Domestic Taxes

Treasury Secretary Timothy Geithner on Tuesday said a bank tax based on profit would not accomplish President Obama's primary goal of creating a tax that would stop banks from taking extraordinary risks. 

"We did look at a profits tax, as well as a financial transaction tax, but we thought this [Obama's proposal] was a better design because it would have the additional benefit of not just covering losses from TARP, but it would help reinforce our broader objective of limiting risk-taking," Geithner said. "A profits tax would not do that." 

The Secretary's comment came during a Senate Finance Committee hearing on creating a bank tax. 

Senate Finance members from both parties on Tuesday repeatedly questioned a notion espoused by Treasury Secretary Timothy Geithner that the availability of credit, such as to start-up companies or individuals, would not be restricted by the bank tax. 

Geithner argued that most institutions serving small businesses and individuals would not subjected to the tax. He also said that institutions subjected to the levy would likely lose customers if they passed the cost of the tax on to end users. 

"The other more than 99 percent of the American financial system that is not covered by the tax would be able to come in and take that business away," Geithner said. 

Read more...

In testimony before the Senate Finance Committee, Treasury Secretary Timothy Geithner on Tuesday urged lawmakers to include the bank tax proposed by President Obama in the financial reform bill that is being considered on the Senate floor. 

"We believe this fee is an important complement to the financial reforms now on the Senate floor," he said in prepared remarks. "Those reforms will provide better protection for American families and businesses, require stronger limits on risk taking by large institutions, bring transparency and oversight to derivatives markets, and enable the government to break apart failing firms with no exposure to the taxpayer."

In prepared remarks, Treasury Secretary Timothy Geithner told a Senate panel that only a small fraction of banks would be subjected to the bank tax proposed by President Obama and those paying the levy would lose market share if they passed its cost onto their customers. 

"The fee excludes over 99 percent of U.S. banks, which currently provide the majority of small loans to businesses and farms across the country," Geithner said in a statement. "If covered firms try to pass on the costs of the fee to their borrowers, they will lose market share to other institutions."

A financial reform bill under consideration by the Senate would reduce federal budget deficits by $19.5 billion over 10 years while increasing spending by about $13.2 billion over the same period, according to an updated estimate released Monday. 

The measure reduces the deficit by $5.9 billion between 2011 and 2015 and would increase spending subject to appropriation by $4.6 billion over the period, according to The Congressional Budget Office and Joint Committee on Taxation. 

The estimate makes two changes to reflect new provisions in the bill sponsored by Senate Banking Chairman Chris Dodd (D-Conn.) with derivatives language included from the bill authored by Senate Agriculture Chairwoman Blanche Lincoln (D-Ark.). 

A new Commodity Futures Trading Commission program that would provide  awards to individuals who provide information about violations of commodity trading laws would increase direct spending by $200,000 from 2011-2020. 

Small businesses and individuals in need of tax help can stop by an open house being held next month by the Internal Revenue Service. 

The IRS will open about 200 offices nationwide, at least one in every state, from 9 a.m. to 2 p.m. May 15 to help taxpayers either in person or by phone. Two other open house's are scheduled fro June 5 and 26. 

"Our goal is to resolve issues on the spot so small businesses and individuals can put any issues they have with the IRS behind them," said IRS Commissioner Doug Shulman in a release. 

Shulman encouraged taxpayers to stop by with issues on notices and payment, return preparation, audits and a variety of other issues. 

At an open house March 27, 88 percent of taxpayers resolved their issues, Shulman said. 

For IRS locations that will be open May 15, click here. 

A bipartisan bill suggesting a new tax on imports to close the U.S. trade deficit wouldn't resort to a new value-added tax (VAT), according to its supporters.

While some of the Border Tax Equity Act's past supporters and a Hill story Monday said the new proposed border tax on imports was similar to a VAT, current backers said the two taxes aren't the same.

"If the bill's supporters advocated instituting a VAT, the legislation would have included a VAT," according to the American Manufacturing Trade Action Coalition (AMTAC), a DC-based group that has pushed for the bill.

The legislation, introduced by Rep. Bill Pascrell (D-N.J.) and co-sponsored by five House Democrats and five House Republicans, calls on the U.S. Trade Representative to negotiate a way to close trade imbalances with countries that use a VAT, which is levied at each stage of production of a good and is used by most industrialized nations. Under the legislation, if those negotiations don't work, a new tax would be placed on imports from those VAT countries. Revenue from the new tax would go to U.S. companies to offset subsidies that VAT countries' manufacturers get from their nations' VAT systems. But unlike a VAT, the new border tax would only be levied on imports as they entered the country, not at different production stages.

Airlines collected a record $7.8 billion in service fees last year, bolstered by checked-bag fees, possibly giving lawmakers more motivation to cap or prohibit certain fees. 

Collection of fees for a variety of services was up 42 percent from $5.5 billion in 2008, when airlines introduced additional costs for passengers to check their bags as oil prices soared to $147 a barrel, according to a Transportation Department report released Monday. 

The airlines collected $2.7 billion in baggage fees for 34 percent of the total, followed closely by $2.4 billion for reservation changes and $2.7 billion from other fees such as frequent flyer award program mileage sales and pet transportation. 

Sen. Chuck Schumer (D-N.Y.) is waging the latest battle over fees -- protesting a fee proposed by Spirit Airlines for carry-on bags that can only fit into the overhead bins. Schumer has asked the Treasury Department to write a rule prohibiting the fee and he has introduced legislation that would do the same. 

Spirit, which sells itself as a low-cost airline, received 21 percent its revenue from fees, leading all carriers. Fees represented a 6.5 percent average of the total revenue of 32 carriers reporting fee collection. 

New York state lawmakers are telling Congress to oppose President Barack Obama's plan to tax banks for the financial bailout.

The lawmakers are telling Congress the president's plan, "would make New Yorkers pay for the sins of Detroit."

In a letter to Rep. Peter King (R-N.Y.), 10 members of the New York State Assembly are urging Congress against the proposal, saying the tax, "is loaded against New York because we are where the vast majority of affected financial institutions have their largest employment and profit centers."

The letter is signed by Darryl Towns, Jose Peralta, Michael Gianaris, Jonathan Bing, Vanessa Gibson, Adriano Espaillat, Adam Clayton Powell, Carl Heastie, Sam Hoyt and Marcos Crespo.

The tax is meant to recoup money from the $700 billion financial bailout package from 2008. When the White House originally proposed the tax in January, the administration said it would not apply to General Motors, Chrysler, Fannie Mae and Freddie Mac. The bailout is known officially as the Troubled Asset Relief Program (TARP).

"It is the car industry bailout where American taxpayers are likely to suffer the big losses from TARP, but the car companies are not among those being hit with the new tax," the lawmakers wrote.

Treasury Secretary Timothy Geithner is expected to be pressed on the issue Tuesday by the Senate Finance Committee.