Essential reading: Next school crisis for Chicago is its dwindling pension, and more

September 20, 2012

Chicago teachers ended their strike and went back to the classroom September 19. REUTERS/John Gress

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

 * Next school crisis for Chicago: Pension fund is running dry. Mary Williams Walsh – The New York Times. One of the most vexing problems for Chicago and its teachers went virtually unmentioned during the strike: The pension fund is about to hit a wall. The Chicago Teachers’ Pension Fund has about $10 billion in assets, but is paying out more than $1 billion in benefits a year — much more than it has been taking in. Link  

* US tax net closes on Americans living in Britain. Vanessa Houlder – The Financial Times. The US tax net is closing on hundreds of Americans living in Britain who have failed to file returns, as further details emerge about the planned transfer of their banking details to the Internal Revenue Service. Banks will have to identify all their US customers by 2015, according to a consultation paper spelling out the implementation of a pioneering agreement on tackling tax evasion that the US and UK governments signed last week. Link  

* Wind-sector cuts tied to tax-credit clouds. Keith Johnson – The Wall Street Journal. New layoffs at Siemens AG’s wind-power factories in the U.S. mark the latest retrenchment in the wind industry caused in part by the looming expiration of a federal tax credit. Current U.S. law gives wind-power producers a tax credit of 2.2 cents per kilowatt-hour, a subsidy that keeps wind energy competitive with other methods of generating electricity. The tax credit is set to expire at the end of the year. Link  

* Distortion in tax code makes debt more attractive to banks. Jesse Eisinger – ProPublica (via The New York Times). For businesses, debt interest payments are tax deductible; equity payments, like when a company pays out a dividend, are not. At the margin, this encourages entities to take on more debt than they otherwise would. The tax break makes the debt cheaper and encourages banks, at the margin, to gorge on more. Link  

* Ruling boosts fight against tax avoidance. Vanessa Houlder and Ed Hammond – The Financial Times. The government has won an important legal victory in its fight against stamp duty avoidance, in a blow to similar schemes used to dodge an estimated 170 million pounds ($275.79 million)of tax. A tribunal has ruled against a company that used a rule, originally designed to prevent double taxation, to avoid 290,000 pounds of stamp duty on a 2006 purchase of a business park in Stockton-on-Tees. Link

* Poll shows close call for Jerry Brown’s tax plan. The Los Angeles Times. Roughly half of California’s likely voters support Gov. Jerry Brown’s tax initiative, according to a new poll, making its success a tossup less than two months before the election. The poll, released Wednesday night by the Public Policy Institute of California, said 52 percent supported the measure, putting passage within the 4.4 percent margin of error. Link  

* N.J. tax showdown looms. Heather Haddon – The Wall Street Journal. Gov. Chris Christie received more difficult budgetary news Wednesday, setting up a political showdown with the Democratically-controlled Legislature over the governor’s plans for a property-tax credit. Tax collections were 5 percent below targets for July and August. Link

* Sweden 22-U.S. 35. The Wall Street Journal editorial. Sweden’s Prime Minister Fredrik Reinfeldt has announced that he intends to cut the corporate tax rate to 22 percent from 26.3 percent. The rate cut will be partially offset by closing some loopholes, but it will leave famously high-tax Sweden with one of the lowest corporate tax rates in Western Europe. Link

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