GOP Calls for Shift as White House Drops Tax Hint

Shortly after President Obama suggested compromising with the new Congress, the Republican leader in the Senate insisted that the White House would have to shift dramatically right for compromise on taxes.

Market Watch reports

Sen. Mitch McConnell of Kentucky vowed in a speech at the conservative Heritage Foundation to keep his party’s focus on attacking government spending and rolling back the newly enacted health-care law.

“Our primary legislative goals are to repeal and replace the health spending bill; to end the bailouts; cut spending; and shrink the size and scope of government,” the Republican said.

On Wednesday, the president extended an olive branch to the Republicans, saying he’d negotiate with them where he felt possible on issues like energy and tax cuts. On Thursday, White House spokesman Robert Gibbs told reporters that making tax cuts “permanent” is not a good idea, leaving the clear implication that doing so on a temporary basis would be possible.

Wall Street was paying keen attention to any talk of a possible deal on taxes, as the Dow Jones Industrial Average and other benchmarks tracking U.S. stocks rallied.

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Is this the Tax Reform Obama and the New Congress can Agree on?

The mid term elections are over and both President Obama and Congress are going to have to decide on a few tax laws in the next few weeks. Earlier today Reuters published an article bringing attention to a non-partisan tax proposal from Senator Ron Wyden, a Democrat from Oregon, and Senator Judd Gregg, a Republican from New Hampshire, that many expect the President and Congress to consider.

The proposal would simplify income tax rates for individuals and businesses, and change laws so that businesses could immediately write off capital investments. It would also raise capital gains tax rates, but would reduce the federal budget deficit, while reducing the average family's tax liability by around $4,000.

Reuters reports:

President Barack Obama’s bipartisan deficit commission has a mandate to cut the U.S. budget gap. But the White House panel may surprise in another area: tax reform. Democrats and Republicans are taking a hard look at a plan that would simplify the code and cut corporate taxes. Although not perfect, it would be a big improvement.

Much of the public focus on the commission, which is expected to vote on any recommendations it makes next month, has been on its efforts to slash spending. Two areas that could suffer the knife are tax breaks and Social Security, analysts say. But panelists are also assessing ways to reform America’s labyrinthine tax code to promote economic growth, and thereby more tax revenue to help pay down the debt.

Smartly, members won’t recommend a total scrapping of the current system in favor of some ideal tax code concocted by academics. No politically unfeasible value-added or flat taxes here (though a flat consumption tax would be ideal). Instead, they’re examining a plan devised by politicians — Senator Ron Wyden, a Democrat from Oregon, and Senator Judd Gregg, a Republican from New Hampshire and panel member — that uses the current system as a baseline and then tweaks it a whole lot.

The Wyden-Gregg idea mostly succeeds. For individuals, it would reduce the number of tax rates from six to three and dump the alternative minimum tax. It would also combine several existing government savings plans into one. For business, Wyden-Gregg would combine multiple rates, including a 35 percent top rate, into a flat, 24 percent corporate rate. Small businesses could immediately write off capital investments. And companies could only deduct part of their interest payments, making equity financing more competitive. All great, great stuff.

There are some downsides, which is to be expected of a plan meant to win votes on both sides of the aisle. It would raise the top capital gains tax rate to 23 percent from 15 percent (not counting what happens with the Bush tax cuts or the new Obama Medicare tax). It would also subject the foreign income of U.S. multinationals to immediate taxation. Most advanced economies tax only income earned domestically.

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U.S. States, Cities Seek Voter Approval for $17 Billion of Debt

States and municipalities across the country are asking voters to approve $16.8 billion in bonds this upcoming election on November 2nd. According to Business Week.com, this represents the lowest amount during a congressional year general election since 1996. Check out a snippet of their story below.

U.S. states and municipalities from Maryland to Alaska will ask voters to approve $16.8 billion in bonds Nov. 2, the lowest general-election amount in a congressional year since 1996, Ipreo Holdings LLC data show.

Lawmakers in Alaska seek to issue $997 million of bonds, the most of any ballot question this year, to fund mortgages for veterans, while voters in Washington state will consider $505 million for energy projects at schools, according to New York- based Ipreo, a market-research company. Issuers asked for authority to borrow almost $67 billion in the general election two years ago and $79 billion in 2006, the largest amounts since 1946, according to data compiled by Thomson Reuters.

In 1996, voters considered $16.6 billion in bonding authorizations, Thomson Reuters data show. General-election ballots typically contain more debt in even years, when congressional elections are held, than in odd-numbered ones. In 2009, governments sought approval for $9.8 billion.

“The public is getting nervous about all the debt being accumulated in this country,” said John Matsusaka, president of the Initiative & Referendum Institute at the University of Southern California in Los Angeles. “The appetite has been diminished.”

The $67 billion sought two years ago was driven by California, which isn’t putting any statewide bond questions before voters on Nov. 2.

Continue reading at Business Week.com…