US Senate Finance Chief Vows Vigorous Tax Reform Effort this Year

On Tuesday the Senate Finance Committee Chairman said they will attempt to overhaul the US tax code this year. However, Max Baucus also warned that it will not be completed "quickly." I think I could have told you that…

From iMarketNews.com:

"I expect this to take a little time," Baucus said in comments during a Finance Committee hearing on the airport and airway trust fund.

Baucus said his panel will hold a "lot of hearings" on tax reform, examining the AMT, individual and corporate tax policy as well as the international competitive consequences of the U.S. tax code.

He said tax reform efforts must also include the nearly $1 trillion in annual tax expenditures--which some describe as spending through the tax code.

"It's just too complex," Baucus said of the U.S. tax code.

The Senate Finance Committee, under Democratic leadership, began holding hearings on tax reform last year. The House Ways and Means Committee, under Republican leadership, launched tax reform hearings last month.

President Obama in his State of the Union address called for tax reform cooperation between Congress and the administration.

Continue reading here...

President Obama Expresses Disappointment with Tax Vote

Over the weekend the Senate blocked legislation that would have extended the Bush tax cuts to middle income taxpayers. President Obama reportedly called the vote very disappointing.

"It makes no sense to hold tax cuts for the middle class hostage to permanent tax cuts for the wealthiest two percent of Americans," he added.

Check out this video from the Associated Press, or the article below explaining the Senate's decision.

In a rare weekend session that followed days of stormy debate, the 100-member Senate on Saturday fell short of the 60 votes necessary to approve the Democratic proposal of renewing low tax rates only for individuals earning up to 200,000 dollars and for families with 250,000 dollars or less of income.

The measure, backed by the White House, would have let rates on higher earners rise at the beginning of next year to where they were before cuts enacted by former president George W. Bush's administration in 2001 and 2003.

Republicans blocked the legislation on a procedural vote, complaining the measure failed to extend low tax rates for wealthier Americans. They want all of the tax cuts -- including those that directly benefit the top earners -- to be extended instead.

They also rejected another Democratic proposal to extend the tax cuts for annual incomes of up to one million dollars. A handful of Democrats voted against the two measures.

"With so much at stake, today's votes cannot be the end of the discussion," Obama said in a statement.

Read more here

Senate Votes Down Ban on Earmarks

Yesterday morning the senate defeated a proposal to ban congressional earmark spending. Fifty-six senators voted against the legislation, which was offered as an amendment to a food-safety bill.

The Hill.com reports:

Senate Republicans have already passed a voluntary ban on earmarks in their caucus, but several GOP senators have objected to it. Democrats have so far declined to ban earmarks from their members.

The legislation would have established an earmark moratorium for fiscal years 2012 and 2013, and also would have covered the fiscal year that began on Oct. 1. Congress has yet to pass an appropriations bill for the current fiscal year, and in the lame-duck session lawmakers are likely to approve either an omnibus spending bill or a continuing resolution to keep the government operating.

In speeches on Monday, Coburn said the ban was the only way to rein in out-of-control spending. He did not speak on Tuesday morning, but Minority Leader Mitch McConnell (R-Ky.), who supports the ban, alluded to the issue in remarks about the current debate over tax cuts.

"Republicans have heard the voters loud and clear," McConnell said. "They want us to focus on preventing a tax hike on every taxpayer, on reining in Washington spending and on making it easier for employers to start hiring again."

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Senate Blocks Repeal of Health Care Provision

Yesterday, the Senate blocked an effort to repeal part of Obama's health care reform package. The tax provision would require nearly 40 million businesses to start filing tax forms for every vendor that sells them more than $600 in goods.

The Associated Press reports:

The provision was included in the new health care law passed last year, but even Democrats who supported the law now acknowledge that the filing requirement would be a paperwork nightmare for businesses.

Most senators support repealing the requirement, but they couldn't agree Monday on whether to make up the lost revenue. The filing requirement raises an estimated $19 billion over the next decade.

Read more here

California Senate Approves a Budget Plan

100 days after the constitutional deadline to pass a budget, the California Senate finally came to an agreement and sent a budget to Governor Arnold Schwarzenegger. According to News10.com, the vote came after a long night of floor votes and party caucuses. However, not everyone is happy about the new changes and spending cuts it includes.

"This budget has too much spending, which could make next year's deficit even worse. I'm voting no, "said Sen. Jeff Denham, (R) Merced.

Democrats say the spending plan is fair.

The state Assembly passed the main bill Thursday afternoon in a legislative package aimed at ending California's record budget impasse and closing a $19 billion deficit. Trailer bill list

Lawmakers voted 54-1 Thursday in favor of the measure, SB970, getting just enough support in the 80-member house to reach the required two-thirds vote threshold.

The budget package contains no new taxes or fees, and just 40 percent of the gaping deficit would be closed by additional spending cuts. The rest would be addressed through rosy revenue assumptions and creative accounting.

Regulatory Squabbles Threaten Financial Reform

From MarketWatch.com:

The initial confrontation before the Senate Banking Committee didn’t come from the expected parties, Sheila Bair of the Federal Deposit Insurance Corp. or Treasury Secretary Timothy Geithner. It was between Geithner deputy Neal Wolin and the committee chairman.

The issue: Would Geithner be a good-faith participant with other regulators?

The answer was Geithner would, Wolin said. Moreover, he will head the council of regulators when it meets for the first time Friday. This seemed important to Sen. Christopher Dodd, D-Conn., who noted that the infighting and lack of communication between agencies was partly responsible for the regulatory breakdown that failed to forecast and address the financial crisis.

“There has to be a change in how we operate,” Dodd told the panel.

Committee officials and Treasury Department officials told MarketWatch that Geithner wasn’t invited, while Wolin was. They also said all of the agencies have been cooperating.

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.

Senate Passes $30B Small Business Credit Measure

The Senate passed new legislation on Thursday that will offer new tax incentives to business owners. According to Forbes.com legislators passed the bill in a 61 to 38 vote, which will establish a government fund to open up lending to credit-starved small business owners.

The tally gives President Barack Obama and his besieged Democratic allies in Congress a much-sought - but relatively modest - political victory with less than seven weeks to go before Election Day.

Obama said Thursday that the bill will help millions of small business owners across the country grow and hire. "These tax breaks and loans are going to help create jobs in the short term," he said.

The new loan fund would be available to community banks to encourage lending to small businesses. Supporters say banks should be able to use the fund to leverage up to $300 billion in loans.

The loan fund is opposed, however, by most Republicans, who liken it to the 2008 bailout of the financial system. They warn it would encourage banks to make loans to borrowers who aren't good credit risks.

Continue reading at Forbes.com…

Senate Fails to Cut Tax Provision in Health Law

According to the Associated Press, on Tuesday the Senate voted against repealing a new tax reporting provision in the new health care law. Even the White House backed the proposal by a Senator Bill Nelson to exempt companies with 25 or fewer workers and raise the reporting threshold for businesses with more than 25 employees.

It was an inconclusive ending to an early skirmish over repealing part of President Barack Obama's signature domestic policy achievement. But it signaled battles to come if Republicans gain control of Congress in the midterm elections this fall.

Tucked into the health law is a requirement that businesses file tax forms called 1099s with the Internal Revenue Service for every vendor that sells them more than $600 in goods. Business groups say it would create a paperwork nightmare for more than 40 million companies as they struggle to keep going in a weak economy.

But Nelson's amendment failed a 60-vote procedural test 56-42. That vote came shortly after the Senate also sidelined, by 46-52, an amendment by Sen. Mike Johanns, R-Neb., that would have repealed the reporting requirement.

"We're stuck on this issue of whether or not businesses are going to have to file these 1099s," Nelson said.

The votes were a sidelight in a debate over broader legislation to help small businesses, but nonetheless they underscored the difficulty of making any substantial changes to the health care law.

Continue reading at Google.com…

Senate Takes Up 'Job Killing' IRS Rule

The Senate is back in session this week after returning from recess, and the members have a lot of hotly debated issues to vote on. They are scheduled to decide on expiring tax cuts, and the health care law that would require small businesses to file more forms.

CNNMoney.com reports:

Lawmakers return to Capitol Hill this week after the summer recess and small business tops their to-do list.

Their goal: Help small business, and boost the economy. The Senate will consider two proposals right off the bat.

The broader measure is the Small Business Jobs Act, which includes a $30 billion fund to spur lending and $12 billion worth of tax breaks. The Senate will also decide whether to repeal a law enacted as part of health care reform that will require small businesses to file millions of new tax forms -- a provision a top Republican calls "job killing."

Main Street needs the help: Credit remains hard to come by, and without it hiring is suffering. In fact, small business hiring has been on a downward slide for the past two and a half years.

And both the number of small business loans and the total value of those loans have declined, according to data from the FDIC. The number of loans has dropped by 17.8% since the second quarter of 2008 and the total value of those loans plunged by $60 billion to $650 billion.

Read more here

What Affect will the Wall Street Reform Legislation have on Taxpayers?

After a long battle in the Senate, President Barack Obama finally signed the Wall Street Reform bill into law on July 21, 2010. The historic legislation includes plenty of new laws that apply to large financial firms, but will also have a significant impact on U.S. taxpayers. The contents of the bill changed frequently as the legislation made its way through Congress, so I wanted to make sure and explain the impact of the new law to all of my readers.

Taxpayer Funded Bailouts

One of the biggest goals of the new law is to prevent any future taxpayer-funded bailouts. The President has promised that no big banks will ever be bailed out at the American taxpayers’ expense. In fact, federal regulators now have the ability to disassemble a financial institution that could pose a threat to the economy. This does not mean that they will go around closing random banks- experts predict the authority will only be used for situations that need a quick solution.

Credit Card Fees

Starting in 2011, a hand full of new rules will take affect that are going have a significant impact on credit card companies. The new restrictions aim to get rid of undisclosed fees and soaring interest rates. However, there is a provision in the legislation that will allow businesses to setup minimum purchase requirements of $10 for credit card transactions.

Consumer Disclosure

To provide additional protection to American consumers, the law will introduce a set of consumer disclosure laws. They will prevent banks and other financial institutions from misleading customers to enhance their own profits. This also means that as a consumer you now have the right to more information about your finances, such as easy access to a free credit report.

Bureau of Consumer Financial Protection

One of the most debated parts of the financial reform bill was a new division it created: the Bureau of Consumer Financial Protection. President Obama has not yet selected a person to lead the new bureau, which will have an impact on how the agency acts. The committee will have an annual budget of $500 million, and the ability to act without Congress approval. Front runners for the leader include Elizabeth Warden, chair of the Congressional Oversight Panel; Eugene Kimmelman, a Deputy Assistant Attorney General in the Justice Department; and Michael S. Barr, an assistant Treasury secretary.

Small Business Relief

A lot of small business owners have become frustrated as they watched large financial institutions get huge bailouts, while they had to struggle without any government assistance. To help these small business owners, new rules have been included in the legislation which aim to increase funding for small business loans.

Mortgage Changes

Several changes have also been made to the way mortgage lenders can run their business. In the past, lenders could take commissions or bonuses for putting a client in a riskier but more expensive loan. However, this act is now illegal, and there will also be a new cap on mortgage origination fees, as well as requirements for all lenders to check borrowers assets and income.

$26 Billion for States Passes Key Test Vote

A measure to send federal aid to cash-strapped states passed a key vote in the Senate, putting it one step closer to becoming law. However, if a final vote is not made by the end of the week, the bill will have wait until the end of the month because the Senate has an August recess scheduled to begin next week.

The measure, which passed by a 61-38 vote, contains $16.1 billion in additional Medicaid money and $10 billion in education funding to prevent teacher layoffs.

State officials have been desperately lobbying their representatives, saying they need the money to shore up their budgets. President Obama weighed in Monday, asking lawmakers to pass the bill.

Senate Democrats needed to garner at least 60 votes for the measure to pass this initial vote, meaning some Republicans had to cross the aisle. That help came in the form of Maine Republicans Susan Collins and Olympia Snowe.

A final vote could come late in the week, just before the Senate is scheduled to recess for the long August break. The measure would then have to go back to the House, which has already recessed. So it might not get to President Obama's desk until September.

Continue reading at CNN.com…

Five Problems Financial Reform Doesn’t Fix

As I mentioned yesterday, the Senate approved the historic financial reform legislation, and sent it to President Obama for a signature. Many experts are questioning the affect this bill will have on Wall Street, and earlier today I came across this interesting article from NewsWeek.com on the five problems the new legislation will not fix. Check out a snippet of the article below, or head over to NewsWeek.com for the full text.

“We would have loved to have something like this for Lehman Brothers," said Hank Paulson with a sigh, in a recent New York Times story. "There’s no doubt about it.”

Paulson was talking about the financial-regulation bill that the Senate passed today. And he’s right: the next time there’s a financial crisis, regulators will say a quick prayer of thanks to Rep. Barney Frank for giving them the power and information to quickly figure out what’s happened and how to respond. The legislation ushers derivatives out of the darkness and onto exchanges and clearinghouses, gives regulators the power to oversee shadow banks and take failing firms apart, convenes a council of superregulators to watch the megafirms that pose a risk to the full financial system, and much else.

But the bill does more to help regulators detect and defuse the next financial crisis than to actually stop it from happening. In that way, it’s like the difference between improving public health and improving medicine: The bill focuses on helping the doctors who figure out when you’re sick and how to get you better rather than on the conditions (sewer systems and air quality and hygiene standards and so on) that contribute to whether you get sick in the first place.

That is to say, many of the weaknesses and imbalances that led to the financial crisis will survive our regulatory response, and it’s important to keep that in mind. So here are five we still have to watch out for:

1. The Global Glut of Savings: “One of the leading indicators of a financial crisis is when you have a sustained surge in money flowing into the country which makes borrowing cheaper and easier,” says Harvard economist Kenneth Rogoff. Our crisis was no different: Between 1987 and 1999, our current account deficit—the measure of how much money is coming in versus going out—fluctuated between 1 and 2 percent of gross domestic product. By 2006, it had hit 6 percent.

Wall Street Bill Clears Crucial Senate Hurdle

Despite many doubts, the historical financial reform bill passed a major hurdle in the Senate today. 60 Senators voted in favor of the legislation, which gave it enough support to overcome a filibuster. According to Retuers.com, President Obama intends to sign the bill into law next week.

Senate leaders set a series of final votes for 2 p.m., with passage looking assured. President Barack Obama, who proposed reforms more than a year ago, has said he wants to sign the measure into law next week.

Republicans who largely oppose the measure could delay a vote until Friday evening, though they are unlikely to do so.

The House of Representatives has already approved the bill, which tightens regulation across the financial industry in an effort to avoid a repeat of the 2007-2009 financial crisis.

Senate Combines Jobless Benefits, Homebuyer Credit

While still recovering from a failed attempt to extend unemployment benefits last week, Senate Democrats are working on a new bill that would combine the unemployment benefit extension with an extension of the homebuyer’s credit.

Sponsors of the legislation have said it aims to create more jobs and support the struggling real estate market. As this article from the Associated Press claims, Democrats are going to need to get a handful of Republicans on board if they want the bill to pass the Senate.

Under current law, homebuyers who signed purchase agreements by April 30 must close on their new homes by Wednesday to qualify for credits of up to $8,000. The bill would give those buyers until Sept. 30 to complete the purchases and qualify for the credit.

Democrats hope to pick up Republican support for the bill by combining the two provisions. They have been trying for weeks to pass an extension of unemployment benefits as part of a larger tax and spending package, but the larger bill died in the Senate last week.

Without an extension, unemployment payments would continue to be phased out for more than 200,000 people a week.

Many Democrats see the benefits as insurance against the economy sliding back into recession. Many Republicans, however, worry that adding nearly $34 billion to the budget deficit will only contribute to the nation's economic problems.

Continue reading at Google.com…

Senate: Oil and Gas Industry Tax Breaks Remain

As you know, anti-oil company sentiment is at its peak right now. A recent poll showed that 75% of Americans blame BP “a great deal” for the spill. So, it was no real surprise when the Senate failed to say no to $35 billion worth of tax breaks for the oil and gas industry. Senator Bernie Sanders (I-VT) introduced a provision that would have limited write offs for drilling expenses, eliminated a tax deduction for the capital costs of oil and gas wells and repealed a tax deduction for domestic production of oil and gas. He needed 59 additional votes. He got 34.

Why should such companies receive additional forms of tax relief when the average taxpayer enjoys hardly any at all. Let’s us not forget that we are in a deficit of $13 trillion dollars…yes, that’s with a “T”. So, with such a deficit, a stagnant national unemployment rate and a lingering recession, why are we looking to give tax breaks to oil companies? Especially when over the last decade, the five largest oil companies (Exxon Mobil, Chevron, ConocoPhillips, BP and Shell) made more than $750 billion in profits. This is a no-brainer; these companies simply don’t deserve tax relief.

What are your thoughts? Let me know @ronideutch on Twitter or on Facebook.

Unemployment Bill Dealt Senate Defeat

After a vote in the Senate, the new unemployment extension bill came short of the 60 votes necessary to pass. In fact, only 52 Senators voted in favor of the legislation. I have included a brief article on the bill’s failure below courtesy Forbes.com.

Republicans and a dozen Democratic defectors in the Senate have dealt a defeat to President Barack Obama just days after he pressed Congress to renew pieces of last year's economic bill.

After coming out on the losing end of a 52-45 test vote, Obama's Democratic allies have been forced back to the drawing board in their efforts to extend unemployment benefits for the long-term jobless and provide $24 billion in aid to cash-strapped state governments.

Democrats seeking to reduce the measure's deficit impact are looking at rolling back last year's $25 a week increase in unemployment checks and giving doctors just a short reprieve from scheduled cuts in their Medicare payments.

Democrats' Tax Bill Moves Toward Vote In US Senate

The Senate is scheduled to vote on the new tax bill designed to extend unemployment insurance tomorrow. In order for the bill to pass, 60 of the 100 Senators will need to vote in favor of the legislation. Many Republicans and fiscally conservative Democrats are still weary of the bills price tag, and some bloggers are predicting the bill will not pass. Read more from this Reuters.com story below.

According to Reuters.com, Majority Leader Harry Reid moved toward an initial vote on the $126 billion earlier this week.

Under Senate rules, the vote on whether to limit debate on the legislation will likely occur Wednesday. Sixty votes are needed out of the 100-member Senate.

Complaints by fiscally conservative Democrats about the plan's price tag and opposition by some Democrats to the investment fund manager tax has stalled the proposal.

According to several lobbyists, the majority Democrats remain shy of the 60 votes necessary. They need to attract as least one Republican plus keep all of the 59 votes they generally hold in the chamber.

Over the next 10 years, the Senate proposal would increase direct spending by $126 billion and add $22 billion in funding to prevent a 21 percent payment cut to doctors in the Medicare program, the Congressional Budget Office estimated.

Continue reading at Reuters.com…

The Unemployed Held Hostage

From NYTimes.com:

Since June 1, when federal unemployment benefits began to expire, an estimated 325,000 jobless workers have been cut off. That number will swell to 1.25 million by the end of the month unless Congress extends the benefits. The Senate, so far, has failed to act.

Some senators, including Democrats, have balked at an unrelated provision that would begin to close a tax loophole enjoyed by some of the richest Americans. You heard right. Desperately needed unemployment benefits have been held hostage to a tax break for the rich, and the Senate’s Democratic leadership has had to delay and finagle to get its own caucus in line.

State-provided unemployment benefits generally last for 26 weeks, and the federal government picks up the tab after that, provided Congress approves the extensions. There is no disagreement over the need: 46 percent of the nation’s 15 million jobless workers have been unemployed for more than six months — a higher level than at any time since the government began keeping track in 1948.

There is not even any genuine debate about how to pay for extended benefits. An extension through November would cost about $40 billion. But unemployment benefits are correctly considered emergency spending — they are a vital safety net, and the money is crucial to supporting consumer demand in a weak economy — and exempt from pay-as-you-go budget rules.

Nonemergency provisions in the bill do need to be paid for, including renewal of several generally useful business tax breaks, like the research-and-development tax credit, totaling $32 billion over 10 years. To help cover those costs, Democratic lawmakers in the House and Senate started out with the sound idea to close an egregious tax loophole that allows wealthy fund managers at private equity firms and other investment partnerships to pay a top tax rate of just 15 percent on much of their earnings — versus a top rate of 35 percent for all other higher-income Americans.

Senate Plan For Oil Company Tax Has Sparks Flying

Yesterday, Democrats in the Senate unveiled legislation aiming to increase taxes on oil companies, and provide tax breaks for individuals, businesses, and the unemployed. The huge measure is already drawing criticism from conservative members of congress that do not approve of the $60 million tax increases included in the legislation.

The bill contains many long-pending provisions, including the renewal of dozens of popular tax breaks for individuals and businesses.

Many elements of the bill, like the tax cuts and further unemployment benefits for people out of a job for more than six months, enjoy broad support. But Republicans generally oppose the measure’s nearly $60 billion in tax increases.

Even with those levies — on investment fund managers, oil companies, and some international businesses, among others — the measure would add about $80 billion to the deficit over the next decade, congressional analysts said.

It closely resembles a bill the House passed last month, with a handful of exceptions.

Continue reading at Boston.com…