Tax Break

Virginia plan to end gas tax quickly panned

Virginia Governor Bob McDonnell, entering his last year in office, offered on Tuesday a bold plan to finance badly needed road work and transportation expansion in the state.

His plan, to end the state’s 17.5 cent per gallon gas tax and replace it with a 0.8 percent increase in the state sales tax, was quickly booed by tax experts, however.

Their argument: removing the tax’s connection to gas would shift the burden of road repairs and upgrades to the broader population from the daily drivers who use roads most.

In a system where gas is taxed, there are incentives to buy cars with better gas mileage and to use mass transit. Those would also be lost.

“When it comes to highway policy, it’s important to follow the “benefits principle” of taxation: people who use the roads the most should be required to pay the most for those roads.  It’s a basic issue of fairness,” explained Carl Davis of the Institute on Taxation and Economic Policy (ITEP) in an email exchange.

Essential reading: After Sandy, tax cuts fade from Christie plan, and more

Ortley Beach, New Jersey after super storm Sandy REUTERS Tom Mihalek

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

 * After Sandy, tax cuts fade from Christie plan. Heather Haddon – The Wall Street Journal. In his annual address to the state on Tuesday, New Jersey Gov. Chris Christie laid out what he said would be a difficult road ahead as the state recovers from Sandy—a somber departure from last year, when he extolled the state’s economic health and centered his agenda around an aggressive income-tax cut. Link

* Despite promise, federal tax-refund debit cards a no go. Ann Carrns – The New York Times. Giving consumers who lack accounts at a bank or credit union the option of getting tax refunds on multiuse, prepaid debit cards may help bring them into the financial mainstream, a report from the Urban Institute finds. But the accounts must be low-cost, easy to use and available early in the tax season to encourage their use. Link 

 * Mega-millionaire, 79, admits offshore tax evasion. Kevin McCoy – USA Today. A Palm Beach heiress and charity benefactor pleaded guilty Tuesday to using foreign bank accounts to hide more than $43 million from the IRS in one of the largest cases in the continuing U.S. crackdown on offshore tax evasion. Link  

Essential reading: Insiders benefited from special dividends, and more

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* Insiders benefited from special dividends. Maxwell Murphy and Emily Chasan – The Wall Street Journal. Many big companies raced to pay special dividends in the fourth quarter, ahead of potentially large tax increases on cash distributions this year. Most of the one-time payouts, however, came from smaller companies that had higher-than-average ownership by their management, employees and directors. Link 

 * Dealing on a deadline. Carmel Melouney – The Wall Street Journal. With an increase in capital-gains tax looming over the market, commercial property sales volume spurted in the weeks leading up to the new year. Sellers scrambled to close deals, worried that if they waited until 2013 their tax bill on the transactions would be higher. Link 

 * Actor Depardieu denies leaving France for tax reasons. John Irish – Reuters. Film star Gerard Depardieu denied that he was leaving his homeland for tax reasons on Monday, saying that, although he now had a Russian passport, he was still very much French. Link

Essential reading: More tax revenue to IRS before cliff, and more

 

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

* U.S. tax bonanza may be tapped out. Spencer Jakab – The Wall Street Journal. All the talk about the fiscal cliff and the inadequacy of the last-minute deal to avert it obscures one fact: It probably provided the government with tens of billions of dollars in unexpected tax receipts. Link

* Tax code may be the most progressive since 1979. Annie Lowrey – The New York Times. With 2013 bringing tax increases on the incomes of a small sliver of the richest Americans, the country’s top earners now face a heavier tax burden than at any time since Jimmy Carter was president. Link

* France says no tax rises planned. Inti Landauro – The Wall Street Journal. French Budget Minister Jerome Cahuzac said on Sunday the government isn’t planning any tax increases for the next few years as it tries to offer stability to companies and taxpayers following the exit of high-profile citizens such as actor Gerard Depardieu. Link

Calendar

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

Tuesday, Jan.8

* Panel discussion of the fiscal cliff debate and what is likely to happen on taxes in 2013. 12 noon – 1:30 p.m. ET, Urban Institute. Washington.

* The American Petroleum Institute president Jack Gerard will give a speech on policy recommendations for the new Congress and administration. 12:15 p.m. ET, Andrew Mellon Auditorium. Washington.

Wednesday, Jan. 9

* State and local tax year end review. 12 noon – 2 p.m. ET, D.C. Bar Conference Center. Washington.

Essential reading: Inquiry into tech giants’ tax strategies nears end, and more

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

 * Inquiry into tech giants’ tax strategies nears end. Charles Duhigg and David Koieniewski – The New York Times. Congressional investigators are wrapping up an inquiry into the accounting practices of Apple and other technology companies that allocate revenue and intellectual property offshore to lower the taxes they pay in the United States. Link  

* Step 1: Corporate tax giveaways. Step 2: Outcry. Step 3: Profit. Suzy Khimm – The Washington Post. Pundits on both left and right were outraged when they realized a whole flotilla of corporate tax giveaways were buried in the fiscal cliff deal, ranging from a tax break for race-car track owners to electric-scooter makers. Link  

* IRS quick to issue withholding rules after the tax deal. John McKinnon – The Wall Street Journal. Hours after President Barack Obama signed the bill averting the fiscal cliff, the Internal Revenue Service issued new guidelines for employers on how much to withhold from workers’ paychecks this year. Link  

Essential reading: Cliff fix hits small business, and more

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

* Cliff fix hits small business. Emily Maltby and Angus Loten – The Wall Street Journal. The fiscal-cliff deal didn’t change the corporate tax rate, which is no more than 35 percent. But many small S-Corp businesses will see a tax increase to 39.6 percent. Link

* Small-business tax incentives survive the deal. Robb Mandelbaum – The New York Times. The bill also renews dozens of other income-tax provisions for individuals and businesses through a series of provisions that the legislating class calls “extenders.” And though advocates for small businesses were concerned that legislators might overlook their interests in the high-pressure negotiations, it turns out that their pessimism was unfounded. Link

 * How deal was made, unmade, then saved. Patrick O’Connor and Peter Nicholas – The Wall Street Journal. By early Wednesday, partisans on the left and right had found plenty to grumble about in Congress’s New Year’s deal to avoid going off the fiscal cliff. But it is unlikely there would have been any deal at all to grumble about if not for a Sunday afternoon phone call from one end of Pennsylvania Avenue to the other. Link

Essential reading: Cliff bill means some pay more taxes, and more

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

* Analysis: 77 percent of households to see tax increase. John McKinnon – The Wall Street Journal. The fiscal cliff bill’s impact would be far-reaching for American taxpayers, and particularly painful for very high-income households, according to a new analysis. About 77 percent of American households would see a tax increase compared to their 2012 tax levels, according to the analysis by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. Link 

* Amid pressure, House passes fiscal deal. Jennifer Steinhauer – The New York Times. Ending a climactic fiscal showdown in the final hours of the 112th Congress, the House late Tuesday passed and sent to President Obama legislation to avert big income tax increases on most Americans and prevent large cuts in spending for the Pentagon and other government programs. Link

* Congress’s feeble finish to the ‘fiscal cliff’ fiasco. The Washington Post editorial. The compromise bill passed by Congress to avert the worst effects of the “fiscal cliff” is a small, imperfect package that will do too little to address the nation’s long-term debt problem. But for all its weaknesses, the bill’s enactment is far better than a failure by this Congress to act before it adjourns Thursday. Link

Essential reading: Fiscal cliff talks down to the wire

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

* Obama summons congressional leaders for ‘fiscal cliff’ talks. Lori Montgomery and Rosalind Helderman – The Washington Post. President Obama summoned congressional leaders to a Friday summit at the White House in a last-ditch effort to protect taxpayers, unemployed workers and the fragile U.S. recovery from severe austerity measures set to hit in just four days. Also Thursday, House of Representatives Speaker John Boehner announced he would call the House back into session this weekend. And in perhaps the most significant development, Senate Minority Leader Mitch McConnell was engaged directly in talks with the White House. He signaled an interest in cutting a deal. Link 

 * Summoned back to work, senators chafe at inaction. Jennifer Steinhauer – The New York Times. Senators bid hasty goodbyes to families, donned ties and pantsuits in lieu of sweat pants and Christmas sweaters and one by one returned to the Capitol on Thursday to begin the business of doing nothing in particular. But for once, those lawmakers were fully united, if only around their sadness and frustration at being stuck in Washington in a holiday week, peering over the edge of the fiscal abyss. Link

Cliff talks down to the wire. Janet Hook and Carol Lee – The Wall Street Journal. Congress and the White House took small steps toward breaking the budget impasse Thursday, but Democrats and Republicans grew increasingly fearful they will not be able to avert the tax increases and spending cuts known as the fiscal cliff, a prospect that is unnerving consumers and investors. President Barack Obama invited congressional leaders to the White House on Friday afternoon for a last-ditch effort to broker a deal, as the Senate returned to Washington on Thursday. House Republican leaders said in a Thursday conference call with Republicans, who are growing nervous about their party being blamed for the deadlock, that the House will reconvene Sunday evening. Link

Calendar

Some important tax and accounting dates in the weeks to come:

Sunday, Dec. 30

* U.S. House of Representatives returns to work on legislation to avoid tax increases and spending cuts associated with the fiscal cliff that begin to kick in on Jan. 1.

Monday, Dec. 31

* U.S. government borrowing hits its debt ceiling, according to Treasury Secretary Tim Geithner.

Thursday, Jan. 3

* The 112th U.S. Congress adjourns. New Congress in session starting at noon ET.