By TOM RAUM, Associated Press Writer Tom Raum, Associated Press Writer   – Tue Sep 7, 4:11 pm ET

WASHINGTON – President Barack Obama’s proposed tax breaks for business sound like ideas that have enjoyed broad Republican backing in the past. But in today’s toxic political atmosphere, he’s unlikely to get much — if any — GOP help.

Still, his plans put Republicans on the spot, making it harder for them to say no to legislation they once embraced.

In a speech on Wednesday in Cleveland, Obama will ask Congress to let businesses quickly write off 100 percent of their spending on new plants and equipment through 2011.

Its part of a raft of new Obama proposals to spur job creation and help businesses — and to try to give his party a much-needed boost ahead of November elections that will determine which party controls the House and Senate.

Clearly frustrated by the halting economic recovery and mindful of polls showing Republicans poised to make big midterm gains, Obama had his economic advisers come up with a fresh set of proposals with job-creating potential.

Among them: a $50 billion program to rebuild roads, railways and airports and to create a new infrastructure bank to oversee long-term projects. Legislation containing multiple public works projects has usually been popular in Congress across party lines.

The administration has not spelled out exactly how it would pay for all the new proposals, but suggested it would offset tax cuts by closing various corporate loopholes and levying targeted tax hikes on big business, particularly on the oil and gas industry and on multinational corporations. Some of these tax proposals were included in the budget Obama submitted to Congress earlier this year but were never acted on by Congress.

Rep. Dave Camp of Michigan, the senior Republican on the tax-writing House Ways and Means Committee, called Obama’s business tax measures serious proposals worthy of consideration. But he said that “raising taxes to cut taxes is at best a zero sum game.”

The proposed tax break for research and development has been around in one form or another since 1981 and in the past has drawn bipartisan support. However, Congress previously extended it just for short periods of time, usually just for one or two years, with frequent lapses that make it hard for businesses to plan. The credit most recently lapsed in 2009.

Obama has long advocated making the credit permanent.

His proposal to let companies quickly write off 100 percent of their investments in new plants and equipment is similar to proposals advanced several times by President George W. Bush — with considerable GOP support at the time.

The idea is to give companies an incentive to spend and invest now, rather than later. The administration claims the change would put nearly $200 billion in the hands of businesses over the next two years.

Under the current law, a company gets to deduct 50 percent of the costs upfront, and the remainder over three to 20 years, depending on the nature of the investment.

“This measure would provide tax incentives for businesses to invest in the United States when our economy needs it most,” says a White House fact sheet.

A senior administration official said the expensing provision would potentially benefit 1.5 million corporations and several million individuals. The tax break would be retroactive to this Wednesday.

Obama’s expensing and R&D tax credit proposals would generally help large businesses the most. A separate bill is before the Senate to give special tax breaks and loan incentives to small businesses. Obama has said that legislation should be Congress’ first order of business when it returns next week from its summer recess.

Chris Edwards, director of tax policy for the libertarian-leaning Cato Institute, said he favors both a permanent research tax credit and Obama’s proposal for 100 percent expensing, calling both “very positive” steps and a sign that the administration is getting seriously worried about the economy.

Still, he added, “the administration would nullify the benefits if they are matched by various tax proposals for businesses.”

Thomas Mann, a political scientist at the Brookings Institution, said Obama’s three proposals — infrastructure spending, a permanent R&D credit and upfront 100 percent business write-offs — “constitute a re-entry into the make-the-economy-grow argument.”

“All of them had support among conservatives and right-of-center economists for many years. That makes it more awkward for the Republicans just to say no,” Mann said. But that isn’t stopping them, he added.

The Obama proposals would require congressional approval, which is highly uncertain given Washington’s partisan atmosphere and the fast-approaching midterms.

“We understand what season we’ve entered in Washington,” said White House spokesman Robert Gibbs. Still, he said, even if Congress doesn’t take up Obama’s new proposals before the elections, “the president and the economic team still believe that these represent some very important ideas.”

The acceleration of the business write-off for plants and equipment would have a net long-term cost of $30 billion, far less than the amount the legislation would put in the hands of businesses, the White House contends. That’s because if companies take their write-offs upfront, they can’t depreciate the costs over a longer period for future tax breaks — as they do now.

Republican leaders greeted Obama’s most recent proposals cautiously, given past GOP support for various components.

“The White House is missing the big picture,” said House Minority Leader John Boehner, R-Ohio. “These aren’t necessarily bad proposals. …” But he said they don’t address the larger problems of “excessive government spending” and Democratic tax policies, including the impending expiration of Bush-era tax cuts.

Obama and Democratic congressional leaders want to renew the Bush tax cuts for households earning under $250,000 a year. Republicans want to extend all of them, saying a recession is no time to raise taxes.

Obama’s recently departed budget director, Peter Orszag, suggested in an op-ed article in Tuesday’s New York Times that policymakers seem locked “into a budget scenario out of which there are few politically plausible routes of escape.” As a compromise, he suggested extending the Bush tax cuts until 2013 “and then end them altogether.”

Gibbs said he had never heard Orszag make such an argument in internal White House deliberations and that the president did not agree with him on such a “compromise.”

___

Associated Press writers Julie Pace and Stephen Ohlemacher contributed to this report.

By Clare Baldwin, Soyoung Kim and Kevin Krolicki Clare Baldwin, Soyoung Kim And Kevin Krolicki  – Sun Sep 5, 11:00 am ET

NEW YORK/DETROIT (Reuters) – The U.S. government is likely to take a loss on General Motors Co in the first offering of the automaker’s stock, six people familiar with preparations for the landmark IPO said.

Subsequent offerings of the government’s holdings may be profitable depending on how investors trade the newly listed stock, the sources said.

But the question of whether taxpayers are ultimately made whole on GM’s $50 billion bailout could be left open for years, the people said.

It could take more than three years for the Treasury to sell down its remaining stake in GM after the IPO, one person said. That would push a final accounting into the next presidential term.

A decision to price the initial GM shares below the cost to taxpayers would follow the usual Wall Street practice of giving the first investors in a new stock a discount, but it could also help allay investor concern in the face of the slow recovery of the U.S. economy and flat auto sales.

Preparations for GM’s IP0 remain confidential. Both GM and the U.S. Treasury have declined to comment, citing restrictions by U.S. securities regulators.

The Obama administration has pledged to exit its investment in GM as quickly as possible while holding out the prospect that taxpayers could ultimately be paid back in full.

Treasury spokesman Mark Paustenbach declined to comment. GM spokesman Tom Wilkinson also declined to comment.

GM plans to begin a roadshow for its IPO immediately after the November 2, U.S. midterm congressional elections, paving the way for a stock debut on November 18, sources have said.

GM in August filed paperwork for an IPO that could potentially be worth as much as $20 billion, making it one of the biggest IPOs of all time.

The U.S. Securities and Exchange Commission is now reviewing the automaker’s S-1 filing.

Analysts and potential investors have projected a market value for GM of between $50 billion to around $90 billion, based on projections for the automaker’s cash flow, comparisons with rival Ford Motor Co and trading in bonds in the old GM, which are convertible into shares in the new company.

A market value at the high end of that range would be above the roughly $70 billion in market capitalization that GM needs to achieve for the U.S. government to break even on its $43 billion remaining investment in the automaker.

But IPOs typically price at a discount of 10 percent to 15 percent to theoretical fair value to reward investors for taking a risk on a new issue and pave the way for future stock floats. In tough market conditions, that discount can be even larger.

“You have to sell people on the notion that there is an upside to what they are buying,” one of the sources said.

Another of the sources said the discount could be as much as 20 percent on the GM IPO compared with the U.S. Treasury’s break-even point.

Preparations for the GM stock offering remain in the early stages. A number of the sources cautioned that the size and value of the deal and the size of the stake to be sold by the U.S. government have not been determined and will not be set for weeks.

GOVERNMENT STAKE IN ‘GOVERNMENT MOTORS’

The U.S. government pumped $49.5 billion worth of taxpayer money into the automaker and took nearly 61 percent of its common stock.

GM has paid back $6.7 billion in debt to the Treasury and returned another $700 million in interest and dividends. The U.S. government also holds $2.1 billion in perpetual preferred shares in the automaker.

That leaves the government with a roughly $40 billion investment in the GM common stock that will debut in an IPO along with a new class of preferred shares that will convert into common shares under a mandatory provision.

In the days leading up to GM’s August S-1 filing, Republican Senator Charles Grassley asked a special Treasury Department watchdog for an analysis of the GM IPO and how much money would be returned to taxpayers.

In its pitch to potential investors, GM will tout its global reach, recent gains in quality and pricing in its home market, and its sharply lower cost of operations after its 2009 bankruptcy, sources have said.

GM’s $1.3 billion second-quarter profit was its biggest since 2004, when industry-wide U.S. sales were near 17 million vehicles compared with the 11.5 million sales rate of August.

But GM will have to address investor concern that growth in industry car sales in the U.S. in the second half of 2010 and into 2011 will likely be slower than analysts had expected just a few months ago.

At the same time, GM will have to confront a pension shortfall that remains a liability from its pre-bankruptcy operations.

GM eliminated about $40 billion in unsecured debt and other obligations in bankruptcy, but the automaker still needs to address a pension shortfall estimated at about $26 billion.

A successful IPO would be a political victory for the Obama administration and would help GM distance itself from critics who dubbed it “Government Motors” after its bailout.

(Reporting by Clare Baldwin and Soyoung Kim in New York and Kevin Krolicki in Detroit; editing by Carol Bishopric)

By DR Dr   – Thu Sep 2, 2:16 pm ET

It may seem a bit strange to be talking about income taxes in September. There are, however, good reasons to think about taxes well before April 15. For starters, there are some big changes in the tax code that go into effect in 2011. Depending on your income tax bracket and investments, some simple planning now could save you a bundle later.

[In Pictures: 8 Painless Ways to Save Money.]

And taking steps now to organize your tax files can avoid headaches and aggravation at tax time. So we’ve put together 5 tax moves to make now to take advantage of changing tax laws and to better prepare for tax season.

1. Evaluate Capital Gains: The current long-term capital gains tax rate, with some exceptions, is either 0 percent or 15 percent depending on what ordinary income tax rate you fall into. But in 2011, these rates jump to 10 percent and 20 percent. That means if you have some investments that have done well, you may want to consider selling them in 2010 to take advantage of the lower tax rates. If you currently fall within the 0 percent long-term capital gains rate, the decision may prove to be an easy one. But even for those that fall into the 15 percent bracket, saving 5 percent over next year’s higher rate is significant. Of course, the tax consequences of an investment are just one factor to consider when deciding whether to sell.

2. Make Money Now: As you’ve probably heard, some of the higher income tax brackets will get even higher next year. The top two rates for the 2010 federal income tax brackets are 33 percent and 35 percent, which will move to 36 percent and 39.6 percent in 2011. The effect these changes will have on lower tax brackets depends on what Congress does this year, but the lower tax brackets are set to increase as well. If you fall into a rising tax bracket, it may be in your best interest to accelerate income into 2010 if at all possible. This could be particularly helpful for small business owners and independent contractors who have some control over the timing of income.

3. Green Your Home: There are several energy tax credits that are set to expire at the end of the year. For example, you can get a tax credit up to 30 percent of the cost ($1,500 maximum) on certain qualifying home improvements, such as roofs, water heaters, and HVAC systems. Make sure to verify that the product you want to install qualifies for the tax credit. And get the work done this year before the tax credit expires.

[Visit the U.S. News Personal Finance site for more insight and money management tips.]

4. Get Organized: Every year on April 15th at about 8 pm I tell myself I’ll be better organized the following year. While it’s taken several years of last-minute tax return filings to finally motivate me into action, this year I’m actually organized. The key is not to wait until tax season. Keep records of your taxable investments to help you calculate gains and losses. Keep your business receipts organized and separate from personal expenses. If you’ve made home improvements that qualify for tax credits, keep your receipts in a separate file. Staying organized takes just a few minutes week, but it can save you a lot of headaches when it comes time to file your taxes and will reduce the risk that you’ll miss a tax deduction.

5. Plan Your Tax Preparation: Many use online tax software to prepare and file their tax returns. For those folks, they have some time before the 2011 versions of the tax software are released. But if you plan to have a tax professional prepare your return, there are good reasons to hire them now. First, you can take your time to find the best tax professional for your needs, taking into consideration recommendations from friends and family. Second, they can further assist you with tax planning now in anticipation of the many changes to the tax code in 2011.

It’s important to recognize that tax planning is specific to each individual’s situation and can involve complex analysis. So if you think some of these tax moves may be right for you, consult with a tax specialist before making any decisions.

By Corbett B. Daly Corbett B. Daly   – Mon Aug 9, 11:03 am ET

WASHINGTON (Reuters) – Mortgage finance giant Freddie Mac (FMCC.OB) on Monday said it would need another $1.8 billion in aid from taxpayers, bringing its total request since it was taken over by the government two years ago to more than $64 billion.

The second largest U.S. residential mortgage funds provider reported a loss of $6.0 billion, or $1.85 per diluted share, in the second quarter, including a $1.3 billion dividend payment to the government.

That compares with an $8.0 billion loss in the prior quarter and is the best three-month performance in a year. The firm lost $840 million in the second quarter of last year.

The company said losses stemmed primarily from loans purchased or guaranteed between 2005 and 2008.

The U.S. Treasury took control of Freddie Mac and its sister entity, Fannie Mae (FNMA.OB), at the height of the financial crisis in 2008 as loan losses mounted.

Since the government takeover, the two firms together have requested close to $150 billion from the government’s unlimited credit line, scheduled to expire at the end of 2012.

The plan to put Freddie Mac and Fannie Mae into conservatorship was meant to be temporary.

But nearly two years later, Treasury Secretary Timothy Geithner has only just begun the process of figuring out how to overhaul the U.S. housing finance system.

Geithner has called for a conference on the future of housing finance to be held at the Treasury later this month.

The financial regulatory overhaul, which was signed into law by President Barack Obama last month, did not address reorganizing Freddie Mac and Fannie Mae, though it did restrict some mortgage lending practices that led to risky loans.

Freddie Mac said loans made last year and the first half of this year have significantly lower default rates than comparable loans made from 2006 through 2008. The company said about a third of its portfolio of single-family home loans consisted of those newer, higher quality loans.

Fannie Mae has also said stricter lending standards adopted last year are beginning to pay off and the firm’s “new book” of business is the strongest in a decade.

Congress has scheduled hearings on the U.S. housing finance system in the coming months and any new system could take years to implement.

Despite the improved loan quality, “there is no going back to the Fannie-Freddie model (where shareholders profit in good times and taxpayers pay in bad times) and it does not matter how well their current book of business performs,” said Howard Glaser, a consultant to mortgage lenders and a former housing official in the Clinton administration.

(Editing by Theodore d’Afflisio)

By GLEN JOHNSON, AP Political Writer Glen Johnson, Ap Political Writer   – 2 hrs 50 mins ago

BOSTON – Sen. John Kerry moved to end a controversy over his decision to base his new $7 million yacht in tax-free Rhode Island, informing the Massachusetts Department of Revenue on Tuesday that he would “promptly” pay taxes as if the vessel were docked in his home state.

In a statement to The Associated Press, the Democrat said, “As we’ve said from the beginning, we have always complied with tax laws and we always will. … The payment is being made promptly.”

The 2004 Democratic presidential nominee has been dogged by charges of tax evasion since last week, when the Boston Herald first reported about his decision to dock the 76-foot sloop Isabel in Newport, R.I.

Doing so spared Kerry a $437,500 one-times sales tax charge in Massachusetts, as well as about $70,000 in annual excise taxes. Rhode Island repealed those taxes in 1993, making the state something of a nautical tax haven.

Massachusetts officials said Kerry was within his rights to base the vessel in Rhode Island, despite owning homes in Nantucket and Boston, but they also said he would be liable for taxes if he brought the yacht to Massachusetts within six months of taking ownership.

Subsequent news accounts placed the Isabel in Nantucket over the Fourth of July weekend and on Martha’s Vineyard more recently. It is now in a shipyard in Portsmouth, R.I., undergoing warranty repairs. A Kerry spokesman said he chose to base the vessel in Rhode Island not for tax purposes, but charter opportunities and long-term service.

In his statement, Kerry said, “Whether owed or not, we intend to pay the equivalent taxes as if the boat’s home-port were currently in Massachusetts.”

The wording underscored the tax treatment Kerry and his wife, millionaire philanthropist Teresa Heinz, constructed for the boat.

It is registered in Newport but owned by a limited liability corporation based in Pittsburgh, hometown of both Heinz and the ketchup company from which her family derived its wealth. In recent days, Kerry has indicated Heinz was the majority stockholder in the corporation, raising questions about whether a Pennsylvania resident owed taxes in Massachusetts for a vessel based in Rhode Island.

Reporters dogged Kerry at a public event on Monday, and the issue bubbled over to the Massachusetts gubernatorial race on Tuesday.

Independent gubernatorial candidate Timothy Cahill, a former Democrat, told reporters it “looks like” John Kerry was dodging his tax bill and said the revenue department should investigate.

“I don’t think that the state should treat anyone differently — senators, congressmen or regular people — so, if someone’s not paying their taxes that should be paying them, then the DOR should go after them,” said Cahill, who currently serves as state treasurer.

Gov. Deval Patrick, a fellow Democrat, also was asked if he thought Kerry was trying to avoid taxes.

“I think if there’s a tax to be paid he’s going to pay it,” the governor said shortly before Kerry released his statement.

The Massachusetts Republican Party was unyielding in its criticism, despite the promised tax payment.

“Senator Kerry will only pay the taxes because he got caught,” party Chairwoman Jennifer Nassour said in a statement. “He should spend more time creating jobs rather than customizing his yacht. Democrats think they live by another set of rules, and the voters of the commonwealth will soon remind them they do not.”