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December 4, 2022

Accounting News Roundup: Insulting New York’s Wealthy; State Taxes and Migration; No Love for OCI | 09.05.13

IRS Rule Leads Restaurants to Rethink Automatic Tips [WSJ]
An updated tax rule is causing restaurants to rethink the practice of adding automatic tips to the tabs of large parties. Starting in January, the Internal Revenue Service will begin classifying those automatic gratuities as service charges—which it treats as regular wages, subject to payroll tax withholding—instead of tips, which restaurants leave up to the employees to report as income. The change would mean more paperwork and added costs for the restaurants—and a potential financial hit for waiters and waitresses who live on their tips but don't always report them fully.

Wealthy New Yorkers Call De Blasio’s Tax Plan Offensive [Bloomberg]
“It shows lack of sensitivity to the city’s biggest revenue providers and job creators,” said Kathryn Wylde, president of the Partnership for New York City, a network of 200 chief executive officers, including co-Chairman Laurence Fink of BlackRock Inc. (BLK), the world’s biggest money manager. Days before next week’s primary election, de Blasio, 52, has seized the lead decrying economic inequality. After 20 years of Republican and independent mayoral rule during which crime rates and welfare rolls plummeted and parks, stadiums, shopping, tourism and luxury apartments and office towers rose up, de Blasio speaks of a “Tale of Two Cities,” where almost half of New York residents are poor or struggling. De Blasio’s new frontrunner status has renewed attention to his tax-the-rich idea, with opponents saying the plan hinges on unlikely support from the state legislature. Finance executives say it may hurt the local economy and drive out the wealthy, who already pay a disproportionate share of income levies.

Back To School: Tax Breaks For Cyclists And Other Commuters [Forbes]
Get on your bike and ride.

Income Migration: What Does It Really Mean for States? [Tax Analysts/Cara Griffith]
The decision of where to locate is not done in a vacuum. It is the result of many factors, income tax burden being only one of those factors. Employment, family connections, and quality of public services (in particular education and health care) play roles as well. Migration solely because of tax policy is uncommon and likely restricted to the very rich. But this does not excuse bad tax policy. Good state tax policy dictates a stable system with a broad base and low rates. High income tax rates can cause a small, but wealthy portion of the population to leave and can directly affect small businesses. We have the federal government to worry about income redistribution and business regulation. States should focus on tax systems that will create competitive business climates.

Narrow Net-Income Reporting Can Misguide Investors: Study [CFO]
[P]ublicly held companies typically give the non-net-income portions of comprehensive income much less prominence than earnings. The "key focus for measuring financial performance remains with net income," according to a new report by the Georgia Tech Financial Analysis Lab. Net income, however, excludes what's known as "other comprehensive income" (OCI): gains or losses stemming from foreign currency conversion; cash-flow hedges; securities that are available for sale; and pensions and other post-retirement benefits. And that can confuse investors, according to the study, which looks at the elements of OCI for the S&P 100 companies from 2010 to 2012 . "Because net income excludes gains and losses that are often quite material, evaluations of financial performance based on net income may be misguided," its authors state.

Detroit woman's good deed rewarded with $5,300 tax bill. Diligent, comprehensive record keeping saves the day [DMWT]
Good news out of Detroit? 

Man Buys Promoted Tweet to Complain About British Airways [Mashable]
Well done.

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