut for the middle class shortly thereafter. Virtually every Republican in Congress has taken the pledge, pushed by Grover Norquist’s Americans for Tax Reform, never to vote for a tax increase — a pledge both parties see as a serious impediment to a tax compromise. But if tax rates snap back to the levels of the Clinton presidency on Jan. 1, any legislation to reinstate some of those tax cuts — but not all of them — would be considered a tax cut. Link

* Kansas Republicans war over “Ryan plan” style tax cuts. Nick Carey – Reuters. Fiscal conservatives in Kansas have turned their state into a laboratory to test reforms similar to the “Ryan plan,” named after Republican Paul Ryan, for massive tax cuts at the national level — and the result has been a Republican civil war. Backers of recent state tax cuts argue they will create jobs and boost the economy to partially offset lost revenue, with budget cuts solving the remaining shortfall. The tax cuts go into effect in January, and the Kansas Legislative Research Department calculates the lost revenue will amount to the equivalent of 36 percent of the state budget within five years. Link

* Revenue wins back 100 pounds in avoided tax. Vanessa Houlder – The Financial Times. About 200 people face tax bills totaling about 100 million pounds ($155.71 million) after the Court of Appeal ruled against an avoidance scheme recommended by PwC, a professional services firm in 2003. The tax planning, described by Revenue & Customs as an “artificial, circular, self-cancelling scheme designed with no purpose other than to avoid tax” was used by Howard Schofield, a businessman to create a 11.8 million pound loss to offset the capital gains tax incurred when he sold shares in his company. Link

($1 = 0.6422 British pounds)

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