Carbon tax might be offset by tax cuts

 
Australians earning less than $80,000 a year could be given two rounds of tax cuts as compensation for any price rises under the Gillard government's proposed carbon tax. But wealthier people "will pay a price" as the country moves to a low-carbon economy under a 10-year plan unveiled by Labor climate alter adviser Ross Garnaut.

Both sides of politics were fast to use the economist's final update to his landmark 2008 climate alter review to push their own barrow. Labor noted, properly, that the report was scornful of Tony Abbott's direct action policy because it would cost more than placing a price on carbon but not raise any revenue to compensate households with.

But the opposition leader held on another claim in the report. Prof Garnaut made clear on Tuesday that "Australian households will in due course bear the full cost of a carbon price". "So how can (the prime minister) continue to preserve that her tax only makes big polluters pay," Mr Abbott asked parliament.

"Who pays? Big polluters or households? The truth is households." A carbon price of $26 a tonne would raise about $11.5 billion in 2012/13. After the tax transitions to an release trading scheme in 2015 it could rake in much more - up to $16 billion by 2022/23.

Prof Garnaut wants 55 per cent of the revenue raised in the first three years to go to low and middle-income earners in the form of tax cuts and senior welfare payments. That could rise to 65 per cent by 2021/22. The rest of the revenue would be used to help business, drive innovation and stock up carbon in land systems.

Wealthier Australians would pick up the tab. That's because in the long run business will pass carbon costs from side to side to the users of their products. "High-income earners who don't get a tax cut or something else will experience a reduction in real incomes," Prof Garnaut told reporters.

"That's just the economics of it... people on high incomes will pay a cost." Most of the household assistance under Prof Garnaut's 10-year plan would be in the form of tax cuts, with the tax-free threshold raised to $25,000. That would result in 1.2 million Australians paying no tax.

Other rates would be rejigged to ensure people earning more than $80,000 a year wouldn't benefit. Prof Garnaut argued that as transitional aid to business declines there would be further opportunity for "a second round of tax cuts". Such a move wouldn't be bad politics, the adviser said. Ms Gillard seems to agree. She told parliament on Tuesday "tax cuts are a serious option".

The impact of a carbon price on petrol prices would be lessened by a one-off cut to the fuel excise. But business would get less under Prof Garnaut's plan than was on offer under Kevin Rudd's carbon pollution reduction scheme. Emissions-intensive, trade-exposed industries would get 30 per cent of the revenue pie for the first three years but that would decline by 1.5 percentage points annually after that.

Electricity generators would receive just three per cent until 2015 and then nothing. When it comes to pollution reduction targets, Prof Garnaut wants them determined by an independent committee. In 2014, it would review Australia's current pledge to cut emission by five per cent in 2020 relative to 2000 levels. The committee could advise much deeper reductions depending on international developments.

The world's developed countries have, on average, already vowed to cut emissions by between 10 and 16 per cent by 2020.

A Texas Attorney Is Disbarred from Practicing Before the IRS for Willful Failure to File Tax Returns

The Internal Revenue Service’s Office of Professional Responsibility (OPR) has prevailed in a Texas attorney’s appeal of an order for disbarment to practice before the IRS for willfully failing to file his federal tax returns, according to the Decision on Appeal.

The Treasury Secretary’s Delegate to hear appeals (Appellate Authority) has confirmed the basis for, and result of, the summary judgment granted by Administrative Law Judge (ALJ) Susan L. Biro in the case of Director, Office of Professional Responsibility vs. Donald J. Petrillo, according to the Decision on Appeal.

OPR alleged that Texas attorney Petrillo willfully failed to timely file his federal individual income tax returns for 2001 through 2006 and willfully failed to file his 2007 tax return. The untimely filings were from two to four years late. OPR further alleged that Petrillo willfully failed to pay the outstanding tax balances due on the late filed returns.

Petrillo did not deny the allegations but argued that his failures to file and pay were not the result of willful conduct but were due to personal circumstances beyond his control. Using the standard for “willfulness” set forth in previously published Circular 230 cases (“a voluntary, intentional violation of a known legal duty”), the ALJ found that the various explanations given by Petrillo for his failures to file did not negate his willfulness.

However, the ALJ explicitly declined to adopt OPR’s position that willful evasion of payment for purposes of Cir 230, sec 10.51(a)(6) should be analogous to Trust Fund Recovery penalty assessments. Finding that the failures to file were significant enough by themselves, the ALJ ordered disbarment without addressing the failures to pay.

In his appeal, Petrillo argued that (1) the ALJ applied a willful negligence standard rather than a willfulness standard; (2) the ALJ applied the wrong standard for willfulness; (3) material facts were in issue making summary judgment inappropriate; and (4) he was denied due process because the standards were changed from willfulness to willful negligence after the Complaint was filed.

The Appellate Authority determined that the ALJ had correctly and consistently applied the existing standard for willfulness to Petrillo’s conduct; that the ALJ had correctly determined from the deposition testimony and briefs that there were no material factual issues remaining to be heard; and that the ALJ’s findings of fact were well supported by the record and not clearly erroneous. Finding, during the periods in issue, that Petrillo was not mentally or physically incapacitated; was gainfully employed; prepared tax returns for others; engaged in legal work for clients; and conducted his own personal business, the Appellate Authority concurred in the ALJ’s decision to disbar, noting that Petrillo had been previously suspended by OPR from 1993 through 1997.

“This is yet another in a line of Final Agency Decisions in the past two years which reiterate that practitioners cannot expect to be excused for not filing or late filing their own tax returns when the record reflects their active engagement in other tax and business matters on behalf of paying clients, or active involvement with their own personal activities which belie any debilitation,” said OPR Director, Karen L. Hawkins.

Tax On Funk Food

In an effort to alter bad eating habits of its citizens, the Hungarian government plans to bring in “tax on hamburgers.”

“Ministry of studying the likely effects of introducing taxes called” hamburger tax ‘, “said economics minister Gjergi Matolči on the site of the Assembly.

“Psychoanalysis of dietary habits in recent years and their effects on health shows that eating too much fatty and salty food reasons more problems,” noted the minister.

“To stop this process, various ministries are studying taxes that could be introduce, their economic effects, but it is still unclear which products will be to relate, and how to used the profits from these taxes,” he added.

If being a “hamburger tax”, a fast food restaurant chains will be able to protest to him as a discriminatory measure, since the Hungarian cuisine is not easy.

IRS Announces VCAP Relief from Debt Extinguishment for Certain Issuers of Tax-Exempt Bonds

Internal Revenue Service (“IRS”) Announcement 2011-19 provides relief from debt extinguishment for certain issuers purchasing and holding their own tax-exempt securities under the Tax Exempt Bonds Voluntary Closing Agreement Program (“TEB VCAP”).

Notice 2008-41, modified by Notice 2008-88, and extended by Notice 2010-7 to December 31, 2010, provided temporary rules allowing state and local governmental issuers to purchase and hold their own tax-exempt obligations for temporary holding periods. This rule prevented extinguishment of the purchased obligations under § 103 and §§ 141-150 of the Internal Revenue Code (“Code”). These temporary rules provided relief from liquidity constraints in the tax-exempt bond market during the financial crisis.

For various reasons, some issuers that purchased their bonds under the temporary rules were unable to resell their bonds by December 31, 2010. Other issuers are experiencing an ongoing need to purchase and hold their own tax-exempt obligations due to certain financial challenges.

Closing agreements executed under this program provide that the extinguished bonds are treated as remaining outstanding for purposes of § 103 and §§ 141-150 beginning from the later of January 1, 2011, the expiration of the temporary rules, or the date the issuer purchases its obligations.

The closing agreement will require the issuer to:

(1) submit a resolution of its intent to resell or currently refund the extinguished tax-exempt bonds no later than 180 days after the closing agreement is signed;

(2) submit representations or an unqualified bond counsel’s opinion the bonds are outstanding legal, valid and binding obligations of the issuer under State law and, if treated as outstanding under the closing agreement, will qualify as tax-exempt obligations of the issuer under § 103 of the Code;

(3) pay a fee based on the formula described in the Announcement. The TEB VCAP requests are due no later than December 31, 2012 under the operating procedures described in section 7.2.3 of the Internal Revenue Manual.

Simplifying federal tax code will decrease fraud

USA TODAY's article "Inmates stole $39 million from the IRS in 2009" serves to highlight that the wealthy are not the only ones trying to get extra money back, avoid taxes or pay less than their compulsion under the current federal tax system. Income tax evasion and fraud cut across all income tax brackets.

A complex system of exemptions, deductions and credits creates a state of mind that others aren't paying their fair share, so why should I? It creates a false insight of tax evasion and fraud as victimless crimes. But the victims are the countless taxpayers who pay and file their taxes in a timely, precise manner. They are supporting financially all the tax cheats.

It is time to make simpler the tax code and stop using it to advance political agendas or to accomplish social engineering.

Every year, I pay my Pennsylvania income tax, and I am reminded how simple and fair it is. Take your income and increase it by the current tax rate, a flat 3.07%, and arrive at your tax obligation. Simple. There are very few adjustments, credits or exemptions. The system is fair. Low-income Pennsylvanians have their tax compulsions forgiven. For Pennsylvania retirees, Social Security and pension income do not count as taxable income.

By using the Pennsylvania income tax system, much of the fraud and abuse that occur with the current federal income tax system could be eliminated

Obama to recommend break for states on jobless aid

President Obama is expected to recommend easing the burden on states that on loan to provide jobless benefits during the economic downturn by allow them to postpone debt payments to the federal unemployment trust fund for two years.

The proposal in his upcoming 2012 budget is likely to be embraced by states frantic for help as they struggle to shore up budget shortfalls. But it is being disapproved of by congressional Republicans as a job-killer that will eventually inflict higher taxes on employers who pay the cost of most jobless aid.

Obama is likely to discuss the suggestion with Republicans on Wednesday, when House Speaker John A. Boehner (R-Ohio) and other House GOP leaders join him for lunch.

White House Press Secretary Robert Gibbs said the president thinks the steps future in his budget outline would reduce the burden on states providing jobless aid, and would give state officials time to "reduce what they offer and how they pay for it." Obama's budget is expected to be revealed Monday.

The proposal is not the only gauge to help states run the fiscal fallout from persistent unemployment, said one person familiar with the discussion.

Yet Republican leaders in the House and Senate have made it clear they have little interest in providing federal help to cash-strapped states, as Democrats did last year when they forbidden Congress. At the time, Obama approved a states' aid bill to keep teachers on the job and give medical care for lower-income residents.

"There will be no post security of the states," Rep. Eric Cantor (R-Va.), the House majority leader, said recently.

Thirty states owe almost $42 billion to the federal unemployment insurance trust fund, and the president's proposal would congeal for two years their interest payments to the federal government. Obama's plan would also halt the tax adds to that kick in automatically to pay it off.

Congressional Republicans say the Obama proposal would obstruct job growth by allowing states to eventually increase the tax on employers who pay for unemployment benefits.

IRS Announces 2011 Air Transportation Tax Rates

The Internal Revenue Service today announced the 2011 inflation adjustments to the excise taxes on air transportation.

Excise taxes apply to the domestic segments of taxable air transportation and to the use of international air facilities. The Airport and Airway Extension Act of 2010, Part IV, signed into law on Dec. 22, 2010, extends these excise taxes to air transportation that begins or is paid for no later than March 31, 2011.

These excise taxes are adjusted annually for inflation:
•    For 2011, the excise tax on the domestic segment of taxable air transportation is $3.70, unchanged from 2010.
•    The excise tax for 2011 for international flights that begin or end in the United States is $16.30, up from $16.10 in 2010.
•    The tax on use of international air facilities also applies at a reduced rate to departures of interstate flights that begin or end in Alaska or Hawaii. For 2011, the international air facilities tax on these flights is $8.20, up from $8.10 in 2010.

The new rates take effect Jan. 1, 2011.

Tax cut deal: What to expect in your paycheck

Come January, you'll start to see some changes in your paycheck, as the new Social Security tax break that President Obama signed into law Friday takes result. The measure, part of a sweeping package of tax cuts, will decrease the amount of money workers pay into Social Security in 2011, which will mean more take-home pay for many workers, although not for all.

Workers normally pay 6.2% on their first $106,800 of wages into Social Security. As a result of the tax cut deal passed by the House on Thursday night, they will only pay in 4.2% in 2011. So, for every thousand dollars in wages per paycheck up to the cap, one would only have $42 withheld (4.2% x $1,000), rather than $62 (6.2% x $1,000).

But given how late in the year it is, it may take employers a pair of pay periods to get everything working as it should. Employers typically need a few weeks to program and test their new payroll systems. The IRS just issued guidance on Friday morning, a few weeks later than normal because Congress waited until the very last minute to render its decision on tax policy for 2011.

"It could be the third paycheck of the year before you see a 'normal' check," said Scott Mezistrano, senior manager of government relations of the American Payroll Association.

Here's what that might mean:

Say you make $1,000 a paycheck. Your first paycheck in 2011 may have $62 withheld -- or $20 too much -- because your employers' payroll tax system has not been fully re-programmed, Mezistrano said. To compensate you for that, only $22 may be withheld in your second paycheck (4.2% x $1,000 - $20).

And, with any luck, by your third paycheck in 2011, everything will be set to the right dial. The IRS on Friday asked employers "to adjust their payroll systems as soon as possible but not later than Jan. 31, 2011. For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers' pay as soon as possible, but not later than March 31, 2011."

How much more they will net relative to this year depends on whether they qualified for the expiring Making Work Pay credit. That credit provided up to $400 to any working individual making less than $75,000 (or up to $800 for working couples making less than $150,000).

For instance, individuals who make $50,000 will see a bump of $1,000 in take-home pay, which is $600 more than the Making Work Pay credit they got this year. For a couple at that income level, it will mean $200 more than they received under Making Work Pay.

For people making less than $20,000 (or couples making less than $40,000), they may actual see a drop of about $210 on average in their take-home pay relative to this year, because the payroll tax break will be worth less to them than the Making Work Pay credit was.

The IRS noted that the Social Security tax break for 2011 will have no effect on your future Social Security benefits, which are based on your career earnings.

Deal on Bush-era tax cuts

In an eleventh-hour compromise, United States President Barack Obama struck a deal with his well-established Republican opposition to extend Bush-era tax cuts for another two years.

The cuts, introduced in 2001 by the former President, George W. Bush, were set to end on December 31 since Congress was forbidden from making them permanent under rules at the time. The situation saw both the White House and the opposition digging in their heels as the deadline approached.

President Barack Obama had initially hoped to protect the tax cuts for middle-class Americans while allowing the benefit to lapse for the richest two per cent a distinction that Republicans sought to block.

Under the bargain struck this week, Mr. Obama will have his way at smallest amount on one item on the White House agenda the extension of unemployment benefits and a payroll tax cut that will improve the lot of ordinary Americans.

In remarks following the negotiations, Mr. Obama said he “completely disagreed” with the Republican view that the tax cuts, including for the wealthiest, should be made permanent. “A permanent extension of these tax cuts would cost us $700 billion at a time when we need to start centering on bringing down our deficit,” he said.

He, however, said he would not accept the “chilling prospect” faced by middle-class Americans of a tax rise on January 1, 2011, and unemployment insurance payouts drying up. “Make no mistake; allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family. And that could cost our economy well over a million jobs,” he said.

While the deal marks the breaking of a stalemate that could have spelt economic doom for millions of American households still reeling from the effects of the downturn, some experts noted that Mr. Obama has endangered the support of his liberal base.
Economist Paul Krugman recently argued against precisely such a deal, saying: “Mr. Obama should draw a line in the sand, right here, right now. If Republicans hold out, and taxes go up, he should tell the nation the truth, and denounce the blackmail attempt for what it is.”

Under the bipartisan deal, American families will retain not only the Bush-era tax cuts, but also those introduced under Mr. Obama.

Mr. Obama said that in exchange for a temporary extension of tax cuts for the wealthiest, middle-class tax credits such as the Earned Income Tax Credit and the Child Tax Credit would persist, as would the American Opportunity Tax benefitting nearly eight million students.

The agreement will also see unemployment insurance extended for a further 13 months, a direct benefit to nearly three million Americans.

State finances billions in the red

The State's finances were 13.3 billion euro in the red even though the Government took in more tax than predictable. The latest Exchequer figures showed revenue officials took in 470 million euro more in levies than predictable.

The Department of Finance said a higher-than-predicted corporation tax intake joint with smaller surpluses in excise and VAT offset falls in income tax. Despite the better than expected returns, taxes are still 1.3 billion euro below the first 11 months of last year.

Michael Noonan, Fine Gael finance spokesman, said the figures exposed a deep split in Irish society, revealing the hardship now facing huge numbers of Irish families. "On one side, the multinational sector and large companies are enjoying a reasonable resurgence," Mr Noonan said.

Striking a more conciliatory tone, Joan Burton, Labour's Finance spokeswoman, said that after three years of haemorrhaging tax revenues there was now evidence Exchequer figures were stabilising.

"Due to the continuing depressed state of the economy, tax gate are 646 million euro, or 4.1%, down on 2010 for the year to date," Ms Burton said.

"This serves to underscore the challenge facing any government in meeting the onerous repayments negotiated by the Fianna Fail government in their bailout agreement with the EU-IMF troika. "

Gold inches down, US data calms economic concerns

Gold edged down in thin trade on Thursday after encouraging U.S. jobless claims data calmed some worries about economic growth, but concerns over tensions on the Korean peninsula could present some support.

Bullion barely reacted to news that Vietnam's central bank has granted additional quotas for domestic companies to import gold between now and the year end, but dealers noted buying on plunges from consumers in Asia.

Spot gold eased $4.42 to $1,369.29 an ounce by 0240 GMT - well below a lifetime high around $1,424 struck in early November. It had hit an intraday low around $1,367 an ounce. U.S. gold futures fell $4.5 to $1,368.5 an ounce. U.S. markets are shut on Thursday for the Thanksgiving holiday.

"I would say emotions are still bullish. The conflict between North and South Korea is not going be solved within a short period of time," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"It will take a bit of time. There may be more buying at below $1,370." North Korea warned of additional military attacks if South Korea makes "reckless military provocations again," its official media said on Thursday.

The United States says it considers North Korea's actions were an isolated act tied to leadership changes in Pyongyang, and many experts say the North carried out the shelling to burnish the image of the inexperienced and little-known younger Kim.

U.S. crude futures firmed on Thursday, extending a rally from the day before on optimism about the U.S. economic recovery, but the Thanksgiving holiday in the United States and concerns over tensions on the Korean peninsula may limit further gains.

BC government call off 15 per cent income tax reduction

The proverbial carrot that Premier Gordon Campbell hangs in front of millions of British Columbians has been suddenly yanked away.
Two weeks after Gordon Campbell announced he was stepping down as Premier, the provincial government has decided to hang the 15 per cent reduction in personal income tax rates for the first $72,000 of personal income that was promised in Campbell's televised address last month.

Campbell says this is not the time when he or cabinet should be tying the hands of the future leader. "They will still have the chance where they can bring in the tax cut retroactively January 1, if they decide to do that."

But Finance Minister Colin Hansen says they can't say when or if the tax cut would be re-instated. "The choice as to whether or not to proceed with that should be made by the new premier in conjunction with the cabinet at that time."

NDP Leader Carole James says she was against the tax reduction to start with, but this is a whole new Pandora's Box, "To pull back on that tax cut now, it shows that the government is completely focused on damage control, on their own problems, and sadly it's British Columbians who are hurting because of that."

Brian Bonney with the Canadian Federation for Independent Business says taking away this tax benefit is a big fault. "You give people hope correct before Christmas that they're going to have some extra money to pay off a few bills in the new year, and in one foul pounce that seems to be taken away from us."

He says this is yet another box when politics has trumped good public policy and created unnecessary uncertainty for businesses.

The tax reduction would have taken effect January 1 of next year, provided it received legislative endorsement. It would have become the second largest personal income tax relief gauge in BC's history.

The government will still roll out a throne speech and budget in early February, but won't proclaim any programs until a new party leader is chosen later that month. There will also be what the Executive Council calls a "status quo" budget, with no new proposals beyond what is statutorily required.

Kan. gov.-elect against revoking sales tax hike

Gov.-elect Sam Brownback said Thursday that he opposes a quick revoke of this year's Kansas sales tax increase, an idea circulating among Republican legislators. The incoming GOP governor did leave room for him to back the idea in upcoming years. Brownback already has said he wants to amend the state's tax system to promote economic growth. But Brownback said the Legislature shouldn't revoke the sales tax increase next year because of the budget problems. He takes office and the Legislature assembles its annual session Jan. 10.

"We're short of capital for the state, and I don't think it's something that we should be doing at this time," Brownback told reporters after a Veterans Day ceremony in Topeka. "Our economic situation is not even." Rep. Owen Donohoe, a Republican from the Kansas City-area suburb of Shawnee, suggested in a recent letter to colleagues that GOP House members make the revoke a top priority. He acknowledged in an interview that he hadn't spoken with Brownback about it.

In his letter, Donohoe called on colleagues to commit to a conventional agenda, noting Republicans' big election gains. The GOP picked up 16 House seats, giving those 92 to Democrats' 33. "With the sweeping consent of the Kansas voters, we have a rare opportunity to effect substantial legislation that reflects fiscal and family values in the next session," he wrote.

House Speaker Mike O'Neal, a Hutchinson Republican who, like Donohoe, opposed the tax increase, said it's fair to debate revoking it. However, he also said legislators may want take a longer-term look at tax policy and consider plummeting individual and corporate income taxes to spur growth. Brownback said last week that he'd liked to cut individual income taxes.

"I think that all comes into the discuss that we certainly will have," O'Neal said. The sales tax rose from 5.3 percent to 6.3 percent in July. Outgoing Gov. Mark Parkinson, a Democrat, had pushed for the increase, saying it was necessary to keep away from crippling cuts in education funding and social services. The tax increase is expected to provide $314 million for state programs during the current fiscal year and more than $370 million during the fiscal year that begins in July 2011.
For the first three years, a small portion of the revenues will help support a 10-year, $8.2 billion transportation program that legislators approved this year, also at Parkinson's urging. The sales tax is due to drop to 5.7 percent in July 2013, with all funds raised by the last 0.4 percent going to transportation. O'Neal acknowledged that revoking the increase next year could "hamstring" the program.

"There's a lot of moving parts here," he said. Parkinson and other supporters of the sales tax increase dispute that it stabilized the state's finances. But the state also used federal stimulus funds to bolster aid to public schools and spending on social programs.

Kansas officials expect no additional incentive funds, leaving a $492 million gap in the next fiscal year's budget. "We've got to balance our budget," Brownback said, adding that his goal is to chapter out accounting moves the state has used in previous years to help paper over some problems.

But the governor-elect also refused to portray the sales tax increase as good. "When you raise taxes, you send a signal to the rest of the country (that) you're a high tax state," he said. "We've been a high tax state in this district, so the way to grow is not that way."

To Tax More Rich ‎

Washington State, where politics is as liberal as it gets, has an initiative on its Nov. 2 election ballot to charge a personal income tax on the “rich,” according to an Oct 26 special report by the Tax Foundation. Presently it’s one of seven states with no individual income tax. Washington State voters, along with other Americans will be worriedly awaiting Congress’s decision in the lame duck session next month whether to let the Bush tax cuts expire on Dec. 31. President Obama and his fellow lefties in Congress have bellowed endlessly that the Bush tax drops favor the “rich.”

Washington State’s Initiative 1098 would initiate an income tax on high earners at a rate of 5 percent on income over $200,000 ($400,000 for couples) and 9 percent on income over $500,000 ($1 million for couples). “Officials guess that the new tax would raise approximately $2.2 billion per year. Of that amount $600 million would be used to decrease property taxes by about 4 percent and provide additional credits against the state gross receipts tax.” New spending on health care and education would assert the left over $1.6 billion.

If proposition 1098 passes, “a constitutional challenge is likely,” writes Joseph Henchman. Director of state projects for the Tax Foundation. Since the income tax was ruled unconstitutional in the state, voters there have discarded previous attempts to accept an income tax. “Washington’s planned new income tax “would be out of the norm in two respects, said Henchman. “It will relate to all adjusted gross income with no exemptions or deductions, and it will apply only to high-income earners.” Further, “just as numerous other states are overturning so-called millionaires’ taxes or allowing them to expire, Washington would be accepting one.”

Washington’s constitution has a uniformity section. Its purpose has been described as “strict constitutional supplies requiring equal and uniform taxation.” The initiative’s extremely slim base (exempting over 98 percent of taxpayers) would probably violate that provision,” Henchman wrote. In essence, a mass of voters would decide whether to impose a tax on 1.2 percent of the population.