Tax Break

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

* Oldest Swiss private bank is newest U.S. target. Martin de sa’Pinto and Lynnley Browning – Reuters. On the morning of Jan. 27, Konrad Hummler, Wegelin leading partner, announced the bank had sold most of its assets to another Swiss bank. According to a person familiar with the matter, Hummler called it a last-ditch effort to preserve employees’ jobs amid withdrawals of assets by investors who were increasingly worried about a growing problem: a U.S. federal investigation into Wegelin’s sale of tax-evasion services to wealthy Americans. The dark-suited bankers and conservatively dressed office clerks, said the person, were in shock and tears. Wegelin, Switzerland’s oldest private bank, was indicted by the U.S. Justice Department on charges of enabling wealthy Americans to evade taxes on at least $1.2 billion from 2002 through last year. Link

* Japan to submit bill to double sales tax. George Nishiyama – The Wall Street Journal. Japanese Prime Minister Yoshihiko Noda’s cabinet is set to endorse a plan to double the national sales tax in three years, in a sign of the leader’s determination to push ahead with fiscal reform as focus turns to the country’s massive borrowing. The move will open the way for Noda to submit related bills to the parliament, but their passage is far from certain with the opposition controlling one of the two chambers and resistance to the tax increase even among the ruling party. Faced with outstanding public debt more than twice the size of its economy — the highest among rich nations — Noda wants to raise the current 5 percent sales tax to 8 percent in April 2014 and then to 10 percent by October 2015 to fund social-welfare spending. Link

Who pays no income taxes?

Who pays no federal income taxes?

Republicans grabbed onto a headline number last year from a respected tax policy group noting that nearly 50 percent of Americans pay no income taxes.

The statistics from the Tax Policy Center (TPC) came up again Wednesday at a hearing of the House tax-writing Ways and Means Committee, as lawmakers grilled Treasury Secretary Timothy Geithner about President Obama’s tax proposals.

“Mr. Secretary, you know the facts: the bottom half of earners in this country pay no federal income taxes,” Dave Camp, the panel chairman,  a  Republican, said.

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.

On Capitol Hill, companies want tax rate cut, but it’s unclear whose ox will be gored

Corporate America went to Capitol Hill on Wednesday for one of what will probably become dozens of tax reform hearings over the next few years.

Companies that you might call “winners” under the complex U.S. tax code – such as General Electric and some pharmaceutical companies which tend to pay a much lower rate than the standard 35 percent corporate tax rate – were not there.

Those you might call losers, brand name companies paying close to the top 35 percent — like FedEx and Time Warner — were. They all agree to cut the rate — no surprise there — but there was little consensus on what they would give up in return.

Essential reading: Chinese airlines, Swiss banks and more

 

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.

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.

Tax clips from the Web: Best states for business tax, slow IRS returns and a very wealthy candidate

Politics!

Republican presidential hopeful Mitt Romney released his 2010 tax returns to the public, shedding some light on what puts him among America’s top income earners. This chart on CNNMoney has been making the rounds all week, showing tax breakdowns for Mitt Romney, Newt Gingrich and President Obama.

Anyone who was expecting Romney’s 2010 tax filing to expose the candidate for unscrupulous manipulations of the tax law was delivered a goose egg. The returns did show a tax rate of 13.9 percent for the multimillionaire, but due to the laws on taxation of investment income, this was exactly the amount that Mr. and Mrs. Romney were required to pay, Forbes’s Tax Girl blog writes.

Is something of a seismic shift happening in American rhetoric over taxes? Politico polled members of Congress this week and found that Democrats largely agree with the sentiment that tax increases are now needed to address an expanding gap between wealth levels in the U.S. This suggests the tax issue may have the potential to remake the campaigns for many Democrats, including the president.

Mitt Romney’s tax returns explained: David Cay Johnston on CNN

 

Reuters Tax Columnist David Cay Johnston appeared on CNN earlier this week to discuss some of the interesting details in Mitt Romney’s tax returns.

For a direct link, click here.