Category: Tax

Obama’s Appeasement on Tax Cuts

The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight — everything you need to help you prosper and enjoy the accounting profession.

For those of you unfamiliar with the history of World War II, Neville Chamberlain was the prime minister of Great Britain just prior to the advent of World War II. He is most remembered for his “Munich Agreement“, in which he deeded over Czechoslovakia to Nazi Germany with Germany’s promise that it would not pursue further aggression. Of course, this was making a deal with the devil; Adolf Hitler was Satan incarnate, for certain. Consequently, his name has become the emodiment of total naivete, if not utter stupidity and idiocy. You cannot make a deal with the devil. Shown here in the picture to the right is Neville Chamberlin upon his return from Munich in 1938 after meeting with Adolf Hitler with the scrap of paper that was to “ensure peace in our time”; the paper was signed by Hitler.


The question now is whether Barack Obama is another Neville Chamberlain. Obama is supporting the tax cuts for the rich, claiming that unless we agree to these demands by the Republicans, our economy may dip back into recession, as Chamberlain asserted that unless England and Europe gave Nazi Germany Czechoslovakia, that a war with Germany might occur. Whether you are for the tax cuts or against the tax cuts, the majority of Americans were surprised, if not flabbergasted, by Obama’s immediate acquiescence to Republican demands for inclusion of the rich in the tax cuts, including a very generous exemption from estate taxes: under the plan, as much as $10 million may be exempt from any estate tax, with the estate tax rate on any excess being reduced from 55% to 35%!

Certainly, Barack Obama is no Winston Churchill. Maybe he does his fighting only on a basketball court; however, he certainly did not fight the good fight before conceding to the Republican demands, merely accepting in return a 13 month extension of unemployment benefits for 2 million Americans, a reduction in payroll taxes, and an extension of a grab bag of tax credits for college tuition and other items. Like Chamberlain, who only received Hilter’s signature on a scrap of paper promising never to go to war again with England, Obama got very little in return for the big gift to the rich and privileged.

A recent CBS poll found 70% of Americans were not in favor of these tax cuts for the rich—resulting in huge deficits of $700 billion dollars—when our national debt is already $14 trillion. Many feel that no tax cuts would have been preferable to this agreement, since no deal would spare us from an additional $980 billion of debt.

Obama is justifying these tax cuts through a fear tactic: unless we give the rich these tax cuts, our country may lapse back into another recession.

Dear President Obama: for your information, we are still in this recession. And in 2012, we will still be in this recession in terms of unemployment. Jobs have been going overseas for years now and with the further consolidations of mega-size corporations, more layoffs are looming. Of course, the unemployment numbers will become meaningless since after a certain period of time, the long-term unemployed are no longer included in the current rate of unemployment.

After hearing Harvard’s Larry Sumners endorsement of these tax cuts for the rich and his prediction of another recession if they are not enacted, I suspect that President Obama may still be listening to the counsel of his former Economic Advisor. Consequently, I am not surprised by Obama’s use of fear tactics today to drum support for these tax cuts for the rich.

If this is the kind of way Obama negotiates with Republicans over tax cuts for the rich, imagine how he would negotiate with the Iranians and North Korea? LOL! And then imagine how Hillary Clinton would have negotiated if she had been elected President of the United States. In the immortal words of Yogi Berra, it’s deja vu [Neville Chamberlain] all over again.

(UPDATE) Bernie Sanders Is Getting His Filibuster On

NPR reports that the Vermont Senator has been going for over 90 minutes to delay the vote on the tax deal President Obama made with Republicans and judging by the live feed from CSPAN2, he’s not showing any sign of stopping. NPR quotes Berns:

“You can call what I am doing today whatever you want, you it call it a filibuster, you can call it a very long speech. I’m not here to set any great records or to make a spectacle. I am simply here today to take as long as I can to explain to the American people the fact that we have got to do a lot better than this agreement provides.”

Here’s a snip from feed the (a pie chart!):


And a bar chart!

He’s doing you proud Green Mountain Staters!

UPDATE: Entering hour six! It’s like he’s got an IV of pure Green Mountain joe!

IRS Commish: There’s a Big Difference Between Hiding Money Offshore and Sophisticated International Tax Planning

In a speech before the 23rd Annual Institute on Current Issues in International Taxation, Washington, DC, Doug Shulman (link not yet available on the website) explained how rich dudes schlepping money to Switzerland (but not any more!) or Hong Kong is not even close to the same thing as “Google’s Irrationally Exuberant Tax Strategy.”

As I have said before, I draw a sharp distinction between rooting out individuals hiding their money in foreign tax havens and the IRS and Treasury creating ground rules for multinational corporations operating in a global environment.

It’s no secret that multinational corporations engage in sophisticated international tax planning. We recognize that much of this is perfectly legal and many businesses are trying to get it right. Of course, some are pushing the envelope too far and it’s here that we have issues. Our goal is to differentiate between the two; to be on top of our game in this analysis; and to ensure corporations are compliant with the tax law and stay compliant.

Wesley Snipes’s Prison Sentence Seems Pretty Fair

After suffering in tax and appellate court purgatory for several years, Wesley Snipes is finally reporting to prison today for his conviction of willful failure to file tax returns. There’s a whole slew of stories out there on the subject because a celebrity is going to prison, in case you weren’t aware, is important news.

However, as we told you about last week, some people aren’t convinced that the sentence is fair.

Responding to a post by Tim Cavanagh at Reason, rather than embrace mostly inflammatory nonsense, our friend Joe Kristan writes an objective analysis to get to the bottom of the debate:

Mr. Snipes was convicted of three counts of willfully failing to file tax returns for three years. The federal guidelines for prison sentences on tax crimes are largely based on the “tax loss” determined for the crime. Mr. Snipes’ “tax loss” was determined to be over $40 million, which would by itself indicate a sentence of at least 78 months – 6 1/2 years — under the guidelines. Since the maximum sentence for three counts of failure to file is the three years he got, the sentence is actually smaller than the guidelines would indicate.

Now, you may be saying to yourself, “The sentence is longer because a nasty judge is making an example out of one of the most important American artists in vampire cinema!” Joe checked into that too:

But Mr. Snipes still has a legitimate complaint if he’s the only person getting jailed for criminal failure to file, or he’s getting a much longer sentence than others. Is his sentence exceptional?

I don’t know of any statistical study of tax sentences, so we’ll go to the Google. (prison failure to file -snipes). The first page of results includes:

Anthony Kevin Slicker: $265,477 tax loss, 12 month sentence for failing to file for 1 year.

Steven A. Roebuck, Dentist: unknown tax loss, two-year sentence for failing to file for two years.

Arlan Turley, Dentist: 18 months, unknown tax loss, failure to file for two years.

Contrary to Tim Cavenaugh, then, other people get the maximum sentence 12-month per-year for willful failure to file, even with much lower tax losses.

Will the culture suffer? That’s up for debate. But willful failure to file taxes still happens to be a crime with punishment guidelines. If Wes was really saving all of us from vampires maybe the judge would have a good reason to make an exception. Although, that could make for a decent screenplay (straight to video, natch). Three years should be enough time to nail it down.

Alan Grayson Attempts to Explain Why He Doesn’t Support the Tax Cut Deal

The only problem is, MSNBC host Lawrence O’Donnell (an unabashed Democrat who supports the deal) IS NOT HAVING IT.

Visit msnbc.com for breaking news, world news, and news about the economy

Some favorite moments:

• “I use that term specifically, ‘caved in.'” – Because that’s what Dems do, baby!


• Circa :54 – any use of the term ‘pernicious’ is welcome in our book; Some bald guy is shaking his head incessantly; Arianna Huffington looks like an amused heiress (which is what she always looks like).

• At 2:27 – Larry officially starts flipping out.

• “You are WRONG, sir.” – Grayson is already fanning the heat with his hands at this point.

• “When you’re out of office in January and watching this from the sidelines.” – Too soon!

• At 3:25 there’s an audible sigh by Grayson that gives us the impression he can’t keep from laughing.

• “BE AN ADULT ABOUT THIS CONGRESSMAN!”

[via BI]

The House Will Have a Half-Ass Vote on Tax Cuts Tomorrow

Don’t get too excited, the vote will only be on the tax cuts for those of you earning less than $250k. The vote that really counts (for the people that may be able to afford Snooki!) is being slapped onto the extension of unemployment benefits.

Jake Sherman at Politico:

The bulk of the tax cuts — for lower and middle-class incomes — will be considered in a separate vote on Thursday. Democrats have long sought to only renew tax breaks for households under $250,000 in income, but Republicans have insisted on an extension of current tax rates for everyone.

Right, then. So this is a political play by the Democrats to show everyone that they don’t suck as much as the election results would have you believe. Republicans, however, do not care for this maneuver. Rep. Dave Camp (MI) is especially annoyed and evokes small business in the process:

“This is disappointing and a sign of bad faith after the president agreed to bipartisan, bi-cameral talks. There will be bipartisan opposition to the Democrats’ push to raise taxes on small business,” Camp said.

Gotta say, it is a pretty shrewd move by the Democrats (where was this spunk in October?) but at least everyone will have to get off their ass tomorrow and do something. God forbid the Republican members of Congress actually vote on something during the lame duck session.

House Democrats set Thursday tax vote [Politico]
House GOP Balks at Middle-Class Tax Cut Vote Scheduled Thursday [Fox News]

IRS Commish Reminds Congress That If They Blow Off Tax Policy, We’ll Have a Giant Mess on Our Hands

There’s a small part of us that hopes the lame-o Congress just throws their hands up and lets all the outstanding tax policy issues expire, just to see what the fallout would be.

While we wish no harm to our practitioner friends like Joe Kristan, watching the pols in Congress squirm from the wrath of the American populace would be rather enjoyable.

Doug Shulman, on the other hand, does not share our impish impulses and wrote a letter to Congressional members on the Senate Finance and House Ways & Mean Committees, reminding them that if they let this one get away, his agency will have one hell of a mess on their hands.


Reuters has some excerpts:

“Of course, if legislation has not passed by the end of this year, our computers will have been programed incorrectly and we will need to delay filing for these individuals,” he said in a letter to the top lawmakers on the congressional committees charged with tax policy.

Realizing that the members might not quite understand what all this crazy-talk means, the Commish gave some details:

“It would be an unprecedented and daunting operational challenge to open the tax filing season under one set of tax laws with respect to AMT and extenders, begin accepting tax returns, and then have the law change,” Shulman wrote.

So essentially, re-doing a bunch of work. Nobody wants that. Luckily for everyone involved, Shulman appears to understand that while dysfunction is standard operating procedure on the Hill, most CPAs prefer providing above average client service.

Some People Aren’t Convinced Nancy Pelosi Wants to Compromise on Tax Cuts

President Obama is darn sure that a deal will get made on the expiring tax cuts before the end of the year despite the ‘logjam’ between the two political parties.

He’s confident because hard-working families need it, the economy is fragile yada yada yada and now that Tim Geithner and OMB Director Jack Lew are on the case, this thing is a shoe-in.

While the next Speaker of the House, John Boehner, is not quite on the same page as the President, he’s pretty much in the same chapter:

“Republicans made the point that stopping all the looming tax hikes and cutting spending would, in fact, create jobs and get the economy moving again,” said Representative John Boehner, who will become Speaker of the House next year.

“We’re looking forward to the conversation with the White House over extending all of the current rates, and I remain optimistic,” he said.

Well, as close as to the two will likely get in public anyway. However, this a slightly more optimistic stance than what some people have for Nancy Pelosi, who would, presumably, rather give up her Armani suits than hand the wealthy a tax cut:

“There is some thought that the last thing that Nancy Pelosi wants to do on her way out of the Speaker’s office is to have Congress approve an extension for tax cuts for the wealthy,” said Brian Gardner, an analyst for investors at Keefe, Bruyette and Woods.

“She could muck things up a little bit.”

Well! This should be fun! Stay tuned.

Obama and Republicans agree to negotiate on taxes [Reuters]

Vastly Unpopular 1099 Requirement Survives Thanks to the Reliable Dysfunction of the U.S. Senate

Everyone’s favorite Two Minutes’ Hate from the healthcare reform legislation – the 1099 reporting requirement – managed to live to fight another day despite being as unpopular as the Democrats who originally got behind it (although don’t look at Nancy Pelosi).


As is the wont of Senate, this sliver of bipartisanship was foiled by…wait for it…politics:

The provision survived because of the complex politics of the Senate. Some lawmakers were reluctant to back repeal on Monday since the rule change would have been added to a popular food-safety law that is nearing approval, potentially jeopardizing its passage. In addition, dueling Democratic and Republican proposals allowed lawmakers to register their disapproval of the 1099 requirement whether the repeal passed or not.

In other words, everyone agrees that they hate this thing but they hate it in different ways. You see, it’s not enough to be against the 1099 requirement, it matters who gets the credit for being against so much that they actual introduced the proposal to do away with it.

Sigh. But it’s cool, the rule doesn’t actually go into effect until 2012, so blowing it off for another 12 months is totally an option. And a pretty realistic one, too.

Senators Cannot Agree on Fix to the Health Law [NYT via CPA Success]