Tax Break

Essential reading: In fog of numbers, little tax clarity from Obama-Romney, and more

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

 * In fog of numbers, little tax clarity from Obama-Romney. Kevin Drawbaugh and Kim Dixon – Reuters. For an event so freighted with expectations of tax insights, the Obama-Romney debate on Wednesday offered few clues on what the candidates’ tax plans could mean for average Americans. Republican nominee Mitt Romney stuck to his strategy of promising tax cuts. To pay for this, he pledged again to close yet-to-be-named tax loopholes. And he said new tax revenues would come from economic growth spurred by lower taxes. Link  

* Caps on tax deductions find favor in both parties. John McKinnon – The Wall Street Journal. The idea of limiting personal income-tax deductions is gaining traction in both parties as a way to raise more federal revenue without raising tax rates or scrapping popular breaks. Republicans consider this a way to prevent rate cuts they seek from widening the budget deficit, while Democrats see the extra revenue as a means to shrink the deficit or fund programs. Link

* Romney benefits from rigorous defense of tax plan. Lori Montgomery – The Washington Post. With his forceful denial of charges that he would raise taxes on the middle class, Mitt Romney used Wednesday’s debate to launch an aggressive new effort to regain his footing in the battle over taxes. In one of the debate’s first exchanges, the Republican presidential nominee directly challenged President Obama’s assertion that Romney’s tax plan would finance big new breaks for the wealthy by wiping out popular deductions for those who earn less than $250,000 a year. Link

* MPs slam public sector tax avoidance. Vanessa Houlder – The Financial Times. Tax avoidance in the public sector is “staggeringly inappropriate”, MPs said on Friday as they piled more pressure on the civil service and the BBC over the use of “off-payroll” arrangements for paying permanent staff. A cross-party committee said too many employees had been paid for too long using these arrangements, which raised suspicions of tax avoidance, put value for money at risk and failed to meet the standards expected of public officials. Link

* Pastors to challenge IRS over political endorsements, and they’re likely to get away with it. Lilly Fowler – The Washington Post. As part of “Pulpit Freedom Sunday,” on Oct. 7, religious leaders across the country will endorse political candidates — an act that flies in the face of Internal Revenue Service rules about what tax-exempt organizations, such as churches, can and cannot do. Link

Essential reading: Fact or fiction in the U.S. presidential debate? and more

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

 * Fact or fiction in the U.S. presidential debate? Deborah Charles – Reuters. President Barack Obama and his Republican rival, Mitt Romney, faced off in their first of three debates before the Nov. 6 presidential election. Here is some fact-checking of claims made by the candidates. Link  

* Romney floats tax deductions cap idea resembling one from Obama. Kevin Drawbaugh – Reuters. Mitt Romney’s talk of putting a cap on income tax deductions aligns him with others, including President Barack Obama, behind a tax code change that could gain traction in Washington. On Tuesday, the eve of his first debate with Obama, the Republican presidential challenger told Fox News TV in Denver that one option for changing the code could be to cap deductions, perhaps at $17,000 for a middle class family. Link  

* Candidates spar over taxes. Carol Lee and Sara Murray – The Wall Street Journal. Cutting to the heart of their differences, President Barack Obama and Republican Mitt Romney laid out contrasting visions for the federal government in their first debate in Denver, sparring over tax-cut proposals, regulations and deficit-reduction plans. Link

Essential reading: California Gov. Jerry Brown vetoes labor-backed pension bills, and more

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

* Gov. Jerry Brown vetoes labor-backed pension bills. California Gov. Jerry Brown wielded a heavy veto pen in the final days of bill-signing season, rejecting proposals that sought to undo past budget cuts and increase regulation. It was part of a broad effort to bolster the chances of Proposition 30, which seeks billions of dollars in new taxes to help balance the budget. Link

* Romney floats idea of itemized deduction cap. Damian Paletta – The Wall Street Journal. Republican presidential nominee Mitt Romney floated details of how he might restructure the U.S. tax code, suggesting he would support a cap on deductions, including those for mortgage interest and charitable donations. Romney offered an example of capping the total number of deductions available to a middle-class family at $17,000. He also said the cap on deductions for wealthier Americans could be less than that figure. Link

* Conservatives challenge Obama’s attack on Romney tax plan. Lori Montgomery – The Washington Post. With President Obama campaigning aggressively on the message that Republican Mitt Romney would raise taxes on the middle class, conservatives stepped up their assault Tuesday on the study that forms the basis of Obama’s allegations. The American Enterprise Institute argues in a new analysis that the August study by the nonpartisan Tax Policy Center erroneously concludes that Romney would have to raise taxes on middle-class households by at least $86 billion a year to pay for his proposal to cut tax rates across the board by 20 percent. Link

Essential reading: Chicago faces additional pension bill of $1.5 billion a year, and more

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

* $1.5 billion a year cost to fix pensions? Hal Dardick – The Chicago Tribune. Absent significant pension system reforms, it would cost the city an extra $1.5 billion a year beginning in 2016 to start the process of restoring financial health to its pension funds, aldermen were warned Monday. If those costs kicked in, services would be cut, taxes would soar or both. Link

* U.S. can’t catch a tax break. David Reilly – The Wall Street Journal. Corporate tax receipts remain well below peak, precrisis levels. That is in part due to companies continuing to hoard cash and profits overseas. And as the government on Monday turned the page to a new fiscal calendar, corporate taxes looked likely to miss expectations for the second year in a row. Link

* End of payroll, Bush tax cuts top “fiscal cliff” fears: study. Reuters. If Congress does nothing and the United States plunges off the “fiscal cliff” in three months, taxes would rise for 90 percent of Americans due to automatic increases in income and payroll taxes and other financial shocks, said a report issued on Monday. In the latest forecast of trouble ahead if Capitol Hill cannot overcome its fiscal paralysis, the Tax Policy Center predicted taxes would rise by $500 billion in 2013, or an average of almost $3,500 per household. Link

Calendar

Some important tax and accounting dates in the week ahead:

Tuesday, Oct. 2

* Douglas Holtz-Eakin, former director of the Congressional Budget Office; Diane Lim Rogers, former chief economist of the House of Representatives Budget Committee; and others speak at the Tax Policy Institute’s discussion, “Danger Ahead? Taxes and the Fiscal Cliff.” 1200EDT, Urban Institute. Washington.

* American Bar Association teleconference on the tax and accounting treatment of stock options, the possible impact of international reporting standards on equity awards, and other topics. 1300EDT.

Wednesday, Oct. 3

* The first of three debates between President Barack Obama and Republican challenger Mitt Romney focuses on domestic policy, including economic issues. 2100EDT. Denver, Colorado.

Essential reading: Payroll tax cut is unlikely to survive into next year, and more

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

* Payroll tax cut is unlikely to survive into next year. Annie Lowrey – The New York Times. The 160 million American wage earners will probably see their tax bills jump after Jan. 1 when the temporary payroll tax holiday ends. Its expiration means less income in families’ pocketbooks — the tax increase would be about $95 billion in 2013 alone — at a time when the economy is little better than it was when the White House reached a deal on the tax break last year. Link

* Pressed to explain Mitt Romney’s tax plan, Paul Ryan ducks. Suzy Khimm – The Washington Post. Fox News’ Chris Wallace tried to get Republican vice presidential candidate Paul Ryan to explain how the Mitt Romney tax plan achieved its goal and pointed out that the plan was “not revenue neutral unless you take away the deductions,” but the Wisconsin Republican deflected the question. Link

* Facing ‘fiscal cliff’ Obama would quickly fill Treasury job. Damian Paletta – The Wall Street Journal. If re-elected, President Barack Obama is expected to move quickly in November to nominate a new Treasury secretary, and that person could play a key role negotiating with Congress about the looming “fiscal cliff” of tax increases and spending cuts, people familiar with the planning said. The two people most frequently mentioned by current and former administration officials as likely successors to Treasury Secretary Timothy Geithner are White House Chief of Staff Jacob Lew and Clinton administration Chief of Staff Erskine Bowles. Link

Essential reading: Obama fills in blanks of Romney’s plans, and GOP sees falsehoods, and more

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

 * Obama fills in blanks of Romney’s plans, and GOP sees falsehoods. Michael Cooper – The New York Times. The President Barack Obama campaign is taking advantage of the many unknown details of Mitt Romney’s policy proposals by filling in the blanks in the least flattering light, often relying on the findings of research organizations. The Obama campaign is running an ad based on an analysis of Romney’s vague proposals by the Tax Policy Center, a nonpartisan group, which found that it was impossible for his plan to achieve all of its stated goals. Link  

* Ayrault says wealthy ready to pay 75% tax. Hugh Carnegy – The Financial Times. Jean-Marc Ayrault, France’s prime minister, defended the imposition of a 75 percent marginal income tax rate on the eve of its introduction by his socialist government, insisting that many high earners were ready to pay the levy. The budget is set to be the toughest France has faced for 30 years, requiring 30 billion euros ($38.58 billion)in savings. Link 

* Swiss-German tax deal may face referendum hurdle. Nel Maclucas – The Wall Street Journal. Resolution of a long-running tax dispute between Switzerland and Germany may face a further hurdle in the form of a national referendum on the deal, initiated by a populist group opposed to the watering down of the Alpine country’s banking-secrecy laws. While the tax deal with Germany has been passed by the Swiss parliament, it could still founder on growing opposition from German opposition politicians. Link

How Mitt Romney’s offshore income jumped

Reuters tax reporter Lynnley Browning explains for Reuters TV in the clip below how Presidential candidate Mitt Romney’s offshore income jumped in 2011, also the subject of her recent story.YouTube Preview Image

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

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  

Corporate tax avoidance subsides when IRS audit threat increases, study finds

U.S. companies that face a higher probability of being audited by the tax-collecting Internal Revenue Service voluntarily pay more taxes, a new study has found.

The finding proved especially true among companies with poor corporate governance, according to the study published in the September/October issue of the American Accounting Association’s Accounting Review.

 If that seems obvious, study co-author Jeffrey Hoopes, a doctoral candidate at the University of Michigan, said there was plenty of evidence that seemed to point in the other direction.