Tax Break

Calendar

Nanette Byrnes

Sep 7, 2012 18:02 UTC

Some important tax and accounting events in the week ahead:

Monday, September 10

*Martin F. Baumann, Chief Auditor and Director of Professional Standards for the Public Company Accounting Oversight Board, speaks to the American Institute of Certified Public Accountants’ national conference on financial institutions. Washington.

Tuesday, September 11

* House Ways and Means Oversight Subcommittee hearing on the Internal Revenue Service’s implementation and administration of healthcare reform legislation. 10 a.m. EDT,  Longworth House Office Building. Washington.

Wednesday, September 12

International Tax Institute conference on tax treaty limitation on benefits clauses. 12:15 p.m. EDT, Grand Hyatt Hotel. New York.

Essential reading: Pharma company exploits tax structure, and more

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

 * Valeant exploits tax structure in Dedicis deal. Vipal Monga – The Wall Street Journal. Pharmaceutical company Valeant will use a tax structure it inherited from a 2010 merger to shave millions of dollars off of the tax bill of its latest target, Medicis. Link 

* Democrats hint at showdown with GOP after election. Damian Paletta – The Wall Street Journal. Top White House and Senate officials at the Democratic National Convention in Charlotte, N.C., offered new clues Thursday about their strategy heading into the lame-duck session of Congress after the November election, suggesting they plan on a showdown with Republicans over tax and spending policy. Democratic Senator Dick Durbin rejected a suggestion that lawmakers in the next few weeks block spending cuts that are scheduled to begin in January because he said he wants to keep the threat of these cuts looming over Republicans to force them to negotiate. Link  

* New York State tax department attacks fraud on new front. Nanette Byrnes – Reuters. New York State, a pioneer at catching tax scofflaws in the digital age, has a new weapon in its arsenal – data collected from debit and credit card purchases that will help it detect retailers who are under-reporting sales. By checking customer data against retailer tax returns, wholesaler records and other sources, the state hopes to find retailers who either fail to collect or remit the sales taxes due. Link  

* UK unveils oil field tax breaks in bid to drive growth. Reuters. Britain will offer new tax breaks to encourage investment in older oil and gas fields in the North Sea as the government, under pressure to stimulate growth, moves to revive a key part of the economy which has long been a driver of its prosperity. Finance minister George Osborne said on Friday that income from some mature oil fields would be shielded from a supplementary tax charge on producers to encourage them to maximise the amount of oil they pump out of the ground. Link  

* Romney & Ryan on tax. David Cay Johnston – Reuters opinion. Together Mitt Romney and Paul Ryan have put human faces on how the super-rich game the tax system to pay less, pay later and sometimes not pay at all. Both want to expand tax favors for the already rich, like themselves. Their approach favors dynastic wealth with largely tax-free (Romney) or completely tax-free (Ryan) lifestyles, encouraging future generations of shiftless inheritors. What we need instead is a tax system that encourages strivers in competitive markets, not a perpetual oligarchy. Link  

* Tax planning? Or tax cheating. Ed Kleinbard – The Los Angeles Times opinion. For citizens hoping for serious tax policy and budget debates, this has been a dispiriting election cycle. And now, compounding the race to the bottom, Mitt Romney has stepped forward to congratulate corporate tax cheats. Link  

Who pays the top income tax rate?

David Cay Johnston

Sep 6, 2012 20:46 UTC

President Obama wants to raise the top marginal income tax rate on salaries and other ordinary income from 35 percent to 39.6 percent by letting the extended temporary Bush tax cuts expire at year-end. 

Mitt Romney wants to drop the top rate by a fifth to 28 percent (and running mate Paul Ryan has called for a top rate of 25 percent).

So who pays the 35 percent rate? How much do they pay? And how much more would they pay if the Clinton-era rate of 39.6 percent were restored?

As this graphic shows, had the 39.6 percent rate been in effect in 2009, a few people making as little as $100,000 to $200,000 would have been affected. The total increase per taxpayer in that large group would be less than a penny each.

 The tiny group of 8,274 taxpayers who made more than $10 million in 2009, and collectively reported 3.1 percent of all the adjusted gross income that year, would pay on average $687,500 more if the permanent Clinton rates return.

That is 2.4 percent of their average $29 million adjusted gross income.

The reason the increase is not 4.6 percentage points (the difference between 35 and 39.6) is that only about half of their money is ordinary income, while much of it is long-term capital gains and qualified dividends taxed at 15 percent.

Essential reading: FBI, Secret Service deepen Romney tax mystery, and more

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

* FBI, Secret Service deepen Romney tax mystery. Delvin Barrett – The Wall Street Journal. The two local Tennessee political leaders who received envelopes claiming to contain long-secret Mitt Romney tax returns said they didn’t believe the strange claims in the anonymous letters and didn’t take it seriously until the Secret Service knocked on their doors Wednesday. Earlier Wednesday, accounting firm PricewaterhouseCoopers said it had no evidence that anybody had gained access to Romney’s old tax returns, following a report that hackers claimed to have broken into a PwC office in Tennessee and were threatening to release the tax information. Link  

* Online buying surges as tax deadline looms. The San Francisco Chronicle. Chris Cheng doesn’t need 40 hand warmers right now, but the longtime Amazon.com customer is loading up on them anyway. With the Internet retail giant set to begin collecting sales taxes on California purchases Sept. 15, the San Francisco resident is among many tech-savvy consumers trying to cram in some last-minute tax-free shopping. Link

* Soda tax war taking shape in two California cities. Lisa Baertlein and Martinne Geller – Reuters. Two small California cities are the latest battlegrounds in the $111 billion U.S. soda industry’s fight to defend a near-perfect record of defeating proposed taxes on sugary drinks. In November, voters in cash-strapped Richmond and El Monte will decide whether to pass penny-per-ounce taxes on sugar-sweetened drinks to bolster municipal coffers and fight obesity. Link 

* Should nude lap dances be tax-free? N.Y. court to decide. Rene Lynch – The Washington Post. Nude lap dances are no different from a ballet performance or musical arts performance and should be exempt from sales taxes, according to an attorney for a New York strip club. That’s the argument scheduled to be made before the state’s highest court, the Court of Appeals, and just the latest example of New Yorkers squabbling over where to draw the line between lewd behavior and high-brow art. Link 

* Osborne rejects Barclays’ ‘damage’ claims. Vanessa Houlder – The Financial Times. George Osborne has dismissed claims by Barclays that the Treasury caused “unnecessary damage” to its reputation in its handling of a tax dispute. In a letter to MPs, the chancellor robustly defended the exceptional use of retrospective legislation in February to block a “highly abusive” tax scheme. Link  

* More tax tricks, private equity style. The New York Times editorial. The best way to end the management fee waiver problem is to get rid of the special rate for capital gains. As long as income from investments is taxed at a lower rate than income from work, there will be no stopping the search for ways, legal or otherwise, to pay the lower rate. Link

Essential reading: How Romney avoided a controversial tax practice, and more

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

 * How Romney avoided controversial tax practice. Mark Maremont – The Wall Street Journal. Mitt Romney appears to have dodged a bullet after his lawyer said last week that the GOP candidate never engaged in a tax practice that’s now being investigated by New York’s attorney general. The statement, however, created another mystery: How did Romney avoid getting involved in a tax practice that appears to have been widely used in recent years at his old firm, Bain Capital? Link  

* Facebook says no secondary offering to cover tax bill. Alexei Oreskovic – Reuters. Facebook Inc promised not to sell stock to cover a nearly $2 billion tax bill and said it will allow employees to cash in their stock weeks ahead of schedule, moving to soothe nervous investors and its own staff as its share price spirals downward. The world’s largest online social network company, which has lost more than 50 percent of its market value since going public in May, said on Tuesday its total shares outstanding will be reduced by roughly 101 million shares as a result of the move. Link  

* Reid renews attacks on Romney’s tax disclosures. John McKinnon – The Wall Street Journal. Senate Majority Leader Harry Reid renewed his hard-nosed attack on Mitt Romney over the Republican’s personal taxes, during an appearance at the Democratic convention Tuesday. This time, though, Reid seemed to pull a couple of his big punches. Notably, Reid didn’t repeat his well-publicized charge that Romney hasn’t paid any taxes for a decade, perhaps because Romney has categorically denied that charge. Link  

* U.S. state growth tied to tax, welfare policies, Fed study shows. Reuters. States with simpler tax codes and lower welfare payments have stronger wage and employment growth than other states in the union, research published Tuesday by the U.S. Federal Reserve Bank of San Francisco showed. The findings, published in the San Francisco Fed’s latest Economic Letter, suggest that state policymakers can goose economic and job growth by fostering a better business climate as measured by taxes and other costs. Link  

* The bullish case for dividend stocks. Jonathan Burton – The Wall Street Journal. Don’t give up on dividends. The possibility of an increase in the tax on stock dividends next year will kick up a lot of dust in the next few months about the diminished value of these payouts in that scenario—and about the threat of share prices tumbling as dividend stocks fall out of favor. Link  

* What’s at issue in the private equity tax inquiry. Victor Fleischer – The New York Times opinion. Management fee waiver programs are complicated. At issue is whether, through these Byzantine programs, private equity executives are improperly using pretax dollars, rather than after-tax dollars, to invest in their own funds. Link

Essential reading: Candidates split over tax credit for wind energy, and more

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

* Candidates split over extending tax credit for wind energy producers. Catherine Ho – The Washington Post. President Obama and presumptive Republican nominee Mitt Romney clashed last week over a federal tax credit for businesses that produce wind and other alternative energy. In campaign events in Colorado, Obama emphasized his support for extending the tax credit and attacked Romney for opposing the extension, framing his opponent’s stance as a threat to job creation. Link

* Ryan wants to give the wealthy even bigger tax cuts than Romney does. Suzy Khimm – The Washington Post. In picking Paul Ryan, Mitt Romney has doubled down on his own campaign promise to give big tax breaks to the wealthy, uniting himself with a candidate who goes even further to do so: While Romney would bring taxes for top incomes down to 28 percent, Ryan has proposed bringing the top rate down even lower, to 25 percent. Meanwhile, Ryan’s plan would actually increase the effective tax rate on the very poorest Americans by getting rid of tax breaks that benefit low earners. Link

* Paul Ryan gave Romney camp several years of tax returns. Reuters. Mitt Romney released two years of his own tax returns to the public, but that didn’t appear to be enough when he vetted running-mate Paul Ryan and other vice presidential candidates. The campaign team for Romney, the Republican presidential candidate, reviewed several years of tax returns from Ryan and others, according to the head of Romney’s VP search process Beth Myers. Link

* Apologetic Swiss banks sweat it out as U.S., Europe mull redress. Katherina Bart – Reuters. Swiss banks hoping to atone for decades of complicity in tax evasion may be left to sweat it out for months as the United States and Germany ponder the right level of punishment. Eleven Swiss banks are under investigation in the United States and there is pressure too from Europe where burdened taxpayers want scalps after numerous banking scandals. The Swiss need a deal to remove the taint from their financial industry. Link

* Japan sales tax increase passed, on pledge of early election. Hiroko Tabuchi – The New York Times. Prime Minister Yoshihiko Noda’s plan to double Japan’s sales tax was approved by Parliament on Friday after months of haggling, but only after Noda promised opposition lawmakers that he would call early elections — a move that is likely to end his term in office and his party’s hold on power. Despite low popularity ratings, Noda, who took office last September, has pushed ahead with the plan to raise the tax to 10 percent from 5 percent by 2015, an increase he says is necessary to start reducing the country’s debt. Link

* In super-rich, clues to what might be in Romney’s tax returns. James Stewart – The New York Times opinion. The Internal Revenue Service made this summer a startling disclosure that six of the 400 super-rich individuals paid no federal income tax. The IRS has never before disclosed that last fact. That data demonstrates that many of the ultra rich can and do reduce their tax liability to very low levels, even zero. Link

Essential reading: Attack targets Romney’s role in Marriott tax deals, and more

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

* Attack targets Romney’s Marriott role. Laura Meckler – The Wall Street Journal. The Obama campaign Thursday released another TV ad suggesting that rival Mitt Romney may not have paid any income taxes at all in prior years, the latest in a relentless campaign centered on his refusal to release more than two years of tax returns. It highlights his role on the audit committee at Marriott International Inc., a period during which the company used improper tax strategies. The ad alleges Romney approved “son of BOSS” tax shelters. Link

* Romney on not releasing more tax returns: ‘I’m not a business’ Aaron Blake – The Washington Post. The man who once said “corporations are people” apparently doesn’t believe the inverse. When pressed on why he’s not releasing more tax returns in an interview with Bloomberg Businessweek, Mitt Romney justified it by saying: “I’m not a business.” “I have met with that requirement with full financial ­disclosure of all my investments, but in addition have provided and will provide a full two years of tax returns.” Link

* Obama knocks Romney on renewable energy, tax shelter. Jeff Mason – Reuters. Obama portrayed federal tax credits for the wind industry as a critical economic necessity that Romney, the former governor of Massachusetts, would nix. “Renewable energy is creating new jobs in states like Colorado and Iowa, my opponent wants to end tax credits for wind energy producers,” Obama told a crowd of some 3,500 people at the Colorado State Fairgrounds in Pueblo. The industry supports 5,000 jobs across Colorado, and 37,000 jobs would be at risk nationwide without the credits, he said. Link

* U.S. municipal downgrades most in a decade. Vivianne Rodrigues and Nicole Bullock – The Financial Times. Moody’s downgraded nearly 300 US municipal issuers in the second quarter, the most for any quarter in more than a decade and the latest sign of the potential pressure building in the market where states and local governments raise money. Local areas across the U.S. have been struggling for several years after the recession sharply undercut revenues, with three cities in California recently filing for bankruptcy in an attempt to alleviate their financial burdens. Link

* Japan parliament passes sales-tax increase. Toko Sekiguchi – The Wall Street Journal. Japan’s parliament passed a landmark tax bill on Friday, finalizing the legal framework to double the nation’s sales tax by 2015 as a step toward fiscal reconstruction. The upper house enactment of the contentious bill marks the end of Prime Minister Yoshihiko Noda’s tortuous 12-month road to raise the tax to 8% in April 2014 and 10 percent in October 2015. While Noda staked his political career on the bill, he had to make some serious compromises and his attention is likely to quickly shift to fending off calls from the opposition for a general election. Link

* If guns do not kill, tax the bullets. Jim Dwyer – The New York Times. In 1993, Democrat Senator Daniel Patrick Moynihan had a proposal to stop gun violence. His solution: Increase the tax on bullets. He wouldn’t raise the tax on ammunition typically used for target shooting or hunting. But he proposed exorbitant taxes on hollow-tipped bullets designed to penetrate armor and cause devastating damage. “Ten thousand percent,” Moynihan said. That would have made the tax on a 20-cartridge pack of those bullets $1,500. “Guns don’t kill people; bullets do,” said Moynihan, who died in 2003. Link

Calendar

Nanette Byrnes

Aug 10, 2012 13:00 UTC

Some important tax and accounting events in the weeks ahead:

Wednesday, August 15• A number of lawyers for the U.S. Internal Revenue Service and Department of Justice speak on an American Bar Association, Section of Taxation, webcast entitled “International Tax Enforcement and Globalization: Can the Tax Police Keep Pace with the Criminals?” 1 p.m. EDT.

Thursday, August 16• Brenda Zent, attorney-adviser in the U.S. Treasury’s Office of International Tax Counsel, speaks on a Grant Thornton webcast about international tax matters related to cross-border mergers and acquisitions. 3 p.m. EDT.

Monday, August 20 – Friday, August 24• Tax Executives Institute conference on international tax issues. Atlanta.

Tuesday, August 21 – Thursday, August 23• IRS executives and other experts address tax issues in multiple workshops. Chicago.

Friday, August 24• IRS hearing on proposed regulations affecting pension plans which are connected to bankrupt companies. 10 a.m. EDT, IRS Auditorium. Washington.

Essential reading: Watchdog says U.S. IRS allows bogus taxpayer IDs, and more

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

* U.S. IRS allows bogus taxpayer IDs-watchdog report. Patrick Temple-West – Reuters. The U.S. Internal Revenue Service has recently issued thousands of tax identification numbers to ineligible people and, in some cases, IRS managers condoned the practice, the tax collection agency’s watchdog said on Wednesday. The accusation by the Treasury Inspector General for Tax Administration, or TIGTA, comes at a time of intense national debate about illegal immigrants, many of whom apply for and get taxpayer ID numbers instead of Social Security numbers. Link

* In Iowa, Romney leaves a stance on wind power unsaid. Trip Gabriel – The New York Times. Seeking support in the swing state of Iowa, Mitt Romney on Wednesday called for developing a laundry list of energy resources that included wind power, but he pointedly did not mention that he opposes a tax credit for the wind industry that the state’s Republican leadership strongly favors. Republican Governor Terry Branstad and members of Iowa’s Congressional delegation have criticized Romney in recent days for not backing a longstanding tax break for wind energy in a state where the industry employs about 7,000 workers. Link

* Japanese premier cuts a deal on tax bill. Toko Sekiguchi and Alexander Martin – The Wall Street Journal. Japanese Prime Minister Yoshihiko Noda promised to call elections soon in exchange for the support of the main opposition parties in a deal to save his sales-tax legislation from defeat. The agreement Wednesday to hold general elections “in the near term” ended a revolt that could have derailed the measure and raised more worries about the country’s troubled fiscal condition. Link

* Suburban taxpayers vote to support Detroit Museum. Patricia Cohen – The New York Times. The Detroit Institute of Arts was saved from devastating budget cuts Tuesday night after voters in three Michigan counties agreed to institute a property tax increase earmarked specifically for the museum. The levy — known as a millage tax — is expected to raise $23 million a year and put the arts institute on secure financial footing for the first time in two decades. Link

* Kansas voter uprising. The Wall Street Journal opinion. After Tuesday’s primary, Kansas Governor Sam Brownback now has a conservative majority and a voter mandate to finish the job of simplifying the Kansas tax code and maybe phasing out the income tax. Conservatives for the first time in decades next year will have a governing majority with at least 26 of the 40 Senate seats. Link

* Americans need to face the harsh truth and pay more tax. Jared Bernstein – The Financial Times opinion. Data from the non-partisan Congressional Budget Office reveal that, when it comes to federal taxation, U.S. households are less taxed now than 30 years ago, and that is not just a function of the recession. The CBO data began in 1979 when the typical, or median, household paid 19 percent of their income in federal taxes. In 2009, that share had fallen to 11 percent. Democrats should be forthright with the fact that we’re way below where we need to be in terms of revenue collection. Link

Essential reading: Indigestion for the French in a plan for higher taxes, and more

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

* Indigestion for ‘les Riches’ in a plan for higher taxes. Liz Alderman – The New York Times. A chill is wafting over France’s business class as President Francois Hollande presses a manifesto of patriotism to “pay extra tax to get the country back on its feet again.” The 75 percent tax proposal, which parliament plans to take up in September, is ostensibly aimed at bolstering French finances as Europe’s long-running debt crisis intensifies. But because there are relatively few people in France whose income would incur such a tax — perhaps no more than 30,000 — the gains might contribute but a small fraction of the 33 billion euros in new revenue the government wants to raise next year. Link

* Japan’s Democrats offer polls in ‘near future’ to save tax plan. Yuko Yoshikawa and Tetsushi Kajimoto – Reuters. Japan’s ruling Democrats on Wednesday offered to call an election in the “near future” to save their sales tax increase plan after the opposition demanded a commitment to early polls in return for backing the bill in an upper house vote. The opposition has yet to formally respond to the pledge, but first reactions suggested it was too vague. Link

* Cayman Islands drops plan to tax foreign workers’ income. Shurna Robbins – Reuters. The Cayman Islands has dropped plans to impose an income tax on foreign workers nearly two weeks after proposing it in a last-ditch effort to overcome budget woes. The Cayman Islands, which has had no income tax, is known as a tax haven for the mega-rich. The irony of imposing the tax was not lost on the financial industry workers who came out in droves to protest a measure that they said could hurt the industry that has made the beach-lined British territory one of the richest in the Caribbean. Link

* Chinese accounting earns tough stance. David Reilly and Duncan Mavin – The Wall Street Journal. Accounting fraud and China have become synonymous for many investors. It isn’t hard to see why. Billions of investor dollars have been lost on scandals at overseas-listed Chinese companies such as Longtop Financial and Sino-Forest. Audit firms have resigned at dozens of such companies. And some of their resignation letters make for chilling reading with mentions of fake bank statements, made-up invoices and intimidation of audit staff. Link

* Obamacare’s phony deficit reduction. Betsy McCaughey – The Wall Street Journal opinion. The half-trillion dollars in tax hikes and half-trillion dollars in cuts to Medicare funding together total more than the cost of the new entitlements during the next 10 years, according to the CBO, and produce a small $109 billion surplus. Repealing Obamacare would erase that tiny surplus. So what? Repeal also would reduce government spending, lower taxes, and undo the evisceration of Medicare: all good results. Nevertheless, Senate Majority Leader Harry Reid declared that the CBO “confirms what we’ve been saying all along: the Affordable Care Act saves lots of money.” Untrue. Link

* Reid and Romney’s sleazy rhetoric on taxes. The Washington Post editorial. If Senator Harry Reid has any proof, he owes it to Romney, the presumptive Republican presidential nominee, to put it on the record, now. Otherwise, Reid ought to pause and reflect on the record of another senator who once claimed to have a list of Communists and spies at the State Department — and could not substantiate it. Link