Essential reading: Pension managers become opportunistic amid volatility, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Pension managers become opportunistic amid volatility-survey. Min Zeng – The Wall Street Journal. Greater volatility after the 2008 global financial crisis has conquered and divided the investing community. The latest report from a global survey of investors by asset management firm Principal Global Investors and U.K.-based consultancy CREATE-Research indicated that while retail investors have become more conservative, professional managers have responded with a more dynamic, opportunistic approach. Link
* New York Attorney General rebuffs Congressional Republicans. Nicholas Confessore – The New York Times. Attorney General Eric T. Schneiderman of New York on Monday rebuffed demands from Congressional Republicans to refrain from requesting tax returns and other information from tax-exempt groups that have spent heavily on campaign ads. In a letter to Senator Orrin G. Hatch of Utah, the ranking member of the Senate Finance Committee, and Representative Dave Camp of Michigan, the chairman of the House Ways and Means Committee, Mr. Schneiderman asserted the right to request federal tax documents from such groups and subpoena them if necessary. Link
* Ad attacks Romney on taxes, secret video. John McKinnon – The Wall Street Journal. The ad says that according to the just-released 2011 Romney tax return, the candidate and his wife “paid just 14.1 percent in taxes last year.” And it says that “he keeps millions in Bermuda and the Cayman Islands” and won’t release his tax returns before 2010. Link
* Republicans champion ‘voluntary taxes.’ Bruce Bartlett – The New York Times. The Republican-controlled House of Representatives took a break last week from doing nothing to pass a bill to facilitate voluntary taxation. Almost simultaneously, Mitt Romney released his final tax return for 2011, showing that he voluntarily overpaid his taxes by taking less of a deduction for his charitable contributions than he was permitted. Link
* The 10 percent president. The Wall Street Journal editorial. Liberals continue to claim that the main causes of the current fiscal mess are tax rates established in, er, 2001 and 2003 and the post-9/11 wars on terror. But by 2006 and 2007, those tax rates were producing revenue of 18.2 percent and 18.5 percent of GDP, near historic norms. Another quandary for President Obama’s apologists is that he has endorsed nearly all of these policies. The 2003 Medicare drug benefit wasn’t offset by tax hikes or spending cuts, but Democrats expanded the program as part of ObamaCare. Link
* Tax on wealth is true to Tory principles. Janan Ganesh – The Financial Times opinion. Nick Clegg has one idea that can claim to be big, distinctive and popular: his enthusiasm for taxing wealth, especially property. The party’s mission to raise the threshold of income tax to 10,000 pounds ($16,200) is proceeding apace, but to little acclaim. This is their own fault. Link
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Welcome to the top tax and accounting headlines from Reuters and other sources.
* Pension crisis looms despite cuts. Michael Corkery – The Wall Street Journal. Almost every state in the U.S. has made cuts to its public-employee pensions, seeking to dig out from the economic downturn, but so far the measures have fallen well short of bridging a nearly $1 trillion funding gap. Since 2009, 45 states have rolled back pension benefits for teachers, police, firefighters and other public workers, including cuts by Michigan and California this month. Next week, Republican Ohio Gov. John Kasich is expected to sign legislation requiring, for example, that certain teachers work longer and pay more toward their pensions. Link
* Romney, in interview, says his tax rate is “fair.” Reuters. U.S. Republican presidential candidate Mitt Romney said he thinks it is “fair” that he pays a lower tax rate on his investment income of $20 million last year than someone who made $50,000 annually. Romney released his 2011 return on Friday, which showed he paid an effective tax rate of 14.1 percent. Link
* Next tax argument: Romney’s foreign investments. John McKinnon – The Wall Street Journal. President Barack Obama’s campaign officials on Friday sought to highlight the issue of the Romneys’ foreign investments. Over half the 2011 return’s 379 pages are devoted to about 50 separate filings of Form 8621, which indicate holdings in offshore investment firms. Link
* UK deputy prime minister backs higher ‘wealth tax.’ Ainsley Thomson – The Wall Street Journal. Nick Clegg, the U.K. Deputy Prime Minister and leader of the Liberal Democrats on Sunday said he won’t back plans for further government spending cuts unless the richest people contribute more, saying he believes there will be an additional “wealth tax” in place by the next general election. Speaking in the English seaside town of Brighton at his party’s annual conference, Clegg said the measures to ensure the highest earners paid their fair share weren’t limited to the Liberal Democrats’ longstanding policy of a tax on properties valued at more than 2 million pounds ($3.2 million). Link
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Welcome to the top tax and accounting headlines from Reuters and other sources.
* GOP retreat on taxes likely if Obama wins. Lori Montgomery and Paul Kane – The Washington Post. Senior Republicans say they will be forced to retreat on taxes if President Obama wins a second term in November, clearing the biggest obstacle to a deal with Democrats to defuse a year-end budget bomb that threatens to rock the U.S. economy. Republicans have long resisted tax increases of any kind. But taxes are a major battleground in the campaign between Obama and Republican Mitt Romney, Capitol Hill veterans say, and the victor will be able to claim a mandate for his policies. Link
* Tax credit in doubt, wind power industry is withering. Diane Cardwell – The New York Times. On top of the business challenges, the industry is facing a big political problem in Washington: the Dec. 31 expiration of a federal tax credit that makes wind power more competitive with other sources of electricity. This year, the tax break has become a wedge issue in the presidential contest. Link
* Microsoft, HP skirted taxes via offshore units: U.S. Senate panel. Kim Dixon – Reuters. Microsoft Corp and Hewlett-Packard Co pushed back against claims by a U.S. Senate panel on Thursday that they used offshore units and loopholes to shield billions of dollars in profits from U.S. taxes. Calling tax avoidance rampant in the technology sector, the Senate’s Permanent Subcommittee on Investigations said tech companies used intellectual property, royalties and license fees in overseas tax havens to skirt taxes. Link
* Private company accounting board to tackle uncertain tax positions, fair value. Emily Chasan – The Wall Street Journal. The Financial Accounting Foundation named the first members to its new Private Company Council. Once it is up and running, the body plans to tackle accounting rules that private companies have long complained are overly burdensome, such as accounting rules for uncertain tax positions and fair value accounting. Link
* Rethinking tax-deferral strategies. Arden Dale – The Wall Street Journal. Deferring taxes is a crucial part of most financial plans. But sometimes advisers make the wrong assumptions about which investors stand to benefit most from the strategy. Studies often use flawed logic to conclude that tax deferral gives the biggest benefit to the wealthy who are in high-tax brackets. However, young investors in most cases stand to gain more from the strategy, even when their tax brackets are low. Link
* An Illinois pension bailout? The Wall Street Journal editorial. Now that Chicago’s children have returned to not learning in school, we can all move on to the next crisis in Illinois public finance: unfunded public pensions. Readers who live in the other 49 states will be pleased to learn that Governor Pat Quinn’s 2012 budget proposal already floated the idea of a federal guarantee of its pension debt. Link
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Some important tax and accounting events in the week ahead:
Monday, Sept. 24
* Financial Accounting Standards Board webcast on proposed changes to the 2013 taxonomy for the eXtensible Business Reporting Language (XBRL).
Friday, Sept. 28
* Public Company Accounting Oversight Board member Jay D. Hanson speaks to the University of Nebraska-Omaha’s 2012 speakers series. Omaha, Nebraska.
* Director of the PCAOB’s division of enforcement and investigations, Claudius Modesti, addresses the New York County Lawyers’ Association meeting “Lawyers and Accountants – An Interdisciplinary Dialogue: Issues and Understandings.” New York.
Some important tax and accounting events in the week ahead Join DiscussionEssential reading: Next school crisis for Chicago is its dwindling pension, and more
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
Essential reading: Next school crisis for Chicago is its dwindling pension, and more Join DiscussionEssential reading: L.A. pension proposal would hike retirement age, cut benefits, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* L.A. pension proposal would hike retirement age, cut benefits. David Zahniser and Kate Linthicum – The Los Angeles Times. Setting the stage for a legal battle with employee unions, the Los Angeles City Council is weighing a new plan to reel in pension costs by hiking the retirement age and cutting benefits for thousands of future civilian employees. The proposal, unveiled the same day that the council backed a three-year business tax break worth roughly $50 million, would set the retirement age at 65 and establish new financial penalties for those who retire earlier. Link
* IASB warns of reduction in bank lending. Adam Jones – The Financial Times. Banks could be deterred from lending under a new approach to bad loan provisioning being developed in the US, according to the head of the body that sets rival international accounting rules. In another sign of how attempts to create global accounting rules have unraveled, Hans Hoogervorst, International Accounting Standards Board chairman, criticized a more conservative attitude to bank accounting that has gained favor in the US. Link
* Much of Romney’s view on taxes conflicts with longtime GOP stand. Annie Lowrey and Michael Cooper – The New York Times. On Monday, Mitt Romney waded into an ideological clash pitting two strands of conservative thinking against each other: the longstanding goal of reducing the tax burden on the poor with tax credits versus the growing anxiety that the nation’s “takers” are now overtaking its “makers.” Link
* Some surprises in income-tax-free households. John McKinnon – The Wall Street Journal. More than 40 percent of households between $30,000 and $40,000 paid no income tax in 2011, according to a recent study by the nonpartisan Tax Policy Center. About 30 percent of households in the $40,000 to $50,000 income range had no income tax liability in 2011. Link
* The great American tax debate. Eduardo Porter – The New York Times. The great American tax debate may feel like a stale, perennial feature of our politics. But it is important. The controversy is not merely about how much we pay in taxes. An equally important question is about who pays them. The liberal end of our political spectrum strongly believes that tax policy should aim to reduce inequities in pretax income. Link
* Taxes over the life cycle. Paul Krugman – The New York Times. Even aside from the fact that there are other taxes besides the income tax, even aside from the larger point that lower-income working Americans are hardly grifters, the fact is that the vast majority of Americans do pay income taxes at some point in their life. Link
Essential reading: L.A. pension proposal would hike retirement age, cut benefits, a roundup of Romney coverage, and more Join DiscussionEssential reading: No sales-tax effect on Amazon in Texas, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* The sales-tax effect on Amazon: Nada. Greg Bensinger – The Wall Street Journal. A new survey by Wells Fargo analyst Matt Nemer showed that consumers in Texas, the second most populous state in the nation, essentially haven’t changed their buying habits since the online sales tax went into effect in July. Link
* Credit Suisse to reveal more data, staff names in U.S. tax probe. Katherina Bart – Reuters. Credit Suisse said it would transfer more information on its money management arm for wealthy Americans to U.S. officials, including more names of its own employees, as part of an effort to settle a tax evasion probe. For the first time, Credit Suisse employees will be told before their names are disclosed to U.S. officials, a bank spokesman said, after previous transfers of information by banks drew criticism. Link
* Lawyers focus on new tax crackdown. Vanessa Houlder – The Financial Times. London lawyers are set to be targeted by tax inspectors in an intensive crackdown on evasion that is expected to yield 3 million pounds ($4.88 million). HM Revenue & Customs will announce on Tuesday that the London legal profession is one of five high-risk sectors around the country to be scrutinized by specialist taskforces. Inspectors will visit premises to examine records and carry out other investigations. Link
* Behind the people who pay no income tax. Annie Lowrey – The New York Times. Mitt Romney is absolutely correct that about half of American households do not pay federal income tax. But he is missing some crucial context on why they do not pay federal income tax. Link
* Some big corporations don’t pay taxes, either. Bruce Bartlett – The New York Times opinion. Republicans always accept tax cuts at face value, because to them there is no public policy problem that isn’t caused by high taxes. Tax cuts are their solution to just about every problem. Cutting the corporate tax rate is among the key measures that all Republicans favor to stimulate growth. Link
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Some important tax and accounting events in the week ahead:
Wednesday, Sept. 19
* Center for Audit Quality forum on investor confidence. 8:30 a.m. EDT, Willard InterContinental hotel. Washington.
* Columbia University School of Law panel on how to improve the tax code and what tax policies might boost economic growth. 6:15 p.m. EDT, Jerome Green Hall, Columbia Law School. New York.
Thursday, Sept. 20
*U.S. Senate Committee on Finance and the House Ways and Means Committee joint meeting on tax reform and the tax treatment of capital gains. 10 a.m. EDT, Capitol Visitor Center. Washington.
*Representatives from the Internal Revenue Service, Financial Accounting Standards Board, and elsewhere appear at the U.S. Senate Permanent Subcommittee on Investigations hearing on offshore profit shifting and the U.S. tax code. 2 p.m. EDT, Dirksen Senate Office Building. Washington.
Some important tax and accounting events in the week ahead: Join DiscussionEssential reading: Financially troubled parts of Europe consider taxing church properties, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Financially troubled parts of Europe consider taxing Catholic Church properties. Ariana Eunjung Cha – The Washington Post. Cash-strapped officials in Europe are looking for a way to ease their financial burden by upending centuries of tradition and seeking to tap one of the last untouched sources of wealth: the Catholic Church. Thousands of public officials who have seen the financial crisis hit their budgets are chipping away at the various tax breaks and privileges the church has enjoyed for centuries. Link
* An expiring tax credit threatens the wind power industry. Kate Galbraith – The New York Times. Wind power companies are closely watching developments in Washington, where a tax credit benefiting wind farms is due to expire at the end of this year. The implications of that could be especially significant in Texas, the top wind power state, which contains about a fifth of the nation’s turbines and is building expensive transmission lines to support more growth. Link
* House-Senate hearing planned on capital gains taxes. John McKinnon – The Wall Street Journal. The House Ways and Means and the Senate Finance committees, one run by Republicans and the other by Democrats, will sit down for a rare joint hearing next Thursday, this time on the topic of capital gains taxes. It’s the third in a series of joint hearings that the two committees have held during the current Congress on the broad topic of overhauling the bulky U.S. tax code. Link
* Mere threat of tax cliff already weighing heavily on small businesses. J.D. Harrison – The Washington Post. Small business owners, like so many Americans, are anxiously waiting to see whether Congress can avoid potentially catastrophic spending cuts and tax code revisions scheduled to take place at the end of the year. But already, just the threat of toppling off the tax cliff is weighing on their decisions and bottom lines. Link
* Senate Dems tee up tax bill, but quick work isn’t likely. John McKinnon – The Wall Street Journal. Senate Democratic leaders signaled their hopes of voting soon on extending a range of short-term tax breaks for businesses and individuals. But Republicans remained skeptical that a vote can happen before the November elections despite the procedural move by Democrats to take up the bill. The Senate is scheduled to recess at the end of next week, and resume work after the Nov. 6 elections. Link
* Osborne to reject pleas on green tax subsidy. Jim Pickard – The Financial Times. George Osborne is set to reject pleas by big business for the government to subsidize the scrapping of a 1 billion pound green tax by increasing the energy bills paid by small companies. The chancellor said in the spring Budget that he wanted to revise or scrap the “carbon reduction commitment”, which is levied on 2,100 companies with energy bills of more than 500,000 pounds ($805,900) a year. Link
Essential reading: Financially troubled parts of Europe consider taxing church properties, and more Join DiscussionEssential reading: California workers to shoulder more pension costs, and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* California workers to shoulder more pension costs. Vauhini Vara – The Wall Street Journal. California will begin overhauling pensions for government workers in January, after Gov. Jerry Brown signed a law Wednesday to boost current employees’ contributions and cut benefits for future workers. The new law mandates that, beginning in January, people who start working for California and many of its cities will face higher retirement ages and smaller pensions when they retire. Link
* Obama ad hits Romney on tax cuts. David Jackson – USA Today. President Obama’s latest television ad attacks Mitt Romney over his proposed $5 trillion tax cut, saying it will wind up actually raising taxes on the middle class. The ad also makes reference to Romney’s refusal to release more than two years of tax returns. Link
* Informer sparked New York probe. Reed Albergotti and Laura Saunders – The Wall Street Journal. New York state Attorney General Eric Schneiderman’s probe of tax practices at private-equity firms is based on information from a whistleblower, according to a person familiar with the matter. The ongoing probe is examining whether partners at private-equity firms changed management fees into investment income to delay tax payment and pay less. Link
* Debate over ‘fiscal cliff’ weighs on growth. Phil Izzo – The Wall Street Journal. Dithering in Washington over the “fiscal cliff” of automatic tax increases and spending cuts set for year-end is already hindering economic growth, according to economists surveyed by The Wall Street Journal. The economists put the odds at less than 20 percent that a standoff would trigger all the spending reductions and expiration of tax cuts. Link
* Sometimes, it takes a thief to catch one. Peter Henning – The New York Times. The question of Bradley Birkenfeld is whether there may be a perverse incentive for people to first help others violate the law in the hopes of later garnering a fat check. The eye-popping reward may be a lure for others to search high and low for fraud, and perhaps even help commit a crime for the sake of the potential reward. Link
* Mayor Bloomberg: Low taxes aren’t the most important priority for businesses. Suzy Khimm – The Washington Post. If Washington really wants to help businesses, New York Mayor Michael Bloomberg says that politicians need to stop obsessing so much over tax rates. When it comes to improving the business climate, “Usually the pundits think of this as lowering taxes,” Bloomberg said in a Wednesday speech in downtown D.C. “But taxes are just one element of the environment — and usually not the most important.” Link
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