Fight over Bush-era tax slash moves to campaign trail

Congress prepared to leave town without voting to expand the Bush-era tax cuts Wednesday, choosing to shift the fight over one of the year's biggest partisan battles from the halls of Congress to the political campaign trail.Both Democrats and Republicans see latent political gains in carrying the tax fight to their home states, banking on their ability to induce voters that the other side is to blame for the impasse. Congress is expected to put the issue to a vote in the post-election lame-duck session.

The decision introduces a fiery matter into an election in which control of the House, and possibly the Senate are in the balance. What happens to the $3.7 trillion tax package will feel the pocketbook of almost every voter. It also has major implications for the federal budget and U.S. economy in the residue of President Barack Obama's first term. Most Democrats support extending the tax cuts to all but top earners -- individuals making $200,000 or more and families earning $250,000, for whom they favor letting the Bush cuts lapse. Unless Congress acts, all the tax cuts will slip at year's end. Republicans and some conservative Democrats favor extending the cuts for all, arguing that tax cuts for wealthier Americans would help businesses expand and create jobs.

Voters who are focused on pocketbook issues this campaign season will be offered two distinct views on the tax cut debate. As the tax cuts loomed large over the final days of congressional debate, both the House and Senate conducted a flurry of votes, even though both Democrats and Republicans were anxious to leave Washington for the campaign season. Congress was on track to reach an agreement to keep the government running by approving a stop-gap spending bill called a continuing resolution that would hew to 2010 spending levels. The resolution was needed because Congress had failed to pass any of its annual appropriations bills.

Both the House and Senate also conducted a series of votes this week on core issues designed to underscore Democratic priorities, even though the bills had little chance at final passage before the midterm elections. The House on Wednesday passed legislation to fund a new health program for responders and community members injured in the Sept. 11, 2001, terrorist attacks in New York, and re-open the federal victims' compensation fund. The bill has not passed the Senate.

As a last effort to address the nation's stubborn unemployment rate and promote jobs, the Senate voted also on an outsourcing bill that offered a payroll tax holiday to firms bringing overseas jobs back to the United States and imposed tax penalties on those that ship jobs overseas.The outsourcing bill failed largely along party lines, with some Democratic dissent, in what Sen. Mitch McConnell of Kentucky, the Republican leader, called "about as pure a political exercise as you can get."As the tax cut debate hangs over the political season, both sides offered a glimpse of the arguments as they prepared to make the case to voters.

"It's irresponsible for them to leave town," said Rep. John Boehner of Ohio, the Republican leader, as Democrats made it clear they would not be bringing the issue to the floor. "This is no way to run the people's House."Many economists say that as the economy continues to struggle it would be unwise to raise taxes on the middle class. They give credence to the proposal from Obama and Democrats to extend tax cuts for those making less than $200,000 and families making less than $250,000, despite the $3 trillion cost.But economists are split over extending $700 billion in tax breaks for the wealthy, as the GOP want to do.

Mark Zandi, chief economist at Moody's Analytics, has argued for phasing out the tax break for the wealthy but not until after 2011.Studies from the Tax Policy Center show just 1.7 percent of all American taxpayers earn more than the $200,000 cut off.

Tax credits hype as key to homelessness

Tax cuts -- and not more funding for government-led programs -- could be the key to helping end homelessness in Canada if Ottawa offers tax credits to entice private enterprise into building more low-income housing, according to a policy paper released by the University of Calgary.

The report, issued by the university's School of Public Policy on Tuesday, says U.S.-style tax credits could help stem the tide of condo conversions and make it more financially feasible for developers to construct new multi-family rental units.
Affordable housing has become particularly critical in cities like Calgary, where roughly a third of all multi-family rental housing units in this city have vanished since 1992, and resident research associate for the University of Toronto's Cities Centre, who also co-authored the report.

"Homelessness is a problem that will be solved only with the connection of the private sector. We deem we must pay attention to tax incentives and regulatory measures to harness the energy and efficiency of the private sector.
The tax incentives being planned are based on the U.S. low income housing tax credit, which has been operating since 1986.

It would modify existing Canadian tax laws to offer breaks to developers who include affordable housing units in new construction. Building owners making major repairs on apartments with an eye to converting them into condominiums could also be eligible for the tax credits, if they make a long-term pledge to maintain the units as rentals.

While the tax credits would divert $50 million in tax revenues from federal coffers in its first year, $100 million in the second year and $150 million in its third year, it would fund between 3,500 and 5,000 rental units nationwide.
Alberta's share of this boost to rental spaces would be between 300 and 500 units.
The tax cuts are a small government investment that could yield dramatic results because they offer a financial incentive for private business to get involved in helping address a social concern, said Ron Kneebone, director of economic and social policy research for U of C's school of public policy.

And ultimately it will be the taxpayer who is going to win the race.

Business pushes to extend tax cuts

The business community and anti-tax groups are sloping up their campaign to win an extension of the Bush tax breaks for the wealthy and hand President Barack Obama and his economic team a defeat just in time for Election Day.

This battle, however, is about other than just winning one policy fight. It’s also about clutching an eleventh-hour opportunity and maximizing gains that have largely eluded corporate interests since Obama took office.

With Democrats on the ropes on the campaign trail and cringing from the idea of another tough vote, conservatives now find themselves with a better than fair shot at getting all of President George W. Bush’s tax cuts extended — at least for a couple of years, a prediction that would have been deemed laughable two years ago.

Then, if the Democrats fall in November, the business community can try to make those tax cuts permanent and still pocket a handful of other tax breaks that Obama put on the table in topical weeks — a move one corporate insider dismissed mockingly as “flailing in the face of November.”
Business leaders disagree that a tax hike timed to hit the wealthiest Americans in January would stall job growth by hobbling small businesses and shrinking money available for investments that could help spur new economic activity.

Advocates of revoking the tax breaks dispute that argument, saying only a tiny percentage of small businesses would be affected and that an influx of federal cash is needed to help pay for the extension of Bush’s middle-class tax cuts and support more-effective jobs programs.

To push back on that message, the U.S. Chamber of Commerce on Wednesday will steer into town executives from more than 40 small-to-medium-sized businesses for a tax policy briefing that will close with a lobbying blitz on Capitol Hill.

The Business Roundtable, meanwhile, has 87 chief director officers from major corporations coming to Washington the same day, and their dance cards are full, too. Among those scheduled to assemble down with the CEOs are White House chief of staff Rahm Emanuel, Sen. Ben Nelson (D-Neb.), Sen. Susan Collins (R-Maine) and Rep. Dave Camp (R-Mich.).

“Our situation is that this is not the time to raise any taxes. The economy is very frail,” said Johanna Schneider, the Roundtable’s executive director for external affairs.

The Chamber’s grass-roots division has also helped engender more than 75,000 letters from constituents to lawmakers about the need to extend the credits; a similar letter was generated by its Tax Relief Coalition, which represents just about every trade group in town.

“We will go to the House Democrats who sent a letter to the president in January calling for an extension of the tax cuts and others — a increasing number of them on the battle trail — to try to see if they will join with us,” said Bruce Josten, the Chamber’s executive vice president for government affairs.

Americans for Tax Reform, a conservative group also calling for extension of the tax breaks, is running radio ads in House districts, placing belief pieces in local newspapers and writing letters to Capitol Hill lawmakers updating them of what ATR is doing in their home districts.

“We’re centering on the districts because lobbying is a waste of time when there is an election coming. Democrats and Obama may vote to prolong the tax rate reductions for two years because they fear losing the next election. They can’t be swayed it is bad policy,” said Grover Norquist, ATR’s president. “The only way to change their minds is to make them afraid of the voters. And if they don’t change their minds, the voters can change them.”

DTC provides some relief to tax payers

The much-awaited Direct Tax Code (DTC) Bill, which aims to replace the existing Income-Tax Act, 1961, has finally been presented in the Parliament and once approved by both Houses, it will be enacted as a law, effective from April 1 2012. While a lot had been anticipated from the DTC in terms of widening of tax slabs and reduction in tax rates, the proposal in its current form does not have a great deal for the aam aadmi. For one, though the tax slabs for individual tax payers have been widened, the resultant savings in the hands of the individual tax payers is just a pittance.

TAX SLABS: The DTC proposes to increase the limit of income exempt from tax to `2 lakh from the current `1.6 lakh for individual and to `2 lakh from `1.9 lakh for working women. This will result into a minimum saving of `4,000 per annum for individuals and `1,000 per annum for women.

On the positive note, the new proposal aims to abolish the distinction between the individual and a women tax payer, bringing both of them at par — at least as far as payment of taxes is concerned. But given the rising cost of living with each day, an additional disposable income of about `4,000 and `1,000, respectively, does not sound much appealing.

From today, consumers buying new vehicles will be cuffed with a carbon emission tax.

In February this year the National Treasury announced that the tax which is aimed at encouraging people to drive more environmentally friendly cars.

Primarily the tax will apply only to passenger cars, but it will eventually be extended to commercial vehicles.

Automobile Association NAAMSA says South Africans will have to get used to the idea of having 'green taxes' to help protect the environment.

Nico Vermeulen says the tax is calculated based on how much carbon dioxide a car emits per kilometer.

He explains how motorists will be affected by the new CO2 tax: "The average vehicle will probably incur an additional cost to the consumer of about 2.5%, that is assuming the manufacturer and importer costs are passed on to the consumer.

"But in the case of a number of cars, the increase in the cost to the consumer - as a result of the tax - could be between five and six percent."

But Vermeulen says the tax on all double-cabs will only be implemented next year March, as the industry is still testing the fuel consumption in these vehicles.