Tax Break

Some events in the week ahead:

Tuesday, March 6 – Thursday March 8
Government Accounting Standards Board meeting in Norwalk, Connecticut.

Tuesday, March 6
Senate Finance Committee Chairman Max Baucus to host a hearing on tax reform and incentives currently in the tax code for capital investment and manufacturing and their contributions to job creation and economic growth. 10:00 a.m. in Room 215 of the Dirksen Senate Office Building. Speakers include:

• Dr. Jane G. Gravelle, Senior Specialist in Economic Policy, Congressional Research Service
• Dr. Ike Brannon, Director of Economic Policy & Congressional Relations, American Action Forum
• Dr. Robert D. Atkinson, President, Information Technology and Innovation Foundation
• Dr. J.D. Foster, Norman B. Ture Senior Fellow in the Economics of Fiscal Policy, The Heritage Foundation
• Dr. Michelle Hanlon, Associate Professor of Accounting, Sloan School of Management, MIT

Tuesday, March 6
D.C. Bar Taxation Section, State and Local Tax Committee luncheon with Jack Trachtenberg discussing his role in the creation of New York State’s Office of Taxpayer Rights Advocate how it studies problems facing the state’s taxpayers.

Tuesday, March 6 – Friday, March 9
The Multistate Tax Commission winter committee meetings to take place in Nashville.

* Investors gird for higher dividend taxes. Arden Dale – The Wall Street Journal. Financial advisers and their clients are starting to plan for, if not yet act on, a possible jump in taxes on dividends. Dividend-producing stocks have had a special attraction among investors in recent years, in part because of the lower-than-usual tax rates dividends have enjoyed for much of the past decade. Those low rates gained even more luster as the stock market tanked — driving up the dividend yields — while interest rates on savings accounts have been so low. A 2 percent dividend yield also looks more interesting to investors than it did before U.S. bond yields declined last year and remain near historical lows. Increases in taxes on dividends, capital gains and ordinary income all are currently planned, but dividends may be seeing one of the biggest changes. Link  

 * Credibility of Romney’s big tax cut questioned. James Politi and Richard McGregor – The Financial Times. Mitt Romney’s latest tax-cut proposals would result in $3.4 trillion in foregone revenue for the federal government, with revenues stuck at the very low level of 16 percent of gross domestic product for the next decade, according to a study by an independent think-tank. The calculations by the Tax Policy Center will raise questions about the fiscal rectitude of Romney’s economic plan at a time when the former Massachusetts governor is vowing to slash US budget deficits. Link  

On Wednesday, the Tax Foundation came out with a study on the tax rates different types of businesses face in different states.

Broadly speaking, the foundation found that corporate taxation practices vary widely not only from state to state, but even from one business to another within any one state, and even between businesses in the same line of work in the same state depending on the age of their facilities, with newer locations getting sizable tax breaks and incentives.

“Until you see the data in black and white, these are just perceptions” of differences, Scott Hodge, president of the Tax Foundation, a think-tank that generally  favors lower tax rates for corporations, told me.

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

 * Obama to propose corporate tax rate of 28 percent. Kim Dixon – Reuters. The Obama administration will propose cutting the top tax rate for corporations to 28 percent, and pay for it by eliminating dozens of tax loopholes companies now use to lower their rates, a senior administration official said. Most analysts doubt that the convoluted tax system could be revamped by a deeply divided Congress in an election year, but the announcement is certain to fuel debate in the run-up to November’s elections. The plan, over a year in the making, is President Barack Obama’s first official foray into reform of the tax code, which most experts believe badly needs a revamp after years of being loaded up with special provisions. The centerpiece is a cut in the top corporate rate – now at 35 percent, among the highest in the industrialized world. That will appeal to businesses, which gripe that the current U.S. rate puts them at a competitive disadvantage. Controversy will erupt when officials lay out which “loopholes” they want to cut. The proposal makes a special carve-out for manufacturing – cutting that tax rate to 25 percent – and proposes a minimum tax on profits earned in low tax countries. Link 

* Romney says wants ‘flatter, simpler’ tax system. Steve Holland – Reuters. Battling to come back in Michigan, Republican Mitt Romney said on Tuesday he wants a tax system that is flatter and simpler as he laid the groundwork for a major economic address coming up in days. Romney is expected to release an updated tax plan on Wednesday ahead of the Republican candidates’ debate in Phoenix. “I want to see taxes flatter, and fairer and simpler, because I want our tax policies to encourage growth,” Romney said on Tuesday. Link

* Heralding end of ‘dark times,’ Christie offers budget that is bigger and cuts taxes. Kate Zernike – The New York Times. After two years of enforcing austerity, Gov. Chris Christie argued on Tuesday that New Jersey could afford to have it all, presenting a budget he said would cut income taxes by 10 percent at the same time it gave money to schools, provided for the poor and met the state’s pension obligations. The governor proclaimed that “we have left the dark times” as he proposed a $32 billion budget, a 3.7 percent increase over last year’s spending. While still less than the budget of 2008, when the economy faltered, it would be the largest of his tenure. Democrats argued that the income tax cut, which would be phased in over three years, was aimed more at presidential primary voters in Iowa than wallets in New Jersey. Link  

Japanese Prime Minister Yoshihiko Noda REUTERS/Yuriko Nakao

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

* Obama faces task of selling dueling budget ideas. Jackie Calmes – The New York Times. With the election-year budget he unveils on Monday, President Barack Obama more than ever confronts the challenge of persuading voters that he has a long-term plan to reduce the deficit, even as he highlights the stimulus spending and tax cuts that increase deficits in the short term. In his budget Obama again will commit to $4 trillion in deficit reduction over 10 years, including $1.5 trillion in tax revenue from the wealthy and from closing some corporate tax breaks, and reductions in spending for a range of programs, including the military, Medicare, farm subsidies and federal pensions. But Republicans are sure to criticize the president’s proposals as heavy on gimmickry and double-counting, and reject his proposed tax increases. Link.

* EU say it’s ‘flexible’ on carbon tax. Eric Yep and Gaurav Raghuvanshi – The Wall Street Journal. The European Union is willing to be flexible with its emissions tax on airlines, but won’t suspend the tax unless countries can agree on an ambitious alternative, EU Transport Commissioner Siim Kallas said Monday. Several countries have expressed opposition to the tax, with some threatening retaliatory measures against the EU. It is unclear whether a global agreement is possible by April 2013, when the first payments are due. Link.

* Japan’s big GDP drop a worry for PM tax plan. Tetsushi Kajinoto – Reuters. Japan’s economy shrank much more-than-expected in the fourth quarter, as Thai floods, a strong yen and weak demand hurt exports, casting doubt on hopes for a quick pick up in activity that could bolster government plans to raise the sales tax. Prime Minister Yoshihiko Noda hopes to contain the rise in the debt pile – now already twice the size of the economy – by doubling the national 5 percent sales tax by late 2015, but has yet to win over a combative opposition and a skeptical public. Link.

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.  

Air China planes on the tarmac of the Beijing Capital International Airport. REUTERS/David Gray

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

* China bars airlines from EU tax plan. Simon Rabinovitch – The Financial Times. The Chinese government has barred the country’s airlines from complying with a European Union charge on carbon emissions, escalating a dispute that officials have warned could turn into a trade war. Chinese airlines had previously said they would not pay the EU carbon tax, but the formal prohibition by the State Council, or cabinet, puts Beijing in direct opposition to Brussels. China has notified all Chinese airlines that, without government approval, they cannot join the EU emissions trading scheme or charge customers extra because of it, state-agency Xinhua said. The impact on Chinese airlines with routes to Europe was unclear. Although the EU’s carbon scheme went into effect for airlines on January 1, Brussels has not started charging them yet. Link to The Financial Times.

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

Some events in the week ahead:

Tuesday, January 31

1. Senate Finance Committee Chairman Max Baucus to convene a hearing to discuss the 50-plus tax provisions that expire annually or biannually, termed “tax extenders.” The Joint Committee on Taxation has estimated that a one-year extension of all would cost $37 billion over the next decade. Witnesses will be:

Dr. Rosanne Altshuler, Professor and Chair of the Economics Department, Rutgers University Dr. Jason J. Fichtner, Senior Research Fellow, Mercatus Center, George Mason University Calvin H. Johnson, Andrews & Kurth Centennial Professor of Law, The University of Texas School of Law Caroline L. Harris, Chief Tax Counsel and Director of Tax Policy, U.S Chamber of Commerce

2. The Financial Accounting Standards Board to hold an open meeting with its investors’ technical advisory committee in Norwalk, Connecticut.

3. The Congressional Budget Office to release its annual budget and economic outlook, with director Douglas Elmendorf to testify on it before the House Budget Committee on Feb. 1 and before the Senate Budget Committee on Feb. 2.

Kansas governor Sam Brownback

U.S. tax experts agree Congress won’t see a tax reform plan ahead of the 2012 election, but Kansas lawmakers already have.

The tax reform blueprint, lowering rates but broadening the base of income that’s taxed by eliminating current tax breaks, is playing out in the state capital Topeka. The legislature convened on Monday and will debate Republican Governor Sam Brownback’s new tax overhaul plan.

Brownback’s plan would condense the state’s five tax brackets to just two –  4.9 percent and 3 percent – eliminating three additional rates currently in place, including the current top rates of 6.45 percent and 6.25 percent.