Tax Break

Essential tax and accounting reading: defending big oil’s taxes, taxing the rich, risky deductions, and the payroll tax cut’s impact

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

 
* Big oil, bigger taxes. The Wall Street Journal editorial. President Obama says he wants to end subsidies for what he calls “the fuel of the past,” but lucky for him oil and gas will be the fuels of the future too. His budget-deficit blowout would be so much worse without Big Oil, because the truth is that this industry is subsidizing the government. Much, much worse, actually. The federal Energy Information Administration reports that the industry paid some $35.7 billion in corporate income taxes in 2009, the latest year for which data are available. That alone is about 10 percent of non-defense discretionary spending—and it would cover a lot of Solyndras. That figure also doesn’t count excise taxes, state taxes and rents, royalties, fees and bonus payments. All told, the government rakes in $86 million from oil and gas every day—far more than from any other business. Link

* Most Americans back “Buffett tax”:Reuters/Ipsos. Kevin Drawbaugh – Reuters. Nearly two-thirds of Americans support imposing a minimum tax rate of 30 percent on those who earn $1 million or more a year, according to Reuters/Ipsos poll results released on Tuesday. The poll showed that 64 percent of those surveyed favored a “Buffett tax” as proposed by the Obama administration and named for multibillionaire investor Warren Buffett, who backs it. The poll said that support for the Buffett tax was strongest among Democrats, at 76 percent, but also significant among Republicans, with 49 percent of them viewing it favorably. Link  

* Senate defeats tax break for natural gas trucks. Roberta Rampton – Reuters. A bipartisan proposal to provide tax incentives for natural gas vehicles was defeated in a Senate vote on Tuesday, but a key backer of the bill said it will be revised and reintroduced to address concerns from industry. The five-year plan was designed to spur purchases of long-haul trucks and commercial vehicles that can run on cheap and abundant U.S. natural gas. The amendment to the Senate’s highway bill needed 60 votes to pass, but was rejected in a 51-47 vote after conservative groups panned it as an unnecessary subsidy. Link  

* A nation with too many tax breaks. Eduardo Porter – The New York Times. President Obama’s insistence that the rich must pay more to preserve programs that help the poor and middle class has crashed against the Republican claim that the president’s Robin Hood policies amount to class warfare. Whatever their merits, both arguments rely on an assumption that is at best overstated: that the government uses resources from those who are richer to pay for programs that mostly benefit the less fortunate. Link  

* Romney vs. Obama on Corporate tax reform. Kevin Hassett and Glenn Hubbard – The Wall Street Journal opinion. The one thing on which our political leaders seem to agree is the need for corporate tax reform. President Barack Obama and Mitt Romney unveiled new proposals on the same day last month, with Obama cutting the top corporate tax rate to 28 percent and Romney reducing it to 25 percent. Obama, ignoring the second reality, would also raise taxes on noncorporate business, in the interest of requiring the “rich” to pay for the “privilege” of being an American, to paraphrase a recent statement by Treasury Secretary Tim Geithner. Link 

Tax and Accounting Calendar

A worker arranges a saree drying after dyeing in a village south of Kolkata REUTERS/Rupak De Chowdhuri

Some events in the week ahead:

Monday, February 27 – Tuesday, February 28
The Practicing Law Institute will sponsor a two-day program in New York featuring speakers from Treasury and the IRS on a number of topics including investment adjustments, accounting issues, Treasury Department developments, inter-company transactions, and tax attributes and consolidation.

Tuesday, February 28

* The Public Company Accounting Oversight Board will hold an open board meeting at its offices at 1666 K Street NW in Washington DC and via web conference to consider proposed standards on related parties, significant unusual transactions and other matters. Starting at 9:30 AM.

Essential tax and accounting reading: Santorum’s tax returns, progress on payroll taxes, Wegelin, and more

Republican presidential candidate Rick Santorum speaking at a rally in Tacoma, Washington REUTERS/Anthony Bolante

The top tax and accounting headlines from Reuters and other sources.

* Santorum reports four years of tax returns. Samuel Jacobs – Reuters. Republican U.S. presidential candidate Rick Santorum released tax returns on Wednesday showing he and his wife earned around $1 million annually in the last few years. Santorum issued returns for the last four years, the most of the current Republican candidates who have tried to outdo each other in showing transparency about their taxes. The former Pennsylvania senator and his wife earned $659,000 in 2007, $952,000 in 2008, $1.1 million in 2009 and about $923,000 in 2010, according to the tax returns posted online by the Politico news organization. Link

* Lawmakers finalize payroll-tax agreement. Naftali Bendavid and Siobhan Hughes – The Wall Street Journal. Congressional negotiators working on a deal to extend jobless benefits and a payroll-tax cut say they have come to a deal, paving the way for a vote before the policies expire at the end of the month. A tentative deal outlined earlier this week would extend the tax break, which reduces workers’ payroll taxes to 4.2 percent from 6.2 percent, until year-end. It would also renew expiring jobless benefits but cut the maximum number of weeks. And it would adjust the Medicare payment system to avoid a 27 percent drop in physicians’ fees. Under a last-minute deal, only new government employees will be subject to pension-contribution increases. The Senate’s three Republican negotiators will not back the package, a Senate aide said. That does not undermine the agreement, but it could potentially pose complications for House Republicans, who will take a tough vote without the backing of some key counterparts in the Senate. Rank-and-file GOP lawmakers already dislike the package because lawmakers did not find a way to offset the cost of extending cuts to the payroll tax. Link

Essential tax and accounting news: “dozens” of corporate tax breaks in play, private equity taxation debated around the world, and Swiss banks’ new model

U.S. Treasury Secretary Timothy Geithner testifies before the Senate Finance Committee, February 14, 2012. REUTERS/Yuri Gripas

The top tax and accounting headlines from Reuters and other sources:

* Tentative deal reached to preserve cut in payroll tax. Jennifer Steinhauer – The New York Times. Members of a House-Senate committee charged with extending a payroll tax reduction and providing added unemployment benefits reached a tentative agreement Tuesday evening, with Republicans and Democrats claiming a degree of political victory in a fight with significant election-year implications. One day after House Republican leaders said they would offer a bill to extend the $100 billion payroll tax rollback for millions of working Americans without requiring spending cuts to pay for it, the Congressional negotiators struck a broader deal that would also extend unemployment benefits and prevent a large cut in reimbursements to doctors who accept Medicare. A vote on the measure would most likely happen by Friday. But senior aides warned that negotiators still had to sign off formally on the agreement and that obstacles could surface given the long-running tensions over the measure. Link

* Obama plan would end dozens of business tax breaks-Geithner. Kim Dixon and Rachelle Younglai – Reuters. The Obama administration’s corporate tax reform plan would end “dozens and dozens” of tax breaks, Treasury Secretary Timothy Geithner said on Tuesday as he defended the White House’s election-year call for higher taxes on the wealthy. Within days, the administration intends to unveil a blueprint aimed at eliminating inequities in the corporate tax system and lowering the top rate. Companies, which pay wildly different levels of taxes, are clamoring for a cut in the corporate tax rate – which tops out at 35 percent – but disagree about how to strip out preferences that benefit selected industries. Geithner spoke before the Senate Finance Committee a day after President Barack Obama unveiled a $3.8 trillion budget-and-tax proposal that called for aggressive government spending to boost the economy and higher taxes on the rich. Link

Essential tax and accounting reading: Global accounting push, global tax battle and a vet tax credit

A military veterans hiring event in New York, January 19, 2012. REUTERS/Brendan McDermid

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

* Global accounting reform ups pressure on U.S. to sign up. Huw Jones – Reuters. Plans by the accounting body responsible for global standards to make itself more answerable to the public will put pressure on the United States to sign up or risk losing influence. The International Accounting Standards Board (IASB) has drawn up the standards, which are used by listed companies in over 100 countries, including the European Union. So far the United States has delayed its decision to sign up, under pressure from companies and Congress who say they do not want to cede regulatory sovereignty to a London-based body. But Thursday’s publication by the IASB’s Trustees and Monitoring Board of plans to make themselves more open and accountable in their second decade may push the United States to think again, given the far-reaching impact that accounting rules have on financial markets and investors. Link.

* Pessimism high, Republicans warn of possible expiration of payroll tax cuts. Jennifer Steinhauer – The New York Times. Congressional Republicans said Thursday that negotiations over extending a payroll tax cut were going so poorly that it was possible the tax break – along with added unemployment benefits – could expire at the end of the month. If the benefits are allowed to lapse, it will be a stunning coda to a battle that has lasted months on Capitol Hill over whether and how to extend a two-percentage-point tax break for nearly every working American and to provide additional unemployment benefits for millions more. A temporary agreement forged in December cost Republicans politically and left both parties locked in another round of fights over how to cover the costs. In addition, Republicans are seeking numerous policy changes connected to unemployment benefits – like a mandatory high school equivalency program and possible drug testing for beneficiaries – that Democrats have rejected out of hand. They would also reduce the benefits to 59 weeks, far less than the 79 weeks sought by President Obama. Link.

Essential Reading: Ernst & Young’s fine, Swiss bank fallout and the Buffett rule

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

* Watchdog fines Ernst & Young $2 million over audits. Dena Aubin – Reuters. The watchdog board for corporate auditors on Wednesday said it has imposed a $2 million penalty, its largest fine ever, on accounting and consulting firm Ernst & Young LLP in a settlement involving past audits of Medicis Pharmaceutical Corp. The Public Company Accounting Oversight Board said it also sanctioned four current and former Ernst & Young partners for violating PCAOB rules in the audits of Medicis, which sells prescription drugs for asthma and skin conditions. Ernst & Young settled without admitting or denying the PCAOB’s findings. The audits in question involved Medicis’ 2005, 2006 and 2007 financial statements, the PCAOB said. Link.

* Payroll-tax cut extension talks bog down as time runs short. Siobhan Hughes and Corey Boles – The Wall Street Journal. U.S. Senate Majority Leader Harry Reid said on Tuesday lawmakers working on an extension of a popular payroll-tax cut had only until early next week to reach a deal, as the two sides negotiating the package showed few signs of compromise and spent a morning meeting digging in to their positions. House Ways and Means Committee Chairman Dave Camp said that if negotiators can’t agree on current proposals to offset the cost of the package, they may have to “begin looking at scaling back some of these core policies” or else rely on deficit spending or simply kick the issue “outside the scope of the conference.” House Republicans started the latest round of talks with a proposal to cover the cost partly with a freeze to cost-of-living pay increases for federal workers. That outraged Maryland Democrats, whose constituents include many government workers. Democrats were no happier with a proposal to gradually force more senior citizens to pay higher premiums for Medicare. Link.

* Wegelin boss gives up NZZ role after US tax probe. Emma Thomasson – Reuters. The head of Wegelin – Switzerland’s oldest private bank and which the United States has indicted for helping clients dodge taxes – is standing back from his role as chairman of the country’s influential Neue Zuercher Zeitung daily. Konrad Hummler, one of Switzerland’s most high-profile bankers, said on Thursday he needed to focus on the U.S. case against Wegelin on charges it enabled Americans to evade taxes on at least $1.2 billion in offshore bank accounts. Hummler had come under pressure to step down as NZZ chairman for fear the Wegelin case could damage the reputation of Switzerland’s oldest newspaper – the voice of the country’s business establishment. Link.

Essential Reading: Capitol Hill, Liechtenstein, Mark Zuckerberg and Mitt Romney

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

* US payroll tax talk mired in election-year politics. Richard Cowan and Donna Smith – Reuters.

Republican and Democratic leaders accused each other of bad faith negotiations on Tuesday as both parties played hardball in talks to extend a tax cut for 160 million U.S. workers. Both sides agree the payroll tax cut should be renewed for a full year before it expires on Feb. 29, and its extension has been seen as a foregone conclusion. But the parties are far apart over how to pay for it and the rancor of election-year politics complicates lawmakers’ work. They argued over whether to continue a pay freeze on federal workers for another year, saving around $26 billion, and whether to squeeze $31 billion out of the Medicare healthcare program for the elderly. Link.

* Romney’s returns revive scrutiny of lawful offshore tax shelters. Jonathan Weisman – The New York Times.

Essential reading: payroll tax talks, state income tax cuts and a Swiss bank fine

Swiss bank Julius Baer, Bahnhofstrasse, Zurich. REUTERS/Arnd Wiegmann Welcome to the top tax and accounting headlines from Reuters and other sources.  

* Payroll tax negotiations heat up again. Rosalind Helderman – The Washington Post.

U.S. House and Senate negotiators appointed to reach a compromise over how to pay for extending the expiring payroll tax cut hold a key meeting early on Tuesday. Ongoing discussions between the 20-member conference committee, as well as House and Senate leaders, will make clear whether Democrats and Republicans will reach a quick deal by Feb. 17 to extend the tax cut for the remainder of the year. Democrats and Republicans remain split on how to pay to extend the tax cut. Link.  

The coming week’s tax and accounting calendar

Some events in the week ahead:

Monday, February 6

Comment letters due on the Financial Accounting Standards Board’s proposed accounting standards updating the cumulative translation adjustment following the sale of a nonprofit or foreign business.

Tuesday, Feburary 7

The U.S. Congress Joint Economic Committee (JEC) will hold a hearing on extending the two-percentage-point payroll tax cut and continuing emergency federal unemployment insurance benefits through the end of 2012, including examining the economic impact of extending these policies versus allowing them to lapse.

Witnesses:

    Dr. Mark M. Zandi, Chief Economist, Moody’s Analytics Mr. James Sherk, Senior Policy Analyst, The Heritage Foundation Ms. Judith M. Conti, Federal Advocacy Coordinator, National Employment Law Project

Wednesday, February 8

The payroll tax cut: what it means for you and your neighborhood

President Obama signed in December a two-month extension of the payroll tax cut (Reuters).

The Washington debate over a payroll tax holiday grinds on with House and Senate members meeting to work out just how Congress might extend the Social Security tax break for the rest of the year.

So who benefits from this tax break in your neighborhood?

Everyone with taxable earnings gets the break, but the more you make, the bigger the break. So an extension could have an especially big impact on parts of the country with high income levels, as illustrated by a report from the Joint Economic Committee released on Wednesday. The report analyzes the payroll tax cut savings by county or city.