Tax Break

Essential reading: Greeks stop paying taxes, Nancy Pelosi’s rich tax, and more

The ancient Acropolis of Athens at sunset. REUTERS/Yannis Behrakis

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

* Pelosi pushes tax hike for those making $1 million or more. John McKinnon – The Wall Street Journal. Is House Democratic Leader Nancy Pelosi abandoning President Barack Obama in his effort to raise taxes on households making more than $250,000? It sure sounded that way on Wednesday. In a letter to House Speaker John Boehner, Pelosi called on Republicans to pass a permanent extension of Bush-era tax levels for the middle class. The only group Pelosi singled out for a tax increase was people earning $1 million or more. Link

* Nancy Pelosi risky pander on taxes. The Washington Post editorial opinion. House Minority Leader Nancy Pelosi has an interesting definition of what constitutes the middle class. She believes it includes people earning anything less than $1 million a year — at least when it comes to tax cuts. The Democratic leader’s position offers the political benefit of letting Democrats argue that the GOP opposed curtailing tax cuts even for millionaires. The risk of this particular pander, however, is that $1  million becomes the new, high bar; tax cuts below that level remain off-limits. Do Democrats really want their new slogan to be: “Almost as irresponsible as the Republicans?” Link

* UK govt to stop public sector workers avoiding income tax. Ainsley Thomson – The Wall Street Journal. The U.K. government Wednesday vowed to clamp down on public sector workers avoiding paying their fair share of tax after a review found that more than 2,400 highly paid civil servants were paid “off payroll,” allowing them to minimize their tax bill. Link

* HMRC job cuts ‘undermining’ tax crackdown. Hannah Kuckler – The Financial Times. Cutting the number of tax collectors at Revenue & Customs has lost the tax collecting agency 1.1 billion pounds ($1.73 billion) in taxes over five years, Parliament’s public spending watchdog has estimated. Link

* Euro exit worry prompts more Greeks not to pay tax. Lefteris Papadimas – Reuters. Greeks are notoriously reluctant to pay taxes, but even those that do are holding off at the moment until they are sure their country stays in the euro zone. State coffers are on track for a 10 percent fall in revenues this month as a result, a senior finance ministry official said on Wednesday. Link

Republicans and Democrats diverge on state taxes

Under pressure from Tea Party lawmakers, Kansas Gov. Sam Brownback backed down on sales tax plan.Whether your individual state taxes are climbing or falling, may have something to do with who’s in charge of your state capitol at the moment. Two states changed their personal income tax rates this month. Kansas Republicans cut taxes, while the Democrats in Maryland raised rates on the wealthiest.

Kansas lawmakers lowered income taxes earlier this week. The top rate was dropped to 4.9 percent from 6.45 percent. The overall cut to revenue collection went beyond what Republican Gov. Sam Brownback had initially proposed.

$452 billion tax hike in 2013: Taxmageddon by the numbers

As we wrote last month, 2012 is set up to be a perfect tax storm: a slew of tax breaks are expiring, mandatory spending cuts are looming, and it’s an election year. So rhetoric will be high, hard won compromise on tricky issues will be low.

Not taking action, however, will be costly. This week the OECD said that could lead to an economic slowdown in the U.S. in 2013.

Economist Marty Sullivan has counted up how much taxes will climb if some action isn’t taken and in this Tax.com analysis gives some helpful background on how we got to a $452 billion fiscal precipice.

Essential reading: Who will fill Geithner’s shoes at Treasury? and more

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

* Guessing game begins over next Treasury chief. Glenn Somerville – Reuters. With new partisan showdowns likely to flare up next year over taxes, spending cuts and the nation’s debt limit, interest in the next Treasury boss is even greater than usual given the high economic stakes. Lots of names are making the rounds. Among Democrats, they include finance leaders like Larry Fink of asset management firm BlackRock and politically connected Washington insiders like fiscal expert Erskine Bowles. If the White House goes to the Republicans, Glenn Hubbard, a top Romney adviser, is considered a front-runner, as is Robert Zoellick, the outgoing World Bank chief who boasts Wall Street experience and a contact list that spans the globe. Link

* Altria to pay $500 mln to settle US tax dispute. Reuters. Altria Group Inc, the tobacco company, on Tuesday said it expects to pay $500 million to resolve a long-running dispute with the Internal Revenue Service over its tax treatment of leveraged lease transactions. The parent of Philip Morris USA said the payment includes $450 million of federal income taxes and interest for the 2000 through 2010 tax years, plus $50 million of state income taxes and interest. Link

* Case against chairman of Banco Santander is dropped. Raphael Minder – The New York Times. Spain’s national court on Tuesday closed a tax fraud investigation focusing on Emilio Botín, the chairman of Banco Santander, and 11 of his relatives. The court said the case was abandoned, without any charges being brought, because the Botín family had straightened out its tax problems before June 2011. Link

Essential reading: Renouncing U.S. citizenship to save on taxes, and more

Americans for Tax Reform President Grover Norquist. REUTERS/Jonathan Ernst

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

 

* No comment necessary: Grover Norquist plays the Nazi card. Andrew Rosenthal – The New York Times opinion. Senators Chuck Schumer and Bob Casey introduced legislation last week that would penalize Americans who renounce their citizenship to evade taxes. Grover Norquist, the president of Americans for Tax Reform, had this to say: “I think Schumer can probably find the legislation to do this. It existed in Germany in the 1930s and Rhodesia in the ’70s and in South Africa as well. He probably just plagiarized it and translated it from the original German.” Link

* Ireland-bound Eaton is latest to end U.S. corporate citizenship. Nanette Byrnes – Reuters.
Eaton Corp’s purchase of electrical equipment maker Cooper Industries means another U.S. company will soon leave the United States in favor of relocating its headquarters to a foreign country with sharply lower taxes. In the case of diversified industrial manufacturer Eaton, a complicated corporate structure will allow it to become part of an Irish corporation and enjoy that country’s low 12.5 percent corporate tax rate. Link

* Yahoo to sell Alibaba stake, take hit on taxes. Maxwell Murphy – The Wall Street Journal. Yahoo tried for years to find a tax-efficient way to unlock the value in its partial Alibaba ownership, but ultimately decided to eat the full 38 percent in federal, state and local taxes in order to finalize a deal, CFO Tim Morse said on Monday. Though a tax-free deal eluded Yahoo and Alibaba, the taxable alternative is nonetheless complex, and is designed to incentivize Alibaba’s initial public offering. Link

* Brazil makes new tax cuts to revive economy. Luciana Otoni and Tiago Pariz – Reuters.
Brazil’s government on Monday unveiled a new round of temporary tax cuts worth about $1 billion to boost the struggling automotive sector and other industries in its latest attempt to restore a lost economic boom. Investor jitters about the economy at home and abroad helped send Brazil’s currency to its weakest closing level in three years on Monday. But Finance Minister Guido Mantega said the measures should help revive an economy that has been stagnant since mid-2011, while also providing protection from the debt crisis in the euro zone. Link

* Japan tax hikes can’t wait; BOJ stimulus still needed-OECD. Reuters. Japan should stick to its plan of raising the consumption tax from 2014 or even earlier to demonstrate budget prudence and avert a run-up in borrowing costs, the OECD said, adding that a credible fiscal consolidation plan must be top priority. The Organization for Economic Co-operation and Development also urged the central bank to maintain the zero rate policy and quantitative easing mainly via asset purchases until inflation returns and reaches the Bank of Japan’s target of 1 percent. Link

* IRS widens debt forgiveness program. Patrick Temple-West – Reuters.
More middle-class Americans will be able to work out their debts to the U.S. Internal Revenue Service because of changes in a tax payment forgiveness program, the agency announced on Monday. The “Offer in Compromise” program lets taxpayers negotiate agreements with the IRS to pay less than the full tax owed. The announced changes make the program more flexible for taxpayers, with some people able to pay off their debts faster, according to the IRS. Link

* Would Romney be another Bill Clinton or another George W. Bush? Bruce Bartlett – The New York Times opinion.
The Bill Clinton and George Bush 43 administrations are almost perfect tests of starve-the-beast, tax and spending theory; Clinton raised taxes in 1993, while Bush signed into law seven different major tax cuts, according to a Treasury Department study. If there were any truth whatsoever to starving the beast, we should have seen a rise in spending during the Clinton years and a fall in spending during the Bush years. In fact, we had exactly the opposite results. Link

Essential reading: Critics say Chesapeake’s books obscure costs, and more

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

* Critics: Chesapeake’s murky books obscure costs. Ben Casselman – The Wall Street Journal. Chesapeake Energy Corp accounts for its exploration and drilling expenses using a method that accounting experts say is generally more aggressive and less transparent than the approach many other big energy companies use. The accounting method is legal and not uncommon. But some critics say it makes it hard to figure out the true costs of Chesapeake’s drilling programs and their success, and forces investors to ferret out the hundreds of millions of dollars Chesapeake is making in interest payments. Link

* Vale president says to fight Swiss tax dispute-paper. Caroline Copley – Reuters.
Brazilian mining company Vale SA has no plans to amicably settle a Swiss tax dispute, its president was quoted as saying in a newspaper on Saturday. Switzerland is demanding that Vale pays five years in back taxes, the Tagesanzeigner newspaper reported earlier this year. “We will fight for our interests, which we consider as legitimate,” Vale SA President Renato Neves told Le Temps in an interview. The paper said Switzerland was demanding Vale pay back 212 million Swiss francs ($224.58 million) in taxes. Link

* Business backs income tax rate of 30 percent. Martin Sandbu – The Financial Times. The Institute of Directors has endorsed a radical proposal that recommends replacing part of the UK tax system with a single income tax rate of 30 percent and reducing the government’s share of the national economy to one-third. The TaxPayers’ Alliance, the pressure group that campaigns for lower taxes, and the IoD, published on Monday their report, “The Single Income Tax”, as part of the 2020 Tax Commission, a joint project. Link

* Minnesota continues centuries old tradition of tax subsidies for stadiums. Norman Chad – The Washington Post. In yet another snub to the cry “No More Stadiums, With or Without Tax Subsidies” Tour, the state of Minnesota — the premier serial subsidizer of the 21st century — is publicly funding much of an almost $1 billion football facility. The city of Saint Paul is still trying to pay off $40 million in loans for the construction of the Xcel Energy Center hockey arena in 2000. Then there’s Target Field, the Twins’ baseball stadium opened in 2010, a $522 million project that included $392 million in public subsidies. Link

* The Saverin lesson – The Wall Street Journal opinion.
Democratic Senators Chuck Schumer and Bob Casey pounced on the news by announcing Thursday that they will introduce a plan to tax capital gains at 30 percent for any wealthy Americans who try to escape from U.S. shores. No doubt they hope to score political points by punishing the fleeing rich who will strike most Americans as unpatriotic, but the senators are doing far more harm than Eduardo Saverin is to the United States and its global reputation. Link

* Edward Lazear: Three views of the ‘Fiscal Cliff.’ The Wall Street Journal opinion.
The evidence suggests that we should move away from worry over the impending “fiscal cliff” and focus more heavily on concern about raising taxes. Economists David and Christina Romer have warned an increase in taxes of 1 percent of gross domestic product lowers GDP by almost 3 percent. The evidence on government spending also suggests that high spending means lower growth. Link

* ‘Tax the rich’ the opposite of reform. George Skelton – The Los Angeles Times.
Gov. Jerry Brown defends his soak-the-rich tax proposal as just. And besides, he says, it’s popular with the non-rich. Never mind that it would make California’s roller-coaster tax system even more volatile. We are too dependent on the rich and their capital gains. Unlike the federal government, California treats capital gains as ordinary income. Link

* The tax reform Britain needs. Matthew Sinclair – The Wall Street Journal opinion.
To change things we need a tax system that is much simpler and more honest. Your house doesn’t pay property taxes, your car doesn’t pay gas taxes and we should stop pretending businesses pay corporate taxes. Those taxes are paid by shareholders in lower dividends, workers in lower pay and customers in higher prices. There should be a single tax on labor and capital income at a single proportionate rate: the Single Income Tax. Link

Tax and accounting calendar

The sun causes lens flare as it is photographed between the towers of the National Congress in Brasilia April 12, 2012. REUTERS/Ueslei Marcelino

Some important tax and accounting dates in the week ahead:

Monday, May 21
*The American Society of Pension Professionals & Actuaries and the Internal Revenue Service sponsor a conference on retirement plans and their issues. Speakers include IRS and Labor Department officials. Philadelphia.
*The National Association of Tax Debt Resolution Companies legislative and regulatory conference. Karen Hawkins, director of the Internal Revenue Service Office of Professional Responsibility, is a speaker. Washington.

Monday, May 21 – Friday, May 25
*International Accounting Standards Board meeting, London.

Essential reading: Rewriting the tax code, a large tax bill for Facebook’s Saverin, and more


Kansas Governor Sam Brownback, then a U.S. senator, standing next to the income tax code, Washington, October 5, 2007. REUTERS/Jim Young

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

* Top Republicans boost pressure for U.S. tax rewrite. Kim Dixon – Reuters.
A top Republican lawmaker on Thursday stepped up pressure to force action next year on a rewrite of the U.S. tax code, which both major political parties agree has become overly complicated and inefficient. The chairman of the tax-writing panel in the U.S. House of Representatives said rank-and-file Republicans favor forcing a vote this year on a plan to overhaul the tax system in 2013. Link

* Facebook’s Saverin fires back at tax-dodge critics. Kevin Drawbaugh – Reuters.
Facebook co-founder Eduardo Saverin, under fire over the tax consequences of renouncing his U.S. citizenship, said on Thursday he is obligated to and will pay “hundreds of millions of dollars in taxes to the United States government.” The social media entrepreneur and investor said in a statement, emailed to Reuters by a spokesman, that his decision to move to Singapore was “based solely on my interest in working and living” there. Saverin said he has been there since 2009. Link

* BNY Mellon, IRS spar over $900 million tax benefit. Bank of New York Mellon Corp (BK.N) faced off against the U.S. government on Thursday in closing arguments over a $900 million tax benefit that the Internal Revenue Service called “tax abuse.” The case is the first to go to trial since the IRS accused some banks of generating artificial foreign tax credits through loans with London-based Barclays Plc. Link

* At big U.S. companies, 60 percent of cash sits offshore: J.P. Morgan. Emily Chasan – The Wall Street Journal. Large U.S. companies are holding at least 60 percent of their cash overseas with some keeping nearly all of their cash balances offshore, according to a study from J.P.Morgan accounting analysts published Wednesday. Apple had the highest offshore corporate cash balance, with $74 billion held overseas. If companies choose to repatriate earnings from overseas, they would have to pay taxes on foreign earnings they repatriate. Link

* Coalition issues guidelines for public pensions. Lisa Lambert – Reuters.
A coalition of bond lawyers, analysts, auditors, state treasurers, pension administrators, securities professionals, bond dealers and issuers released on Thursday a framework for describing financial strains on state and local governments caused by pension funding obligations. Nearly two years ago New Jersey became the first state charged with securities fraud by the U.S. government. Without admitting or denying any wrongdoing, the state settled allegations that it had lied about the magnitude of its pension shortfall. Link

David Cay Johnston debates Grover Norquist

Reuter’s tax columnist David Cay Johnston appeared on the most recent episode of Real Time with Bill Maher, on the same panel with anti-tax activist Grover Norquist.

To see the whole show, you have to be a subscriber to HBO or HBO go, but here’s a clip from the “overtime” section of episode 248 including tax commentary, a discussion of J.P. Morgan’s loses, and much more politics both old and new.

Ep. 248: May 11, 2012 – Overtime

Essential reading: Tax tension in Washington, and more

U.S. President Barack Obama (L) shakes hands with House Speaker John Boehner, (R-OH), after Obama's January 2012 State of the Union address. REUTERS/Larry Downing

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

* Obama, Boehner united on sandwiches, still split on deficit. Jared Favole and Siobhan Hughes – The Wall Street Journal. House Speaker John Boehner asked President Barack Obama if he wanted Congress to extend the debt limit without spending cuts and was told “yes,” an aide to the speaker said. The speaker told the president “as long as I’m around here, I’m not going to allow a debt ceiling increase without doing something serious about the debt,” according to the aide. The U.S. faces a similar scenario, as a series of tax cuts are set to expire at the end of the year and the government is scheduled to reach its debt limit either just after the November elections or early next year. Link

* Taxes lurk behind court test of Obama health law. Kim Dixon – Reuters. While Supreme Court watchers focus on the controversial insurance requirement in President Barack Obama’s healthcare law, lesser known is that the court’s ruling next month will also decide the fate of billions of dollars in new taxes. Set to take effect in 2013, the two tax increases have been called into question by the court case, which also has clouded the outlook for new provisions already in effect, such as a small business tax credit and a tax on tanning salons. Link