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Entries in Tax Breaks (9)

Thursday
Mar292012

Senate Rejects Obama Call to Strip Oil Company Tax Breaks

JEWEL SAMAD/AFP/Getty Images(WASHINGTON) -- A last-minute entreaty by President Obama wasn’t enough to convince senators to strip the oil and gas industry of billions in tax incentives.

The president said Thursday that Americans are getting fleeced by an oil industry awash in profits -- pinched at the pump by rising prices and forking over billions in taxpayer cash, and he put his weight behind a Senate bill that would repeal these tax breaks.

“Think about that. It’s like hitting the American people twice,” Obama said in a Rose Garden press conference, just before senators considered a bill that would roll back many such tax incentives for oil companies.

“They can either vote to spend billions of dollars more in oil subsidies that keep us trapped in the past. Or they can vote to end these taxpayer subsidies that aren’t needed to boost oil production so that we can invest in the future,” Obama said. “It’s that simple.”

Less than an hour later, Republican senators were joined by a handful of Democrats in the Senate to reject a bill that would do just that. They argue it would raise gas prices even more. The “Repeal Big Oil Tax Subsidies” bill failed to advance by a vote of 51-47. It needed 60 votes to overcome a procedural hurdle.

The bill would have killed several tax breaks taken by the five largest oil companies and use some of the proceeds to extend expiring energy tax provisions, such as tax breaks for renewable energy, electric cars and energy efficient homes.

Senate Democrats, mostly from oil-rich states, were not supportive of the legislation. They included Sen. Mark Begich, D-Alaska, Sen. Mary Landrieu, D-La., Ben Nelson, D-Neb., and Jim Webb, D-Va. Voting with the Democrats was Sen. Olympia Snowe, R-Maine.

President Obama had argued the tax breaks were more than Americans could afford.

“Last year the three biggest U.S. oil companies took home more than $80 billion in profits. Exxon pocketed nearly $4.7 million every hour. And when the price of oil goes up, prices at the pump go up, and so do these companies’ profits,” he said, adding, “In fact, one analysis shows that every time gas goes up by a penny, these companies usually pocket another $200 million in quarterly profits.”

Obama said the tax incentives for energy companies --which allow them to pay a lower effective tax rate than other companies -- are outdated and prime examples of a systemic unfairness that compounds frustration among consumers.

“It’s not as if these companies can’t stand on their own. American oil is booming,” Obama said. “With high oil prices around the world, they’ve got more than enough incentive to produce even more oil.”

But Republicans say Obama is calling for an effective tax hike on oil companies that would in turn be passed on to consumers in the form of even higher gas prices. Current nationwide averages are hovering near $4.00 per gallon.

Copyright 2012 ABC News Radio 

Tuesday
Jan312012

Obama Urges Congress to Act On Small-Business Tax Breaks

Official White House Photo by Pete Souza(WASHINGTON) -- President Obama on Tuesday urged lawmakers to act quickly on bipartisan legislation to expand tax cuts for small businesses and unlock capital for startup companies.

“My expectation and hope is that they will get a bill together quickly, that they will pass it and get it on my desk. I will sign it right away. And I would like to see that bill signed this year,” the president told reporters at the start of a Cabinet meeting at the White House.

Earlier Tuesday the president sent Congress his “Startup America Legislative Agenda,” which would eliminate taxes on capital gains in investments in small businesses and provide a 10 percent income tax credit on new payroll to promote hiring, among other measures.

Calling for an “all-hands-on-deck approach” to promote small business growth, the president also directed the members of his Cabinet to put forward their own initiatives to “enhance the ability of entrepreneurs to get up and running.”

Obama also noted a new face at Tuesday’s meeting. SBA Administrator Karen Mills was in attendance for the first time as a new official member of the Cabinet.

“It is a symbol of how important it is for us to spur entrepreneurship, to help startups, to move aggressively so that we can assure more companies that create the most jobs in our economy are getting a leg-up from the various programs that we have in our government,” Obama said.

Copyright 2012 ABC News Radio

Thursday
Dec082011

8 Tax Breaks Set to Expire

Ryan McVay/Photodisc/Thinkstock(NEW YORK) -- Valuable tax breaks are set to expire at year's end. While Congress might act to extend some or to re-instate others, the savviest consumers, tax experts say, will exploit them now. The list of soon-to-vanish breaks includes these eight:

1. Higher Education Expenses: After 2011, the above-the-line deduction for qualified higher education expenses won't be available, so you'd better claim it now. Taxpayers with adjusted gross incomes of up to $65,000 for singles and $130,000 for couples can claim the maximum deduction: $4,000. The deduction applies to fees and tuition paid by students enrolled in an institution of higher learning during 2011 or during the first three months of 2012.

2. Mortgage Insurance Premiums: Before year's end, homeowners with joint adjusted gross incomes of less than $109,000 can deduct the cost of their mortgage insurance. Afterwards, they can't.

3. Adoption Credits: Under a program that expires Jan. 1, parents of adopted children can claim a credit against their federal income tax of up to $13,360 for each adopted child (for qualified expenses). If the expenses have been paid for by an employer, they can exclude up to $13,360 form their gross income.

4. Sales Tax: Planning to buy a big-ticket item? Buy it now, if you're somebody who doesn't have to pay state and local income taxes (a retired public employee, for instance). Up to now, such people have had the option of deducting sales taxes to reduce their federal income tax. After the new year, however, they won't.

5. Classroom Materials: Are you a K-12 teacher, instructor, principal or aide? Have you worked in a school for at least 900 hours during the school year? If so, you can claim an above-the-line deduction of up to $250 for any expenses you have paid out of pocket for books, computer equipment, supplies or supplementary materials used in the classroom. Next year, however, you won't be able to: The deduction vanishes.

6. Energy Efficiency Upgrades: Taxpayers who improve their home's energy efficiency can claim a credit of 10 percent for the cost, up to a maximum of $500. You can, for example, add insulation to your attic, install insulated windows or buy an energy-efficient air conditioner or furnace. You should retain the receipts and any certification by the manufacturer that your property meets the requirements for the credit. Be advised: This is a one-time deal: If you claim credit for an upgrade this year, you won't be able to claim it next.

7. IRA Contributions: People 70 1/2 years old (or older) can get a special break for charitable giving, but only if they act before the break expires Dec. 31. Senior donors who have a traditional IRA (or other tax-deferred retirement plan) can give their distribution -- up to $100,000 -- to a qualified charity, excluding it from income. By so doing, they will have satisfied their distribution requirement without owing taxes. The move is especially advantageous, tax experts say, for seniors who don't itemize.

8. AMT Patch: This break, which expires annually, was created by Congress to save taxpayers from having to pay the Alternative Minimum Tax (AMT), a flat 28 percent rate imposed on high-earners. The AMT dates back to the Nixon era, when the Treasury Department, to its horror, discovered that many of the wealthy were paying nothing.

Under the AMT, anyone earning more than a set amount was forbidden from claiming certain deductions and was potentially subject to the 28 percent rate. Problem is, there was no provision made for adjusting that set amount for inflation. As a result, decades of inflation have put more and more people of relatively modest means into the 28 percent bracket.

Rather than change the law and peg the AMT's threshold to inflation, Congress has opted every year to raise the threshold. This re-adjusted amount is the so-called patch, the latest of which is now due to expire at the end of December. It's $72,450 for a married couple filing jointly, and $47,450 for a single filer.

To determine what the threshold means to you, says CPA James Smith, managing director of Smith, Jackson, Boyer & Bovard in Dallas, start with your net taxable income after itemized deductions. Then add back certain permitted deductions, including state and local taxes and other items listed on IRS Form 6251. If the resulting number exceeds the patch's number, everything above it will be subject to the AMT's 28 percent.

Smith says Congress almost certainly will enact a new patch for next year, because to do otherwise could be politically suicidal: the threshold would automatically drop to what it was in the 1960s, catapulting millions of Americans into the higher bracket, not a good move in an election year.

What can you do to avoid the AMT? In the long run, Smith says, nothing. But if your calculations show that you're in danger of exceeding the patch this year, you can take steps to defer the tax bite to the next.

You could, for instance, defer payment of some of your state or city taxes until next year: your property taxes, say. Likewise, you could defer income until next year. Doing either could keep you below the threshold.

But you'll almost certainly be subject to the AMT next year. "You can run," Smith said, "but you can't hide."

Copyright 2011 ABC News Radio

Wednesday
Jul272011

Walmart, Kimberly-Clark CEOs Would Trade Tax Breaks for Lower Corporate Rate

Justin Sullivan/Getty Images(WASHINGTON) -- At 39 percent, the United States has the highest corporate tax rates in the world. In Britain and Canada the government collects just 28 percent of corporate profits, and in Ireland companies get away with a rate as low as 12.5 percent.

In a rare moment of consensus on Capitol Hill Wednesday, both Democrats and Republicans on the Senate Finance Committee agreed that in order for America to remain globally competitive against these lower rates, Congress must make drastic reforms to the tax code.

“If we're going to be competitive, we've got to get in the game,” said Finance Committee member Sen. Kent Conrad, D-ND. “Our tax code was designed at a time when we did not have to worry about the competitive position of the United States. I don’t think anybody, if they were going to sit down and devise a tax code for the United States in 2011 or 2012, would come up with one that looked anything like this one.”

Four CEOs from some of America’s largest corporations agreed. In their testimony the heads of Walmart, Kimberly-Clark, CVS Caremark and PMC-Sierra each emphasized that Congress needs to overhaul the entire system to encourage companies to invest in America and create jobs at home.

The devil, though, is in the details. The United State’s corporate tax system is an intricate web of loopholes, tax breaks and investment incentives.

For example, tax breaks for research and development saved companies $8 billion in taxes this year and an incentive to encourage domestic investment in machinery and equipment eliminated almost $40 billion from the federal coffers.

Thomas Falk, the CEO of Kimberly-Clark -- a Fortune 25 company that produces health and hygiene products such as Kleenex and Depends -- said he would give up his company’s research and manufacturing tax breaks in favor of a lower overall rate.

Falk said many companies make investment decisions based on the marginal, or overall, rate, so lowering that rate would increase companies’ ability to invest and create more jobs.

Walmart CEO Mike Duke cautioned that tax reform must not only lower the overall rate, but also revise the loopholes and address how foreign profits are taxed and brought back into the country.

But it is much easier to talk about cutting incentives than to actually eliminate them, as there are a host of corporate lobbyists whose job it is to create and protect such loopholes.

For example, just within the four-member panel there was disagreement over what the lowered tax rate should be. Falk suggested dropping the rate to 25 percent and eliminating most of the tax breaks.

But Gregory Lang, CEO of the technology corporation PMC-Sierra, said 25 percent still would not be competitive against China or India, where most technology manufacturing is located and the tax rates are only 15 to 17 percent.

With the unemployment rate still hovering around nine percent and the debt ceiling crisis threatening to rock the country’s financial system, Falk said the climate is right to push the tough pill of comprehensive tax reform through Congress.

“Our nation is facing a crisis and in a crisis you can get amazing things done. You can drive a lot of change in a short period of time and get things done that once were thought to be impossible,” he said. “I would urge you to be bold and come up with a tax system that makes American companies more competitive.”

Copyright 2011 ABC News Radio

Tuesday
May172011

Senate Republicans Defeat Democrats' Bill to Scrap Big Oil Tax Breaks

Comstock Images/Thinkstock(WASHINGTON) -- Senate Republicans Tuesday evening rejected an attempt by Democrats to scrap tax breaks for the five biggest oil companies.

The Democratic bill went down to defeat by a vote of 52-48. It needed 60 votes to advance.

Three Democrats -- Alaska's Mark Begich, Louisiana's Mary Landrieu and Nebraska's Ben Nelson -- broke with their party and voted against the bill, while two Republicans -- Susan Collins and Olympia Snowe, both of Maine -- voted in favor of it.

On Wednesday, the Senate will vote on the GOP’s plan to increase off-shore oil production, a measure also destined for defeat.

Copyright 2011 ABC News Radio

Tuesday
Apr262011

New Jersey Panasonic Deal Shows Relocation Incentives Still Juicy

Ethan Miller/Getty Images(NEWARK, N.J.) -- At first glance, it might not seem extraordinary that New Jersey is offering Panasonic $102 million in tax breaks to relocate its corporate headquarters to Newark.

Even today, at a time of tight budgets and taxpayer fury over government spending, state economic development departments spend lavishly to lure companies from other states, the idea being that the influx of jobs will justify the cost.  Kenneth Thomas, associate professor of political science at the University of Missouri at St. Louis, says states collectively spend more than $70 billion a year on such wooing.

What's unusual in New Jersey's case, though, is that Panasonic isn't in another state.  It's in New Jersey, headquartered in Secaucus, nine miles from Newark.  Taxpayers, in effect, will be giving Panasonic carfare of $10.6 million per mile to make the same trip they could make for under 49 cents a mile, assuming that they drove a Honda Civic.  That's according to the American Automobile Association of New Jersey.

The millions will come from a Garden State development program called the Urban Transit Hub Tax Credit, intended to promote use of public transit by giving companies an incentive to relocate facilities to any one of nine New Jersey cities designated a public transit hub.  Newark qualifies; Secaucus does not.

Secaucus stands to lose 850 jobs when the electronics firm leaves, and Secaucus deputy mayor John Bueckner isn't happy: "We're saying, basically, this is crazy!  Panasonic is our largest tax-generator.  Now they're moving 10 miles down the road, and the state's paying them $102 million to do it."

"We don't think that was the intent of the Hub program," Bueckner adds.  "It wasn't set up to help somebody move from one community to another within the state, for Newark to make a gain that costs Secaucus."  It was meant, he argues, to get out-of-state companies to move jobs into the state.

A Panasonic spokesman says his company had given New Jersey notice that it was planning to relocate, and that it had received between 35 and 40 offers, including attractive ones from other states.  When the deal with Newark was announced, Panasonic and the governor's office both toasted it for keeping jobs in-state.

Asks Bueckner, unimpressed, "What's to prevent another company, now, from saying the same thing: I'll move out of state unless you give me the same deal?  It's something the state is going to have to take a look at, moving forward -- something that will cost us millions of dollars."

Copyright 2011 ABC News Radio

Monday
Apr182011

For Super Rich, Taxes Keep Falling

Comstock Images/Thinkstock(WASHINGTON) -- With Monday the last day for Americans to file their tax returns, the super wealthy can look forward to paying significantly less than they would have two decades ago.

Since 1992, the average federal income tax actually paid by the wealthiest 400 households in the country has fallen from 26 percent to 17 percent.

But why, if the top income tax rate in the U.S. is 35 percent, are the very, very wealthy paying such a small percent of their income into taxes?  The short answer is tax breaks.

There are built-in tax breaks in every bracket that everyone can take advantage of, including breaks for having children, paying a mortgage and furthering education.

According to Washington, D.C.-based think tank Tax Policy Center, the number of tax breaks is so high that this year it is estimated that 45 percent of households won't pay any taxes whatsoever.

This has led to efforts to overhaul the tax laws on both sides of the political aisle.  Sunday on This Week with Christiane Amanpour, Treasury Secretary Timothy Geithner accepted that disagreements remain with Republicans on the scope of how to reform the tax.

"We have very big disagreements on what the right balance is," Geithner said.  "The things we're going to disagree on for some time, we can take more time to resolve."

However, he said he does not believe fundamental deficit reduction can happen without ending the Bush-era tax cuts for the wealthiest Americans, which were extended in a temporary agreement last Decembe, and remain in place in House Budget Committee chairman Paul Ryan's budget plan, passed Friday by the House.

Geithner said he thinks the deficit can be reduced without raising taxes on the middle class, specifically by ending tax loopholes and deductions that primarily go to wealthier Americans who itemize their tax returns.

"Those benefits, even like the mortgage interest deduction that lets people have two homes, pretty expensive homes…if you target them on the most fortunate Americans, they can afford to take a little bit larger share of the burden," Geithner said.  “They can afford to do that, and it's the responsible thing to do for the economy."

Copyright 2011 ABC News Radio

Thursday
Mar102011

No Apologies: Rep. Barton Defends Tax Breaks for Big Oil

Digital Vision/Thinkstock(WASHINGTON) -- With oil prices now more than $100 a barrel, gas prices pushing four dollars a gallon and oil companies flush in profits, it might be worth asking whether it is time for Congress to scale back tax credits for the oil and gas industry.

The budget President Obama submitted to Congress last month proposed repealing $3.6 billion in oil and gas subsidies -- subsidies that come in the form of tax credits -- in 2012.  The White House estimates that repealing those tax credits would bring in $46 billion in revenue over the next 10 years.

As the oil and gas industry gears up to fight that effort, it has no better friend than Representative Joe Barton, R-Texas.  Barton made a splash when he apologized to BP CEO Andrew Hayward and called the Obama administration’s investigation of BP a “shakedown.”

Barton knows the industry well.  He worked for the Atlantic Ridgefield Oil and Gas Company before he was elected to Congress in 1984.

ABC News caught up with Barton at his congressional office and asked him why he is still defending tax credits to an industry making record profits. Barton indicated that American companies might be inclined to take their business outside of the U.S. if tax credits are taken away.

"I think if you make it uneconomic to do business in the United States, any corporate executive and their board is going to look at doing business other than in the United States," Barton said.

Copyright 2011 ABC News Radio

Friday
Feb252011

Tax Tip: Parents Who Adopt Get a Big Tax Break

Photo Courtesy - Getty Images(NEW YORK) -- There are changes in the adoption tax credit.

Eric Smith, who is with the Internal Revenue Service says, "If you adopted a child, you can now claim a credit that can be as much as $13,170 based on the expenses you had in adopting that child."

Smith adds that the credit is refundable, which means you can get it you owe no taxes.

While it's a very generous credit, though, you must submit proof you qualify in order to claim it.

"In most cases, we encourage people to file electronically," Smith says. "But this is a situation where you need to file a return on paper to get this credit."

But Kathy Pickering of H&R Block says you may need expert advice for this one.

"There's a lot of rules about carrying forward expenses and things like that, and so, you could be at risk of not getting the full benefit if you don't understand all the rules."

Copyright 2011 ABC News Radio 







ABC News Radio