Unstructured Finance

Essential reading: Some in GOP urge lawmakers to back tax hikes for changes in safety-net programs, and more

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

* Some in GOP urge lawmakers to back tax hikes for changes in safety-net programs. Lori Montgomery and Rosalind Helderman – The Washington Post. A growing chorus of Republicans is urging House leaders to abandon their staunch opposition to higher tax rates for the wealthy with the aim of clearing the way for a broad deal that would also rein in the cost of federal health and retirement programs. Link

* Plan to limit tax breaks gets a push from Boehner. John McKinnon – The Wall Street Journal. A cap on tax breaks designed by a former Reagan adviser is drawing attention after House Speaker John Boehner floated it as an option this week. The White House and Republican leaders have proposed limiting tax breaks to raise tax revenue under a long-term deficit-reduction deal. GOP leaders want to limit deductions instead of raising individual income-tax rates. President Barack Obama wants to do both. Link

* Small firms fret over higher taxes. Emily Maltby – The Wall Street Journal. As President Barack Obama and Republicans in Congress debate how to address the nation’s deficit and avoid the so-called fiscal cliff, some small-business owners are getting a chance to air their complaints. On Wednesday, 15 business owners made a case against Obama’s proposal to allow tax-cuts to expire for those making upwards of $250,000. Link

* In fine print of fiscal debate, charities unite to defend deductions. Annie Lowrey – The New York Times. Proposals to cap or otherwise limit deductions in order to raise tax revenue from the wealthy are gaining bipartisan support in Washington — and making charities and nonprofits very worried. Link

* The shifting line on tax cuts. Ruth Marcus – The Washington Post opinion. Memories are short, which is lucky for politicians. Consider the current debate over letting the Bush tax cuts for the wealthy expire, and the largely forgotten rationale for cutting taxes in the first place. Hint: It wasn’t because rates were too high. It was because the surplus was too big. Yes, too big. Link

What investors can look for in 2013

By Matthew Goldstein and Jennifer Ablan

Big money managers do not always agree–that’s what makes a market–but if there was one consensus coming out of our just concluded Reuters Investment Outlook Summit, it’s that next year will probably be another bang up one for the bond market.

Now the credit markets will have a tough time repeating the kind of numbers put up this year, especially with the Federal Reserve doing its darndest to push down borrowing costs and yields by buying  mortgage backed securities and even Treasuries. Speaker after speaker who joined us in New York said “junk” bonds, corporate debt, mortgage- and commercial-backed securities and even Treasuries “on a trading basis”  should do well for no other reason than credit markets still aren’t showing anything close to the kind of froth we saw in the run-up to the financial crisis. The sense is that it may be another 2 or 3 years before we see excesses build up in the system again.

Oh sure, there are exceptions such as, bonds being sold by companies to pay special dividends to their private equity backers (several speakers said to avoid these). Other guests also are wary of the junk bond market, noting with yields coming down the risk to reward premium isn’t looking as good as it did earlier this year. And at least one speaker said he would avoid mortgage REITS because there’s too much leverage baked into their holdings.

Essential reading: GOP in a difficult political spot in tax fight, and more

Speaker of the House John Boehner walks out with Senate Majority Leader Harry Reid after a bipartisan meeting with U.S. President Barack Obama, November 16, 2012. REUTERS/Larry Downing
Welcome to the top tax and accounting headlines from Reuters and other sources.

* In tax fight, GOP seeks a position to fall back on. Jonathan Weisman – The New York Times.
With President Obama insisting on higher tax rates for affluent Americans and winning public support for the idea, Congressional Republicans find themselves in an increasingly difficult political spot and are quietly beginning to look for a way out. Link

* Obama: ‘Fiscal cliff’ deal must include higher tax rates for top earners. Lori Montgomery and Rosalind S. Helderman – The Washington Post. President Obama on Tuesday rejected a GOP proposal to collect new taxes from high earners by limiting their deductions and tax breaks, insisting that any deal to avert the year-end “fiscal cliff” must include an agreement to raise the top income tax rates. Link

Essential reading: Top U.S. firms are cash-rich abroad, cash-poor at home, and more

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

* Top U.S. firms are cash-rich abroad, cash-poor at home. Kate Linebaugh – The Wall Street Journal. Emerson Electric Co. has $2 billion of cash in the bank. But this year it had to borrow money in the U.S. to help buy back shares, distribute dividends and even pay its taxes. As a result, Emerson says, it brings its foreign cash holdings back to the U.S. only if that can be “accomplished tax efficiently.” Link

* GOP makes counteroffer in cliff talks. Janet Hook and Carol Lee – The Wall Street Journal. House Republicans on Monday made a fresh deficit-reduction proposal to the White House that calls for $800 billion in increased tax revenue, half of what President Barack Obama has proposed. Link

* Expect a few more weeks of cliff diving. Paul Vigna – The Wall Street Journal. Sick and tired of the fiscal-cliff debate yet? Hope not, because we’ve got a few more weeks of the proverbial cliff diving before this whole thing is settled. Link

from Lauren Tara LaCapra:

As Morgan Stanley drops “Smith Barney,” some wonder about the brand

At the Goldman Sachs investor conference on Tuesday, Morgan Stanley wealth management executive Greg Fleming ran through his 31 slides like a financially savvy drill sergeant, with a full discussion of margins, lending, technology, "value propositions" and "illustrative solutions."

But in the Q&A session, he was asked an unusually thoughtful question by an audience member: What about the brand, and the culture, of Morgan Stanley Wealth Management?

As Morgan Stanley has taken control and increased ownership of the Smith Barney retail brokerage from Citigroup, legacy Smith Barney brokers have often complained about what's happening to the culture. Morgan Stanley is all about numbers and metrics, they say, expecting brokers and managers to constantly do more with less.


Some important tax and accounting events in the week ahead:

Monday, Dec. 3 – Wednesday, Dec.5
• Securities and Exchange Commissioner Luis A. Aguilar, SEC acting chief accountant Paul Beswick, and the chairs of the Public Company Accounting Oversight Board, Financial Accounting Standards Board and International Accounting Standards Board all speak to the American Institute of CPAs conference on SEC and PCAOB developments. Marriott Wardman Park Hotel. Washington.

Tuesday, Dec.4
• Former congressional tax staff speak at PwC’s global tax symposium. The Ritz-Carlton. Washington.

Wednesday, Dec.5 – Friday, Dec. 7
• Treasury Department and Internal Revenue Service tax experts address the Practicing Law Institute conference on tax law strategies for corporate acquisitions, dispositions, spin-offs, joint ventures, financings, reorganizations and restructurings. InterContinental Hotel. Los Angeles.

While you were sleeping (the China ISM number came out)

By Katya Wachtel

For Omega Advisors’ Steve Einhorn, the window of sleep-able hours is narrowing.

“One needs to know whats going on around the world. I turn in around midnight so I can monitor what’s going on in China and Japan,” Einhorn, vice chairman at Leon Cooperman’s $7billion fund, said at the Reuters Global Investment Summit last week.  ”A decade ago, did I and most others focus on what’s going on in China? No. Now we wait for the November manufacturing index for China to come out. The day is longer because of that. I am up around 6 in the morning; I review what has gone on overnight in Asia and in Europe. I spend an hour in front of the machine at home, going through data and news releases” before he’s out the door.

This was undoubtedly the most common refrain when we asked some of Wall Street’s savviest money managers and investors how they begin their day, and with what must-read literature, during the week-long summit.

Essential reading: As companies seek tax deals, governments pay high price, and more

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

* As companies seek tax deals, governments pay high price. Louise Story – The New York Times. A Times investigation has examined and tallied thousands of local tax incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. Link

* Companies quietly push for tax break on foreign profits in ‘fiscal cliff’ debate. Jia Lynn Yang and Suzy Khimm – The Washington Post. Amid the tumult over looming tax hikes and spending cuts, a massive change to the corporate tax code is quietly gathering steam. Link

* ‘Fiscal cliff’ talks at a stalemate over tax hikes. Zachary Goldfarb – The Washington Post. As the White House and Republican leaders enter the final month of negotiations to avoid a year-end “fiscal cliff,” both sides struck an uncompromising tone Sunday, as warnings mounted that they will be unable to forge an agreement to stop an automatic series of deep spending cuts and large tax hikes that could push the economy into recession. Link

Essential reading: Most Americans face lower tax burden than in 1980, and more

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

* Complaints aside, most face lower tax burden than in 1980. Binyamin Applebaum and Robert Gebeloff – The New York Times. Most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid 30 years ago. The combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980. Link

* Obama’s cliff offer spurned. Janet Hook, Damian Paletta and Carol Lee – The Wall Street Journal. President Barack Obama made an opening bid in budget talks with Republicans that calls for a $1.6 trillion tax increase, $50 billion in infrastructure spending in 2013 and new power to raise the federal debt limit, a provocative set of demands that Republicans said represented a step backward in efforts to avoid looming tax increases and spending cuts. Link

* Analysis: Democrats’ discord undercuts Obama estate tax push. Kim Dixon – Reuters. Divisions among Democrats are undermining President Barack Obama’s push to raise the U.S. estate tax on inherited wealth, just weeks before the arrival of the “fiscal cliff” could drive the present estate tax rate even higher than Obama proposes. Link

* A menu of revenue-raising options. John McKinnon – The Wall Street Journal.
President Barack Obama and congressional leaders, seeking to raise revenue as part of their high-stakes budget talks, have an extensive menu of options for increasing tax bills. Link

Essential reading: Mortgage-interest deduction could be in play, and more

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

* Mortgage-interest deduction could be on the table in ‘fiscal cliff’ debate. Brady Dennis – The Washington Post. As Congress and the White House negotiate the first major rewrite of tax laws in decades, changing the generations-old mortgage-interest deduction — which costs the government roughly $100 billion a year — has gone from far-off possibility to part of the conversation. Link

* Energy: The next big idea. Ed Crooks – The Financial Times. One key factor in many energy company deals is the master limited partnership (MLP) structure: a tax-privileged structure, protected under 1987 legislation that allows its use for companies in a handful of industries, including natural resources. As the U.S. frets about the approach of the fiscal cliff, there has been speculation that MLPs’ tax-favored status could be under threat. Link

* Obama is flexible on highest tax rates. Damian Paletta and Carol Lee – The Wall Street Journal. President Barack Obama signaled he wouldn’t insist tax rates on upper-income Americans rise to Clinton-era peaks as part of a deficit-reduction deal. The new clarity of the White House position marks a potentially important moment in Washington’s effort to figure out how to handle tax rates that are due to snap higher next year. Link