Essential reading: Foreign profits can create earnings illusion, and more

October 8, 2012

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

 * Foreign profits can create earnings illusion. David Reilly – The Wall Street Journal. Foreign-cash stashes and their impact on U.S. tax revenue are garnering increased attention given the looming presidential election and “fiscal cliff.” Investors should be concerned about the potential for these profits to distort earnings. Companies in the S&P 500 had $1.5 trillion parked outside the U.S. for which they hadn’t accrued tax expense in 2011, more than double the amount five years earlier. Link  

* The math behind Obama camp’s tax changes. Damian Paletta – The Wall Street Journal. One of the most divisive issues between the Obama and Romney campaigns is the math behind the Republican candidate’s proposal to overhaul the tax code. The debate has left many Americans’ heads spinning, given the large numbers and the complexities of the tax code. But it still remains one of the most important questions facing voters in the Nov. 6 election and comes down to this – whose math do voters trust? Link  

* Romney ad says Obama distorts tax cut plan. Trip Gabriel – The New York Times. In a television ad released Sunday, the Romney campaign returned to one of the most contentious issues of the presidential debate, accusing President Obama of falsely claiming that Mitt Romney would cut $5 trillion in taxes. Obama repeated the accusation several times in the debate last Wednesday and that assertion has been a staple of Democrats’ accusations that Romney’s economic plans favor the rich. Link  

* Cameron rules out mansion tax. Helen Warrell – The Financial Times. David Cameron and George Osborne have dismissed Liberal Democrat calls for a mansion tax or other wealth levies, although they both insisted that the rich will be expected to make a contribution towards the public finances. Speaking on the first day of the Conservative party conference in Birmingham, the prime minister confirmed he would not introduce a tax on expensive properties, but said he would make sure those with the “broadest backs” bore the greatest burden. Link  

* Time to end a tax break. The Washington Post editorial. At the risk of spoiling it, we’d like to take note of a quietly growing bipartisan consensus in support of doing something that might actually help the long-term financial condition of the United States government — or, to be more precise, a growing consensus against doing something that might harm U.S. finances. We speak of the broad opposition among Republicans and Democrats to another one-year extension of the Social Security payroll tax holiday, which workers have enjoyed for the past two years. Link

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