Obama Backs Cut in U.S. Corporate Tax Rate

Corporate Finance

President Barack Obama called on Congress to cut the top U.S. corporate tax rate for the first time in 25 years “without adding to our deficit,” a sign that businesses will have to give up tax breaks in exchange for lower rates.

The president, in his State of the Union address to Congress last night, also pressed for simplifying the tax system for individuals, which would restructure how more than $1 trillion in revenue is collected annually.
“The best thing we could do on taxes for all Americans is to simplify the individual tax code,” he said, to applause from the audience. “This will be a tough job, but members of both parties have expressed interest in doing this, and I am prepared to join them.”

Some analysts said Obama’s willingness to consider a corporate tax overhaul along with tax simplification may lead to changes in the code.

“Tax reform has been like the weather, everyone talks about it but no one does anything about it,” said Pat Heck, a partner at the Washington law firm KL Gates and a former top aide to the Senate Finance Committee. “Tonight’s speech could be a game changer. While it would be naïve to think tax reform legislation will be drafted overnight, a long journey always begins with a first step.”

‘Disappointed’

Representative David Camp, a Michigan Republican who chairs the tax-writing House Ways and Means Committee, said he was “disappointed” by the lack of details in Obama’s call for a tax overhaul.
“I think it could have used a little bit more on his proposals on individual tax reform,” Camp said in an interview after the speech. “Frankly, we really need more of a path forward even on the corporate side. I think we need some more concrete plans.”

Obama’s proposal for a corporate tax-rate decrease, accompanied by removal of tax breaks, is at odds with that espoused by corporate chiefs. Robert McDonald, CEO of Procter & Gamble Co., and groups such as the Washington-based Business Roundtable have urged the administration and lawmakers to set aside deficit concerns for now to focus on rate reduction.

Each percentage-point reduction in the 35 percent corporate tax rate could cost $8 billion or more a year in foregone revenue to the Treasury, according to the congressional Joint Committee on Taxation.
Financing a rate cut could mean that corporate tax breaks such as a deduction for domestic manufacturing and production income and accelerated depreciation of capital expenses may have to be sacrificed.

Winners and Losers

“If it’s revenue neutral for businesses, there’s probably some winners and some losers,” said Daniel Shaviro, a professor of taxation at the New York University School of Law. “And when you take away a lot of special benefits, you tend to get losers complaining more than the winners celebrating.”
The top marginal corporate tax rate, or the rate paid on the last dollar of income earned, has stood at 35 percent since 1993.

Companies often pay a lower effective tax rate, after taking advantage of tax credits and deductions and keeping overseas earnings reinvested indefinitely. The U.S. is among a handful of countries that tax profits earned in other countries, though only when the money is brought home, or repatriated.

Obama’s call to cut the top rate “will be highly welcomed by the business community,” though it ought to be paired with changing the way overseas profits are taxed, said Drew Lyon, a principal in the Washington national tax services office of PricewaterhouseCoopers LLP. He said Obama should endorse switching from a worldwide system of taxation to a “territorial” system, where companies’ overseas branches and subsidiaries pay tax only to their host governments.

Deficit Concerns

A report by the Washington advocacy group Citizens for Tax Justice released before the speech said the goal should be to reduce the budget deficit, which was $1.3 trillion for the fiscal year ending Sept. 30. The report said Obama should follow President Ronald Reagan’s example in ending more corporate tax breaks than necessary to finance a rate cut.

The president in his speech also called for ending Bush-era income tax cuts for individuals earning more than $200,000 and married couples earning more than $250,000.

The tax cuts enacted under President George W. Bush for all income levels were extended through 2012 as part of a deal Obama worked out with congressional Republican leaders in December.

Obama also asked Congress to make permanent a stimulus tax credit for higher education expenses, up to $10,000 for four years of college. That Corporate Finance proposal was estimated by the JCT last year to cost $58.1 billion over 10 years.

Mobile Number Portability Launch Today In India

Today is the day for all those who frustrated with their mobile phone networks have been waiting for. You can dump their operator at only Rs 19. And yes, it is so post-paid and prepaid customers.

As Mobile Number Portability takes across the country today, everything you need to switch providers if you have now is not meeting your needs and standards. Of course, you can do in its current coverage area. So not really help people who move into town. You can not keep the number was in Mumbai, where the transition from the bottom of Delhi. But in addition, this service is certainly a little weary calm nerves and help prevent a lot of unnecessary services cries.

Although studies show that MNP will make a negligible difference to the operator's subscriber base and thus overall service, it would be interesting to follow the customer enthusiasm and response to the highly hyped service, which is finally launched, three years late.

Park District Hires Corporate Finance Director

The Naperville Park District has hired a new CFO. Form Stanish, CPA, who took over last Monday had served as chief financial officer of the Village of Willowbrook for 12 years. She also worked as accounting manager for the city of Naperville from 1993 to 1998.

“Not only does Sue Stanish bring excellent qualifications and experience to the district’s finance department, but she also brings personal knowledge of Naperville,” said Park District Executive Director Ray McGury.

Stanish said she is looking forward to working as part of a team that will be building and maintaining parks and facilities for the community. She will be working with the park board and staff to maintain the district’s excellent bond rating and general financial health.

“My goal will be to keep the same level of professionalism in my department that has been here previously,” she said.

Corporate Finance - Arden Boosted By Late Corporate Deals

LONDON (SHARE CAST) - AIM-listed broker Arden Partners has reported a loss for the year to October 2010, but still make an underlying profit in Corporate Finance.

A couple of important fundraising at the end of the period helped increase the income of corporate finance, but secondary income from equity trading fell 29%.

Generally revenues were flat at £13m but there was a sway from a profit of £1.52m to a loss of £512,000. Stripping out share based payments of £1.08m, up from £702,000 the previous year, Arden was profitable. There were also restructuring costs of around £700,000 in the period following the departure of the chief executive Jeremy Grime. The underlying profit was £1.3m, down from £2.2m.

Arden intends to focus its activities on its core areas of the United Kingdom and India. CEO Jonathan Keeling, focusing on the possibility of India. Last month, Arden has raised £ 6,800,000 for Hardy Oil & Gas.
Net cash fell to 9 million pounds in late October 2010, but its financial position remains comfortable. At year end, Arden spent £ 947 000 to buy back shares.

Geithner To Meet With Corporate Finance Chiefs On Tax Reform

The Treasury Department has released the list of companies expected to be represented when Timothy Geithner, the Treasury secretary, discusses tax reform Friday with corporate chief financial officers.

The companies are: Honeywell, Cisco, Johnson & Johnson, Coca-Cola, Emerson, United Technologies Corporation, Wal-Mart, Exxon, PepsiCo, Microsoft, Procter & Gamble, Bank of America, Caterpillar, Disney, Eli Lilly, General Electric, Dow Chemical and MetLife.

The meeting comes as tax reform is getting increased attention around Washington, even as members of both parties acknowledge that overhauling the nation’s tax code would be a difficult undertaking.

Treasury representatives have cautioned that Friday’s event is one in a series of meetings dealing with tax reform and have advised not to read too much into it.

For his part, President Obama has said he wants a “conversation” on the issue this year. And Valerie Jarrett, a senior White House adviser, recently called Friday’s Treasury meeting an opening step in what would most likely be a drawn-out push to overhaul the tax code.

Republicans have also been supportive of considering tax reform. Rep. Dave Camp (R-Mich.), the new chairman of the House Ways and Means Committee, announced Thursday the panel would have the first in a string of hearings on the issue next week.