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Thing One: The Boehner Retreat Begins: Wealthy Americans, you might want to don that knight armor in the front hall or order your manservants to shield you, because your champions in Congress are preparing to toss you beneath the nearest mass-transit conveyance.
Speaker of the House John Boehner yesterday presented his counteroffer to President Obama's opening offer of a deal to shrink the federal budget deficit. It was an obvious non-starter, representing just a teensy retreat from the Republicans' opening offer. It called for about $800 billion in extra tax revenue, but mainly by closing unnamed loopholes and deductions -- a plan first proposed by La Jolla gas-station attendant Mitt Romney. Boehner's offer did not budget on raising tax rates for the wealthy and called for about $800 billion in cuts to Medicare and Social Security. In other words, notes Ezra Klein, it is almost exactly the deal Obama was willing to take last year, when his political standing was far, far weaker. That's probably not going to fly, now that Obama has won re-election on a promise of raising tax rates for the wealthy.
Those wealthy, meanwhile, are taking advantage of the looming fiscal escarpment of tax increases and spending cuts to get even wealthier in a big hurry. Oracle announced it was paying three dividends all at once, before tax rates on dividends potentially rise next year, creating a $200 million windfall for CEO Larry Ellison. Now he can finally build that extension on his island!
Anyway, Obama is probably not going to take Boehner up on his offer to turn the clock back to 2011. Even alleged National Budget Guru Erskine Bowles, who essentially crafted the Boehner proposal as a hypothetical last year, backed away from it yesterday, the Wall Street Journal notes. The point to take from all of this is that Boehner has essentially flinched first, and he will likely flinch last, even though he is already taking some heat from conservatives, as the WSJ points out. He has little choice. Little wonder that, in private, debt-deal talks are moving along relatively well, all things considered, write Sam Stein and Sabrina Siddiqui of the Huffington Post.
Thing Two: Good News, Bad News Economy: All of the panic ginned up about the fiscal cliff, along with Europe's never-ending recession and China's slowdown, have kept the U.S. economy teetering on edge, as fresh data showed yesterday. A closely watched measure of U.S. manufacturing sentiment by the Institute for Supply Management showed factory activity shrank in November for the first time in three months. Meanwhile, General Motors said it was temporarily shutting down an Ohio plant, and maybe another, to curb inventories, the Wall Street Journal writes. At the same time, GM and other auto makers reported their best sales in more than four years in November, the WSJ writes. Fortunately, consumers haven't gotten the memo to panic about the fiscal cliff just yet.
Thing Three: One Bank To Rule Them All: While American politicians haggle endlessly over their debt, European policy makers are haggling endlessly over their debt crisis. Today's knotty mess is a plan to put all European bank supervision under the European Central Bank. You'll never guess who is balking at the idea! OK, you'll guess: It's Germany. In happier news, sort of, at least for somebody, Europe's offer to buy back Greek debt was far more generous than investors expected, meaning a giant windfall for hedge funds, Bloomberg writes. Heart-warming, yes?
Thing Four: Auditors Not Comfortable Being Audited: Whenever there are financial shenanigans or crises around the world, from Enron to AIG, accounting firms can be found, doing nothing to help. The latest case in point: A wave of shady Chinese companies that went public in the U.S. a few years back, milking investors of billions before going bust. And yes, accounting firms rubber-stamped these companies' financial documents. Now the Securities and Exchange Commission is cracking down on the Chinese firms and would like to take a look at the accountants' books. But the accountants aren't cooperating, so the SEC charged the Chinese units of several global accounting firms yesterday over their refusal to cooperate. The accounting firms say they've done nothing wrong and are just having a hard time getting documents from China.
Thing Five: Cash-Poor, At Least At Home: U.S. companies have tons of cash, but much of it is being held forever overseas, in order to avoid taxes back at home, meaning some companies have to borrow money to pay dividends, even though they have plenty of cash, writes Kate Linebaugh of the Wall Street Journal: "With billions of dollars overseas that may never come back, the Securities and Exchange Commission is concerned that companies haven't been presenting investors with an honest appraisal of their liquidity."
Thing Six: Coming Soon: More Miracle Drugs: A ruling by a federal court yesterday could make it easier for drug companies to pitch drugs for any kind of use, a practice banned by the Food and Drug Administration, the New York Times writes: "The judges said that the ban on so-called off-label marketing violated the representative’s freedom of speech. The 2-to-1 decision by a three-judge panel of the Court of Appeals for the Second Circuit in Manhattan addresses a long-running and costly issue for the industry, which has paid billions of dollars in penalties to the federal government in recent years after being accused of marketing blockbuster drugs for off-label uses.
Thing Seven: You Say High-Speed Trading Robots Like It's A Bad Thing: A new study by the chief economist at the Commodity Futures Trading Commission finds that high-frequency traders are profiting at the expense of other, slower investors, the New York Times writes. You might respond to this by saying "duh." But the finding is somewhat controversial, given that some other studies, by the high-frequency-trading industry, have found that high-frequency trading is just wonderful.
Thing Seven And One Half: Photos Of The Year: From BuzzFeed, the 45 most compelling photos of 2012.
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Calendar Du Jour:
Heard On The Tweets:
Kate Middleton announces pregnancy 3 months to the day after I leave London. See where I’m going with this? Yep; I was near sex. #cool— rob delaney (@robdelaney) December 3, 2012
Upon the birth of the heir to the British throne, every third banker in the City of London should be branded on the forehead. #babyadvice— Epicurean Dealmaker (@EpicureanDeal) December 3, 2012
There's still several weeks to form a country band called Fiscal Cliff and have that band play their hit song "Compromise" on morning shows.— Eugene Mirman (@EugeneMirman) December 3, 2012
I forget how the song goes. Which day of Christmas do I eat an entire case of peppermint bark?— Ethan T. Berlin (@EthanTBerlin) December 3, 2012
The autocorrect on my phone just changed "Christmas" to "Pagan Winter Festival."— Conan O'Brien (@ConanOBrien) December 3, 2012
And you can follow me on Twitter, too: @markgongloff
Also on HuffPost:
Residential Energy-Efficiency Credits
No tax breaks for being green in 2012. Homeowner investments in energy-efficient double-pane windows or high-efficiency refrigerators, <a href="http://www.energytaxincentives.org/">don't get any tax benefit</a>. More than 43.5 million Americans have filed and received this benefit, with an average reduction in tax liability of $765.84, according to H&R Block.
Mortgage Insurance Premiums
Bad news for homeowners: They cannot write off mortgage insurance premiums on 2012 tax returns. Congress can act to reauthorize these deductions retroactively to Jan. 1, 2012, and extend them through the end of 2013, but that would cost the government $1.3 billion over the next decade, the <a href="http://articles.latimes.com/2012/oct/07/business/la-fi-harney-20121007">Los Angeles Times reports</a>.
Taxpayers who have out-of-pocket adoption expenses or who adopted a child with special needs can only claim the adoption credit to the extent of their tax liability. While the portion of the credit not taken into account in 2012, up to $12,650 per child, is carried forward to future years, the benefit is no longer fully refundable, according to tax experts.
Alternative Minimum Tax
If the alternative minimum tax legislation is not retroactively patched for 2012, current law could result in an increased tax liability for up to 34 million Americans. According to a study by the Tax Institute at H&R Block, an average family making $85,000 with children in college could see their tax liability soar from a $1,056 refund to owing $1,400.
American Opportunity Tax Credit
Tuition bills will be higher starting on Jan. 1 because families will lose the $2,500 American Opportunity Tax Credit, which ends in 2012 unless Congress takes action. More than 2.4 million Americans claimed this deduction in 2009, resulting in a combined decrease in taxable income of $5.4 billion, according to tax experts.
Payroll Tax Credit
Paychecks will be smaller starting Jan. 1, 2013. An American making $50,000, for example, will lose $80 in monthly pay after the credit ends. The temporary credit also has lowered the amount workers contributed to Social Security by 2 percent.
Educator Expense Deduction
Teachers lose their $250 maximum deduction on expenses related to buying school supplies. This credit expired at the end of 2011, and teachers won't be able to claim this benefit on their 2012 taxes unless Congress takes action. In 2009, more than 3.8 million teachers claimed this benefit for a combined deduction of $9.7 billion, according to H&R Block.
Sales Tax As An Itemized Deduction
Taxpayers will no longer have the option of claiming an itemized deduction for state sales tax in lieu of state income tax. This expiration will have a greater impact on taxpayers who reside in a state with sales tax, but no income tax, including Alaska, Florida, Texas, Nevada, Washington, South Dakota, and Wyoming.
IRA Retirement Funds
Taxpayers over age 70½ no longer have the option of directing their income from an IRA distribution to a charitable organization. Starting this year, older taxpayers must include the distribution in income and claim a charitable deduction, resulting in a potentially higher tax bracket and a need to itemize instead of claiming the standard deduction, according to H&R Block.
As if losing all those tax credits was not bad enough, the earliest date to file a 2012 tax return electronically has moved back to Jan. 22, 2013. As the IRS has indicated that refunds could take as long as 21 days to process this year, a refund in January to cover Christmas credit card payments, winter heating bills, or rent is unlikely.