Obama Concessions Signal Potential Bipartisan Budget Deal [Bloomberg]
President Barack Obama lowered his tax revenue demand by $200 billion and offered to start tax rate increases at $400,000 in income instead of $250,000, moving closer to a budget deal with House Speaker John Boehner. Obama’s revised plan would raise $1.2 trillion in taxes in the next decade and cut $1.22 trillion in spending, said a person familiar with the talks. Obama wants a large enough debt ceiling increase for the next two years and would accept a new inflation yardstick that would reduce Social Security cost-of- living increases, said the person, who sought anonymity. Boehner and Majority Leader Eric Cantor will give House Republicans an update on the negotiations today, said a leadership aide who requested anonymity to discuss the plans. Boehner’s office rejected the offer late yesterday, and the intensifying talks could collapse. Still, a deal about halfway between the most recent offers could include $1 trillion each in tax increases and spending cuts and allow tax rates for top earners to rise in 2013. In exchange, Obama would accept some up-front spending cuts, and other scheduled cuts would be canceled. Congress would pursue broader changes next year against the threat of tax increases and spending cuts in 2014.
White House Offer Could Complicate Deficit Deal Math [WSJ]
On the tax side, the administration’s biggest proposal would permanently extend relief from the alternative minimum tax. That’s a provision designed decades ago to target the wealthiest Americans that now hits tens of millions of middle-class households, in part because it wasn’t indexed for inflation. To protect those middle-class households, Congress every year or two passes a bill to grant relief from the AMT. For 2012, lawmakers are hoping to exempt about 29 million households from the AMT, while letting it hit about 4 million. The AMT has become one of the biggest budget thorns in lawmakers’ sides, because the problem now costs so much to fix each year–$90 billion just for 2012. The administration’s budget for 2013 estimated that it would cost about $1.9 trillion over a decade to permanently extend AMT relief.
Telecoms face costly accounting change over handset revenue [Reuters]
Telecoms companies face costly upheaval to how they treat income from millions of mobile users after accounting rule-setters backed reform on how revenue from subsidised handsets is tallied. The International Accounting Standards Board (IASB), whose rules are used in over 100 countries from Europe to Canada and Asia, is simplifying how companies book revenues. It is being done jointly with the U.S. Financial Accounting Standards Board (FASB) to create a global standard so that investors can compare sectors more easily. The IASB and FASB voted on Monday not to give operators an exemption from the new revenue recognition rule due in 2016 despite heavy lobbying from the industry. "There will be complexity to some extent. There will be a need to determine what is the appropriate margin to be applied to the handset," IASB staff member Glenn Brady told the meeting.
The True Burden of Government [Economix/NYT]
If government revenues are too low to finance the level of spending that voters insist upon, spending automatically rises. Eventually, interest on the debt can only be paid with higher taxes, even if all spending except for interest is abolished. Put another way, the amount of future spending cuts or tax increases necessary to stabilize government finances will always have to be larger when spending increases or tax cuts are deficit-financed. That is because interest increases the size of the future fiscal adjustment. Compounding means that the longer an adjustment is put off, the larger it must eventually be. And of course, debt default is simply a form of tax that falls disproportionately on bondholders; inflation is a tax paid by everyone. Additionally, government borrowing has effects on the economy independent of spending in general. The economic impact of spending depends on what it is for and that impact may be positive or negative. Conservatives often imply that all spending reduces growth by pre-empting resources that the private sector could use better. But unless one believes that anarchy maximizes growth, that is nonsense.
Should We End the Tax Deduction for Charitable Donations? [WSJ]
Politicians and pundits across the political spectrum have been calling for cutting back the tax break that people get for making donations to charities. With the country's finances in such a mess, they say, we simply can't afford to be so generous about rewarding charitable giving—especially when it's mostly the very rich who claim the deduction. Even though trimming or eliminating the deduction won't solve our fiscal problems, they say, the contribution will certainly help get us closer to making ends meet. Opponents of cutting back argue that things aren't that simple. The deduction, they say, is a critical incentive that keeps much-needed cash flowing to charities. And donations have already fallen in recent years—at a time when the need for services is soaring.
Warren Buffett Knows That Tax Rates Matter [WSJ]
[I]n an effort to support raising taxes, particularly capital-gains taxes, and to head off the argument that such hikes would be a drag on the economy, billionaire investor Warren Buffett argued in a New York Times op-ed last month that tax rates don't matter to investment decisions. He wrote that if someone comes to you with a good investment idea, no one says, "If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent." In the field of economics and finance you would be hard-pressed to find something more patently wrong.
Auditors Finish Probe of Indiana Tax Accounting Errors [AP, Earlier]
Auditors investigating Indiana's Department of Revenue are saying outdated technology and a work culture that sacrificed accuracy for speed led to $526 million in tax errors from the state. Auditors for the international accounting firm Deloitte also discovered additional errors with 55,000 taxpayer accounts and 2,880 tax refund requests that were never processed. They credited new management at the agency with trying to correct the problems.
We Wait Too Long to Train Our Leaders [HBR]
This means you.
Man wears 70 items of clothing at airport to avoid baggage charge [DS via DB]
A man took to putting on 70 items of clothing to avoid an extra baggage charge at an airport. The unidentified passenger turned up at Guangzhou Baiyun International Airport in China, described as looking like a 'sumo wrestler'. According to Guangzhou Daily, the man's luggage exceeded the weight limit. He did not want to pay the extra baggage costs, and thus took out and wore more than 60 shirts and nine pairs of jeans. Wanting to board a flight to Nairobi, Kenya, he was stopped by the metal detector and had to undergo a full body search. In his numerous pockets were batteries, thumb drives and device chargers.