Tax Break

Essential reading: Most Americans face lower tax burden than in 1980, and more

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

* Complaints aside, most face lower tax burden than in 1980. Binyamin Applebaum and Robert Gebeloff – The New York Times. Most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid 30 years ago. The combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980. Link

* Obama’s cliff offer spurned. Janet Hook, Damian Paletta and Carol Lee – The Wall Street Journal. President Barack Obama made an opening bid in budget talks with Republicans that calls for a $1.6 trillion tax increase, $50 billion in infrastructure spending in 2013 and new power to raise the federal debt limit, a provocative set of demands that Republicans said represented a step backward in efforts to avoid looming tax increases and spending cuts. Link

* Analysis: Democrats’ discord undercuts Obama estate tax push. Kim Dixon – Reuters. Divisions among Democrats are undermining President Barack Obama’s push to raise the U.S. estate tax on inherited wealth, just weeks before the arrival of the “fiscal cliff” could drive the present estate tax rate even higher than Obama proposes. Link

* A menu of revenue-raising options. John McKinnon – The Wall Street Journal.
President Barack Obama and congressional leaders, seeking to raise revenue as part of their high-stakes budget talks, have an extensive menu of options for increasing tax bills. Link

* Deal makers scramble as cliff nears. Telis Demos and David Benoit – The Wall Street Journal. Deal makers and their clients are hustling to sell chunks of stock or whole companies before possible tax increases in the new year. The threat of losing gains to the tax man has some companies, private-equity shops, venture capitalists and corporate insiders looking to book profits in the waning days of the year. Link
* Charities fight to keep tax break on donations. Naftali Bendavid – The Wall Street Journal. Charitable deductions are again in the cross hairs as Washington tries to avert tax increases and spending cuts. After years of successfully fending off such efforts, nonprofits worry this time could be different. Link

* For small businesses, more than income tax rates are at stake in deficit talks. Robb Mandelbaum – The New York Times.
Since the recession, Congress has allowed companies to expense more investment under Section 179, but the cap fell sharply in 2012, and is scheduled to fall sharply again in 2013, to just $25,000. Link

* Big companies set to divulge tax details. Vanessa Houlder – The Financial Times. Big companies are set to divulge more details of their tax affairs as they try to fend off pressure over aggressive tax planning from members of parliament, investors and the media, according to a leading firm of advisers. KPMG, the professional services firm, said there had been a “sea change in mood” towards tax disclosures after intense public criticism of the low corporate tax payments of some multinationals. Link

Essential reading: Mortgage-interest deduction could be in play, and more

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

* Mortgage-interest deduction could be on the table in ‘fiscal cliff’ debate. Brady Dennis – The Washington Post. As Congress and the White House negotiate the first major rewrite of tax laws in decades, changing the generations-old mortgage-interest deduction — which costs the government roughly $100 billion a year — has gone from far-off possibility to part of the conversation. Link

* Energy: The next big idea. Ed Crooks – The Financial Times. One key factor in many energy company deals is the master limited partnership (MLP) structure: a tax-privileged structure, protected under 1987 legislation that allows its use for companies in a handful of industries, including natural resources. As the U.S. frets about the approach of the fiscal cliff, there has been speculation that MLPs’ tax-favored status could be under threat. Link

* Obama is flexible on highest tax rates. Damian Paletta and Carol Lee – The Wall Street Journal. President Barack Obama signaled he wouldn’t insist tax rates on upper-income Americans rise to Clinton-era peaks as part of a deficit-reduction deal. The new clarity of the White House position marks a potentially important moment in Washington’s effort to figure out how to handle tax rates that are due to snap higher next year. Link

Essential reading: Philippine tax sheriff takes aim at cheats, and more

Philippines’ Bureau of Internal Revenue Commissioner Kim Henares inspects her target board during target shooting, Manila, October 26, 2012. REUTERS/Romeo Ranoco.Welcome to the top tax and accounting headlines from Reuters and other sources.

* Philippine tax sheriff takes aim at cheats to hit target. Karen Lema – Reuters. The Philippines’ chief tax collector is constantly thinking about targets. Sometimes she picks up an assault rifle and hits them. Link

* ADT sees low tax rate bolstering cash. Bob Tita and Saabria Chaudhuri – The Wall Street Journal. ADT Corp. predicted that a prolonged stretch of low taxes will help it generate cash, as the home-security service reported a 1.1 percent rise in fiscal-fourth-quarter profit. The company forecast that its actual cash tax rates will be 5 percent to 8 percent through 2019, even though its income statement will reflect rates of 36 percent to 38 percent. Link

Essential reading: On ‘fiscal cliff,’ both sides lay groundwork, and more

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

* On ‘fiscal cliff,’ both sides lay groundwork for debate’s next phase. Zachary Goldfarb and Lori Montgomery – The Washington Post. Private talks between President Obama and top congressional leaders in search of a deal to avoid the year-end “fiscal cliff” are accelerating, officials said Monday, even as the president began ramping up pressure on Republicans to extend tax cuts for the middle class. Link

* Efforts to curb Social Security face resistance. Robert Pear – The New York Times. President Obama’s re-election and Democratic gains in Congress were supposed to make it easier for the party to strike a deal with Republicans to resolve the year-end fiscal crisis by providing new leverage. But they could also make it harder as empowered Democrats, including some elected on liberal platforms, resist significant changes in entitlement programs like Social Security and Medicare. Link

* Congressional proposal could create ‘bubble’ in tax code. Nate Silver – The New York Times. One idea being floated by Congressional negotiators is hard to defend from the standpoint of rational public policy making. Its arithmetic could require that the 300,000th dollar of income was taxed at a rate of about 50 percent – even while the three millionth dollar of income, or the three billionth, was taxed at a lower 35 percent rate instead. Link

Essential reading: Consensus on increasing tax revenue, a wide gulf on how to do it, and more

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

* ‘Fiscal cliff’: Consensus on increasing tax revenue, a wide gulf on how to do it. Lori Montgomery – The Washington Post. For the first time in decades, a bipartisan consensus has emerged in Washington to raise taxes. But negotiators working to avert the year-end “fiscal cliff” remain far apart on crucial details, including how taxes should go up and who should pay more. Link

* Geithner to play key negotiation role. Damian Paletta – The Wall Street Journal. Timothy Geithner joined the Obama administration during a crisis. He’s hoping not to leave during one. The White House has tapped the Treasury secretary as its lead negotiator in deficit-reduction talks with Congress. Link

* Tax moves to make now. Laura Saunders – The Wall Street Journal. The annual scramble to make smart tax moves before Dec. 31 is proving especially vexing this year. Huge questions remain unanswered even for the 2012 tax year. Link

Calendar

Some important tax and accounting events in the week to come:

Tuesday, Nov. 27  * U.S. Senator Dick Durbin, Majority Whip, speaks on the fiscal showdown and deficit reduction. 11:30 a.m. ET, Center for American Progress Action Fund. Washington.

Wednesday, Nov. 28 * Public Company Accounting Oversight Board open meeting on 2013 budget and strategic plan. Washington.

* Lawyers from the tax division of the U.S. Departments of Justice and the Treasury, as well as the private sector join panel discussion of careers in tax law. 12 noon ET, D.C. Bar Conference Center. Washington.

Essential reading: Congress seeking ways to raise taxes but leave tax rate as is, and more

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

 * Seeking ways to raise taxes but leave tax rate as is. Jonathan Weisman – The New York Times. Congressional negotiators, trying to avert a fiscal crisis in January, are examining ideas that would allow effective tax rates to rise for the wealthy without technically raising the top tax rate of 35 percent. They hope the proposals will advance negotiations by allowing both parties to claim they stood their ground. Link  

* Boehner comments show tough road ahead for ‘fiscal cliff’ talks. Roberta Rampton – Reuters. New comments from top Republican lawmaker John Boehner slamming healthcare reforms illustrate how hard it will be for Washington to reach a deficit reduction deal when talks resume next week, analysts said on Thursday. Link  

* Higher gas-tax idea joins fiscal-cliff talks. Josh Mitchell – The Wall Street Journal. States and business advocates are maneuvering to use the current budget negotiations in Washington to win support for a long-sought increase in the federal gasoline tax—one of a grab bag of proposals various groups are seeking to tuck into a deal. Link  

Essential reading: Politics complicates the math in ending tax breaks for rich, and more

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

* Politics complicates the math in ending tax breaks for rich. Annie Lowrey – The New York Times. Whether to raise revenue through increasing tax rates or cutting loopholes has become a central sticking point in the negotiations on a major debt deal. Congressional Republicans have drawn their line: they might accept higher revenue, but only through the reduction of tax breaks. Link

* Most households face ‘fiscal cliff.’ John McKinnon, Kristina Peterson and Josh Mitchell – The Wall Street Journal. Almost all American households would take a financial blow next year—and low-income families would be among the hardest hit—if the White House and Congress fail to solve the “fiscal cliff” of big tax increases and spending cuts set to start Jan 2. Link

* South Carolina tax chief resigns after taxpayers hit in cyber attack. Harriet McLeod – Reuters. The head of South Carolina’s tax collection agency has resigned after hackers gained access to state computers and the personal information of nearly 4 million state taxpayers, including Social Security numbers, Governor Nikki Haley said on Tuesday. Link

Essential reading: Tax talks raise bar for richest Americans, and more

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

* Tax talks raise bar for richest Americans. David Kocieniewski – The New York Times. For all the broad brush rhetoric of political debate, the tax rate increases and limits on deductions now being discussed by the president and Congressional Republicans are calibrated to take the biggest bite out of the highest earners. Link

* For tax pledge and its author, a test of time. Jeremy Peters – The New York Times. Next to the oath of office, it has been perhaps the most important commitment that Republicans in Congress can make. But the anti-tax pledge and its creator, Grover Norquist, a 56-year-old conservative lobbyist, have never before faced a test as they do now. Link

* Investors show optimism that cliff will be avoided. Jonathan Cheng – The Wall Street Journal. Hopes that lawmakers in Washington will reach an agreement on taxes and spending gave investors new confidence and drove stock indexes to their best day in two months. Link

Paying more in taxes to burnish EPS

Just how important is it for public companies to post earnings that meet investors’ expectations? Important enough to knowingly pay more in taxes, according to a recent study by academics at Duke, MIT and UC Irvine, ”Incentives for Tax Planning and Avoidance: Evidence from the Field.”

 It’s hard to get surprised about the idea that meeting or beting their earnings numbers is important to companies, but Duke Professor John Graham, an author of the paper, was surprised that the 600 corporate tax executives they interviewed overwhelmingly said they’d trade real hard cash paid to the government in taxes in exchange for a boost to the earnings number reported to shareholders.

Earnings per share, a number calculated according to the Generally Accepted Accounting Principles, is a “non-cash” number.