News

The Obama administration will propose a major overhaul of the nation’s corporate tax code on Wednesday, an election-year gambit that aims to draw a contrast over a key policy issue with the Republicans vying to replace him.

The plan would lower the nation’s corporate tax rate to 28 percent. At the same time, he wants to boost overall revenues from corporate taxation by banning numerous deductions and loopholes that save companies tens of billions of dollars a year on their tax bills, according to a senior administration official.

The current U.S. corporate tax rate of 35 percent is one of the highest in the world, but the abundance of loopholes and deductions enable many businesses to pay far less than that — or nothing at all. Companies in the United States pay almost half the taxes that companies in other rich countries pay, compared with the size of the economy, according to the Organization for Economic Cooperation and Development.

Obama is also targeting oil and gas companies for tax increases while promising special breaks for manufacturing companies, according to a senior administration official.

The prognosis for the overhaul plan in Congress is unclear. Many Republicans, including the leading presidential candidates, have favored reducing taxes on businesses well below what the president is proposing.

Former Massachusetts governor Mitt Romney, who has called for a 25 percent tax rate for corporations, is planning to speak on tax reform later this week, while his rivals for the GOP nomination have called for far lower tax rates.

Despite those disagreements, Republicans and Democrats have been supportive of a tax strategy that reduces rates across the board while eliminating special-interest loopholes.

Treasury Secretary Timothy F. Geithner is to lay out the full details of the plan shortly before noon Wednesday.

“We are going to propose a broad reform that will lower rates, broaden the base and eliminate and wipe out a very substantial fraction, dozens and dozens and dozens of special tax preferences for businesses,” Geithner said in congressional testimony last week. “We’re doing that because we think there’s a compelling economic case for doing that.”

Obama’s plan to raise additional tax revenue through corporate tax reform is notable because officials had earlier hoped that corporate tax reform would neither add to, nor subtract from, annual budget deficits.

Now officials are counting on corporate tax reform to make a modest but still significant contribution to deficit reduction. And Obama has become more assertive in his push to raise taxes to help keep spending and revenues in check.

Obama has not offered a detailed blueprint for overhauling the personal income tax code — also full of loopholes and deductions -- other than calling for higher taxes on the wealthiest Americans. Such a blueprint is not expected to come before the November presidential election.

Under the corporate tax plan, American multinational corporations will have to pay a minimum tax on their foreign earnings — to prevent firms from sheltering profits oversees. Obama also wants to end tax breaks for companies that outsource and give new tax incentives to firms that move jobs back home.

Corporate tax reform has been a pet project of Geithner’s for more than a year and a half. Last year, the Treasury Department finished a detailed white paper on the issue, but it was put on the back burner during the acrimonious debate in Washington over the federal debt.

ATHENS — After months in which Greece teetered on the verge of bankruptcy, European officials agreed Tuesday to give the country a second massive bailout in exchange for harsh austerity measures, as grim new estimates about the country’s economy pushed off a resolution until what some officials called the last possible day to reach one.

The decision buys time for the Mediterranean country to try to fix its staggering problems, and gives assurances to the world that a Greek default — and its possibly disastrous ripple effects — will be forestalled, at least for now. If Greece had been cut loose, it would have defaulted in late March, and doubts about the viability of larger countries such as Spain and Italy might have grown.

Under the terms of the deal, private bondholders will take a larger loss than had previously been planned in an attempt to get Greece’s debt to what European officials consider a sustainable level by 2020. The officials also agreed to reduce the interest they charge Greece for the long-term loans.

House Republican leaders said Monday that they will support extending the federal payroll tax holiday through the end of the year without demanding spending cuts to pay for it, a concession aimed at averting another po­litically damaging showdown in Washington.

The House leadership could offer a pared-down measure to extend the tax cuts later this week. But the top three GOP leaders backed off previous demands that the tax break’s extension be accompanied by spending reductions to shore up the finances of the Social Security program, which is funded through withholding taxes.

Instead, House Speaker John A. Boehner (R-Ohio) and his top lieutenants said they do not want to be held responsible for the tax increase on 160 million workers that would happen if the tax holiday were not extended.

The two sides have been negotiating for weeks but have been unable to strike a deal. Republicans want to continue negotiations over financing the rest of the original legislative package, including an extension of un­employment benefits and a key tweak to maintain Medicare reimbursement rates for doctors, while ensuring that taxes will not rise on workers.

“Because the president and Senate Democratic leaders have not allowed their conferees to support a responsible bipartisan agreement, today House Republicans will introduce a backup plan that would simply extend the payroll tax holiday for the remainder of the year while the conference negotiations continue,” Boehner, House Majority Leader Eric Cantor (R-Va.) and House Majority Whip Kevin McCarthy (R-Calif.) said in a joint statement.

The statement came as negotiations between members of a House-Senate conference committee, asked to iron out differences between the two versions of the legislation, remained stalled over how to finance the roughly $150 billion package.

Democratic leaders said they would prefer moving all three measures in a single piece of legislation but did not rule out supporting the House Republican compromise proposal to act on the tax holiday separately. That portion of the deal is estimated to cost $100 billion over the next 10 months.

“The Republican plan to decouple the payroll tax jeopardizes both the ability of seniors to see their Medicare doctors and benefits for millions of Americans who lost their jobs. There is no reason all three of these priorities cannot proceed at the same time as both the House and Senate agreed,” House Minority Leader Nancy Pelosi (D-Calif.) said in a statement.

But there is a sense that the uncertainty that once surrounded the fate of the payroll tax holiday has lifted: All sides agree that it will be extended and there will be no repeat of a pre-Christmas showdown over the tax benefit that created bitter political divisions within their party’s ranks.

As part of a December 2010 tax compromise, which extended the 2001 and 2003 tax cuts through the end of this year, President Obama won inclusion of the payroll tax cut that dropped individuals’ withholding rate to 4.2 percent from 6.2 percent, giving the average worker an extra $80 a month.

Republicans have questioned the efficacy of the plan, while others have lamented its effect on Social Security’s future. But Obama trumpeted the idea as a way to put cash quickly into workers’ pockets, helping to fuel the improving economy, and in his September proposal he offered to extend the holiday through this year and expand it for workers and employers.

While most of his nearly $450 billion in jobs initiatives fell by the wayside, the payroll tax holiday has survived. When a full-year extension of the existing tax holiday could not be agreed upon in December, the Senate passed, by a wide bipartisan vote, a two-month extension, but House Republicans rebelled. They suggested it was bad economic policy to temporarily adjust payroll taxes, and, more important, many of the 89 Republican freshman lawmakers said it was just the sort of half-a-loaf deal that they were swept into office to correct.

Amid the worst political crisis of Boehner’s tenure — GOP presidential candidates, leading Senate Republicans and former national party chairmen called for passing the interim bill — the speaker wobbled for a week over what to do. Finally, just before Christmas, he pulled the plug on his rebels and passed the bill while they were out of town, calling it the “right fight at the wrong time.”

But with the payroll pay-fors off the table, the two sides are now haggling over ways to pay for the remaining $50 billion needed to cover the extension of unemployment benefits and the Medicare reimbursements for doctors.

State and federal officials on Thursday announced a settlement of more than $25 billion with five of the nation’s banks over their flawed and fraudulent foreclosure practices. It is the largest government-industry settlement in more than a decade.

The deal aims to help troubled borrowers by reducing the amount they owe on their mortgages, lowering their interest rates and paying restitution to homeowners who suffered mortgage-related abuses. It will force lenders to revamp how they interact with troubled homeowners and bar them from trying to foreclose on borrowers while simultaneously negotiating mortgage modifications.

In addition, firms will have to make sure borrowers have a single point of contact with a lender, rather than being shuttled to different employees with each interaction.

U.S. Attorney General Eric Holder announced the deal--which he called the largest joint federal-state civil settlement in history--at a packed morning news conference attended by top federal housing and finance officials and attorneys general from many states.

Holder excoriated lenders for behaviors that he said “pushed borrowers into foreclosure” and “fueled the downward spiral of our economy.” He called the deal the country’s latest step forward in “righting the wrongs that led to our nation’s housing-market collapse and economic crisis.”

Officials said the agreement--details of which can be seen on www.NationalMortgageSettlement.com-- probably would be filed in a federal court within a matter of weeks and would require the consent of a judge. Once it is approved, banks would begin to deposit money into a trust account, and those funds would be distributed to qualified homeowners by the government. In all, 49 states have signed onto the agreement, with Oklahoma the lone remaining holdout, federal officials said.

Under the terms of the deal, banks would have three years to complete principal writedowns, refinancings and other relief. But officials said they structured the deal so that it provides incentives for actions taken within the first 12 months, in an effort to get aid to homeowners sooner rather than later.

The settlement also includes about $17 billion that would go toward foreclosure-prevention measures, such as lowering the loan balance for borrowers who owe more than their homes are worth. Banks would be given varying “credits” for different ways in which they write off existing debts.

Other provisions would provide for lowering interest rates for homeowners who are current on their loans. In addition, as many as 750,000 borrowers who lost their homes to foreclosure since 2008 would be eligible for payouts of about $2,000 each, without surrendering the right to join future lawsuits, state officials said.

The five banks now at the heart of the settlement are Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup. The five faced a public uproar in late 2010 when it became clear that the legal paperwork they had filed in numerous foreclosures included flawed and fraudulent documentation. In many cases, because of the way in which loans were hastily packaged and sold to investors, banks had difficulty verifying ownership of the underlying mortgages.

click here for full story

TOKYO — With North Korea deeply mourning its “Dear Leader,” Kim Jong Il, the government in Pyongyang tried to reassure its people Monday with a message about Kim’s son, the “Great Successor.”

“Under the leadership of Kim Jong Eun,” North Korea’s state-run media said, “we should turn our sorrow into strength.”