Tax Break

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

November 27, 2012

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

* Even as ‘Cliff’ approaches, the best move may be no move at all. Jonnelle Marte – The Wall Street Journal. With a number of potential tax changes at stake for investors in the “fiscal cliff” negotiations, financial adviser Andrew Millard is giving all of his clients the same advice: You’re better off doing zilch, zippo, nothing. Link

* Dividends come early to avoid fiscal cliff. Dana Mattoli and Alexandra Berzon – The Wall Street Journal. Faced with a possible tax increase on dividends next year, corporate boards are approving bigger payouts and cutting checks faster to avoid 2013 rates. Link

* Will the fiscal cliff break Grover Norquist’s hold on Republicans? The Washington Post. Grover Norquist says he is confident that the pledge will remain unbroken. He noted that the senators talking about raising taxes have all flirted with revenue increases in the past, as have some other Republicans, but that Republicans haven’t voted for a tax increase since the early 1990s. Link

* Tax cuts, tax rates and tax shares. Bruce Bartlett – The New York Times opinion. Supporting the Republican worldview, the IRS data for 2010 show that the share of total income taxes paid by the rich increased; supporting the Democratic worldview, they show that the wealthy’s share of total income increased more, leading to a decline in their average tax rate. Link

* Republicans and the tax pledge. The Wall Street Journal editorial. One of the more amazing post-election spectacles is the media celebration of Republicans who say they’re willing to repudiate their pledge against raising taxes. So the same folks who like to denounce politicians because they can’t be trusted are now praising politicians who openly admit they can’t be trusted. Link

* The Times should explain marginal tax rates – repeatedly if necessary. Margaret Sullivan – The New York Times ombudsman. Some Times readers were disturbed last week when a Business Day story quoted – and didn’t challenge the thinking of — small-business owners who didn’t seem to understand how marginal tax rates work. She appeared to believe that if the income went over “the cutoff line,” that all of their income would be taxed at a higher rate. Link

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