Tax Break

Essential reading: US tax policies delay $2 billion Chinese loans, and more

September 27, 2012

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

* US tax policies delay $2 billion Chinese loans. Henry Sender – The Financial Times. A loan worth nearly $2 billion from China Development Bank to help fund an ambitious San Francisco housing project is being delayed as a result of Chinese concerns about the effect of tax policies in the US, a person familiar with the situation said. The measures include the controversial Foreign Accounts Tax Compliance Act (FATCA), which comes into effect in 2014 and could force foreign banks to pay a 30 percent withholding tax on the interest income on any loans made to US entities or persons. Link  

* Romney tempers tax plans. Sara Murray – The Wall Street Journal. Republican presidential candidate Mitt Romney, seeking to emphasize his deficit-cutting ambitions, is warning Americans that his tax-cut plan might not decrease their tax bills as much as they expect. The campaign is still exploring options to broaden the taxable-income base, which would mean limiting or cutting deductions and credits for certain taxpayers. Link 

 * How to make Mitt Romney’s tax plan add up…sort of. Suzy Khimm – The Washington Post. Mitt Romney’s tax plan is “mathematically impossible,” according to analysts at the Tax Policy Center, who calculated that Romney would have to raise taxes on lower- and middle-income Americans by $86 billion for the numbers to add up. Curtis Dubay of the Heritage Foundation says they’re wrong. Link  

* How the world taxes, in two charts. Dylan Matthews – The Washington Post. Mitt Romney’s capital gains-heavy tax return has prompted a good deal of debate about the preference the current code gives to investment income. It’s worth taking a step back and how unusual U.S. policy is in this area. Link  

* Fiscal cliff dims business mood. James Politi – The Financial Times. Confidence among US chief executives has plunged to its lowest in three years, according to the Business Roundtable, as a result of fears of steep tax rises and government spending cuts scheduled to take effect next year. The survey is the strongest sign yet that the looming “fiscal cliff”, created by the failure of Congress to agree new tax rates or a long-term budget deal, is hurting companies’ ability to plan and make investment decisions. Link  

* Portugal’s tax blunder. The Wall Street Journal editorial. The talk out of Portugal this week is that Prime Minister Pedro Passos Coelho has committed a serious political blunder in backing down on his proposed social-security reform. The idea was that transferring the tax burden to consumers from employers would be a revenue-neutral way to decrease labor costs and encourage Portuguese businesses to grow and invest. Link  

* Fiscal confrontation undermines the U.S. Simon Johnson – The New York Times opinion. Let the Bush-era tax cuts expire and replace them with other temporary tax cuts (e.g., to payroll taxes), to provide short-term support to the economy. American politicians could find other ways to restore federal government revenue to where it was in the late 1990s while also bringing healthcare spending under control. Link

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