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.
* A year of tax-code reckoning. Jonathan Weisman – The New York Times. Taxpayers struggling with their 2011 returns can take a little solace in the knowledge that change is coming — though it may be accompanied by increasing tax bills. For two decades, politicians have promised — and failed — to overhaul the tax code to make it simpler and fairer. This time they have a deadline of sorts. On Jan. 1, 2013, a major part of the current code turns into a pumpkin. That is when income tax rate cuts — a host of expanded tax deductions and credits, and generous changes in the taxation of dividends, capital gains and inheritances — are set to disappear. That day of reckoning was supposed to have come in 2011, but President Obama signed a two-year extension of President George W. Bush’s tax cuts of 2001 and 2003, along with temporary tax cuts of his own, most notably the two-percentage-point cut to the payroll tax. Link.
* The debate over capital gains has consequences for local budgets. Abha Bhattarai – The Washington Post. The debate over capital gains taxes taking place on the national stage could have major implications for local and state governments in the Washington region, economists say, particularly if the Bush tax cuts are allowed to expire. Capital gains are not just a key source of income for the wealthy, one that critics say allows them to pay lower taxes, but they are a big source of revenue for the District, Maryland and Virginia. Link.