Tax Break

Tax collections rose in all 50 states last year, according to the U.S. Census bureau, as our colleague Lisa Lambert reported Thursday.

“The nationwide increases in state government tax revenue are an indication of the stabilization of revenues for state governments,” Lisa Blumerman, chief of the Governments Division at the Census, was quoted as saying.

Stable but not booming, according to a Rockefeller Institute analysis of that data, which finds overall tax revenue is still down significantly from pre-recession levels in 2008.
Source: Rockefeller Institute analysis of Census Bureau data.

The chart above from the Institute’s report shows the percent change in total, sales and personal income tax collections in for fiscal years 2009, 2010 and 2011 compared to fiscal 2008. At the end of fiscal 2011, overall tax collections were still 2.1 percent below the peak tax collections levels.

Lucy Dadayan, author of the report, explains that results varied from state to state.

Hans Hoogervorst, head of the International Accounting Standards Board REUTERS/Gil Cohen Magen Welcome to the top tax and accounting headlines from Reuters and other sources.

* Tax treatment of private equity: questions over quirk. Daniel Shafer – The Financial Times. Governments in the U.S. and Germany are examining proposals to take away the preferential treatment that has helped to turn swaths of private equity managers worldwide into millionaires and a few dozens into billionaires. The prospect of lower profits as well as higher taxes not only risks denting private equity’s ability to attract talent. It also brings back to the fore accusations that buyout bosses have amassed riches by paying low taxes and taking dividends from indebted companies in their portfolio – a debate that started before the crisis but became sidelined as public anger turned towards banks. Such indictments do not come from trade unions or leftwing anti-globalization groups alone. Calpers, the California pension fund that is among the most influential investors in buyout funds, recently called the U.S. tax break on private equity managers’ profit rewards “indefensible.” Link

* IASB eyes selective reforms after frantic change. Huw Jones – Reuters. Tackling company “disclosure overload” will be among cherry-picked projects for accounting standards reform after industry calls to ease the pace of change, a top accounting rule-setter said on Wednesday. “Now we have most of the world on board, even a small change to a standard can be like dropping a pebble into still water,” International Accounting Standards Board Chairman (IASB) Hans Hoogervorst said in a speech in Mexico. Over 100 countries have introduced IASB rules for use in listed company reporting over the past decade, during which the board also worked with its U.S. peer to align each others’ standards. The aim was to persuade the world’s biggest economy to adopt IASB rules, too. But America has delayed its decision, recently prompting Singapore to put back full adoption of IASB rules. Meanwhile, the IASB is finalizing work for its next phase. Link

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

* California likes Facebook IPO tax possibilities. Vauhini Vara – The Wall Street Journal. California could reap a tax windfall of as much as $2.5 billion from Facebook Inc.’s initial public offering, a state analyst said Monday, in the first official forecast of the IPO’s impact on the cash-strapped state. The offering is forecast to bring in $500 million of income-tax revenue through stock sales in fiscal 2012, ending in June, followed by $1.5 billion in 2013 and $450 million from 2014 to 2016, according to a report from the Legislative Analyst’s Office, a nonpartisan government entity that advises the legislature. Facebook has planned for an IPO this spring. Link 

* Barclays at center of UK tax avoidance clampdown. Steve Slater – Reuters. Barclays Plc said it was the bank at the centre of a clampdown by Britain on two tax avoidance schemes that the government said would close loopholes and raise more than 500 million pounds ($792 million) in tax. Barclays said it notified Britain’s tax office about its plan to buy back its own bonds, on which it and other banks have made hefty profits in recent years. Tax avoidance is legal, but the Treasury said on Monday the scheme and another one were “highly abusive.” Link  

* “Big Four” auditors brace for big changes in China. Rachel Armstrong – Reuters. The Big Four global audit firms, which dominate the Chinese market, are negotiating with Beijing to lessen the impact of forced changes that could mean only accountants with Chinese qualifications can be partners in their audit practices. The overhaul comes at a delicate time for an audit industry reeling from a rash of accounting scandals at Chinese companies. Any reduction in the audit capacity of KPMG, Deloitte, Ernst & Young and PricewaterhouseCoopers (PWC) would increase foreign regulators’ and investors’ concerns about Chinese auditing. Link

Miss Oklahoma, Betty Thompson (R), first runner up in the Miss America contest

Oklahoma wants to abolish its state income tax. The plan, according to Governor Mary Fallin, is to achieve one of the lowest income tax rates in the country by eliminating some tax credits and closing loopholes in the tax code. Other taxes would not be increased, according to The Oklahoman.

“Our goal is to transform Oklahoma into the best place to do business, the best place to live, find a quality job, raise a family and retire in all of the United States. Not just better than average, but the very best,” state Representative Leslie Osborn said. (Cue Rodgers and Hammerstein music)

Across the United States, the average state sales tax rate has dropped, according to William Barrett at Forbes.

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.

New Jersey's Chris Christie wants tax cuts

In December, hopeful children around the world mailed in their requests to Santa Claus. Now it’s January, and governors across the country are standing before citizens and legislatures using State of the State addresses to lay out their wishes for the coming year. Top of the list, with a few notable exceptions, are tax cuts.

State revenues have climbed from 2009 and 2010 lows, largely on increasing individual income tax receipts. Still, that recovery is seen as tenuous due to a generally tepid economy and concerns that pivotal federal funding to the states could be on the cutting block as the country struggles with its growing debt and deficit.

Governors of a few states, including New York and Missouri, are not calling for cuts but say their states can avoid increasing taxes by relying on shrinking government and other moves to balance their budgets.