Democrats Divided on Bush-Era Tax Cuts Vote

From Reuters.com:

Democrats cannot decide whether to hold a vote on extending tax cuts, as some lawmakers fear the issue could hurt their re-election chances in November.

Senator Max Baucus, the Senate Finance Committee chairman drafting a bill to extend tax cuts for all but the wealthiest taxpayers, told reporters he would like a vote before the elections but there was no agreement in the party to do so.

President Barack Obama and most of his fellow Democrats want tax cuts enacted under former President George W. Bush to be extended only for the first $200,000 of a person's income, saying the country cannot afford the cuts for higher earners.

Republicans want the lower rates renewed for all Americans, regardless of income, and say that losing the cuts would hurt small businesses and job creation just as the economy is recovering from its worst recession since the 1930s.

Voter anger over the weak economic recovery has produced heavy headwinds for Democrats ahead of the congressional elections in which Republicans are expected to make big gains and possibly regain control of Congress.

Daschle Apologizes for Income Tax Errors

From Washington Post.com:

Thomas A. Daschle, fighting to defend his nomination to be secretary of health and human services, released a letter early today apologizing to the top lawmakers on the Senate Finance Committee for mistakes on his personal income tax returns that resulted in $146,000 in back payments.

"I am deeply embarrassed and disappointed by the errors that required me to amend my tax returns," he wrote to Sen. Max Baucus (D-Mont.) and Sen. Charles E. Grassley (R-Iowa). "I apologize for the errors and profoundly regret that you have had to devote time to them."

Daschle, who served as majority leader of the Senate, had once been expected to be confirmed easily by his former colleagues. But the tax problems, which were first reported Friday night, could pose a potential obstacle to the former senator from South Dakota.

Appearing briefly before reporters this morning at a White House meeting, President Obama, a close Daschle ally, said he "absolutely" stands by his nominee.

That support was reiterated by White House spokesman Robert Gibbs at his briefing with reporters today.

"We believe that the committee and the Senate as a whole will examine not just one mistake in [Daschle's] career but look at that longer, three-decade career of public service, of serving this country, serving the constituents both in South Dakota and across America," Gibbs said. "The president believes that Senator Daschle is the right person for the very important job of ensuring that we cut costs, reform our health-care system and finally give the American people, in health care, the outcomes that they deserve."

Senate Finance Committee Approves Tax Cuts in 14-9 Vote

From MarketWatch:

A Senate committee approved $342 billion in tax cuts on Tuesday as part of a larger plan to stimulate the economy. The Senate Finance Committee voted 14 to 9 to approve the legislation after amending the original proposal to make sure middle-class taxpayers aren't hit by the alternative minimum tax this year. All Republicans on the committee opposed the package except for Sen. Olympia Snowe, R-Me, according to Dow Jones Newswires. The bill includes a $500 individual tax credit, tax breaks for businesses to hire workers and buy equipment, and tax incentives for energy efficiency.

Geithner Apologizes for Tax Mistakes

From USA Today:

The Senate Finance Committee just opened its confirmation hearing on the nomination of Timothy Geithner to be Treasury secretary.

As we noted earlier, Geithner is sure to face questions about why he failed to pay Medicare and Social Security taxes on some of his income for a few years.

Committee Chairman Max Baucus, D-Mont., just opened the hearing by saying he thinks Geithner made "innocent mistakes," but that he expects to hear an explanation from the nominee.

Republican Jim Bunning of Kentucky told Geithner his failure to pay the taxes fully until just before his selection by Obama was announced was "hard to explain to my constituents who pay these taxes on a regular basis."

Although the tax disclosures provided a bump in Geithner's confirmation process, he appeared to have wide support from both parties, especially given the severity of the downturn and the nominee's past experience in the financial system.

"You will be confirmed," Pat Roberts of Kansas told Geithner. Still, the senator said, his phones were "ringing off the hook" from people in Kansas complaining about the prospects of having a Treasury secretary who was careless in tending to his own tax liabilities.

Senate Tax Panel Proposal Targets Offshore Insurers

From CNN Money.com:

Senate Finance Committee staff Wednesday sought comment on draft legislation that would tax related-party transactions by Bermuda-based insurance companies.

U.S. insurers including W.R. Berkeley Corp. (WRB), the Chubb Corp. (CB), and the Travelers Companies (TRV) have long charged that the Bermuda firms avoid taxes on their U.S. business by reinsuring the risk to the Bermuda parent.

The U.S. subsidiaries of firms including the ACE Group (ACE) and XL Capital Ltd. (XL) can then deduct the reinsurance premiums, lowering their U.S. tax liability. The Bermuda affiliate doesn't pay U.S. tax on the premium, while earning investment income subject to little or no tax.

"Thus, it is an efficient way of significantly reducing U.S. tax without transferring risk," according to a Finance Committee statement accompanying the draft legislation.

The Senate proposal would affect only related-party reinsurance transactions. It would deny a deduction for premiums in excess of an industry average of reinsured policies.