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Bramwell's Lunch Beat: ‘Cadillac Tax,’ Dems Light on Tax Reform, EY in Court

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Oct 15th 2015
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‘Cadillac tax' will initially have limited impact
The excise tax on high-cost health plans, known as the “Cadillac tax,” will initially affect a tiny share of workers and an even tinier share of health plan costs, according to recent estimates by the US Treasury Department, wrote Paul N. Van de Water in an analysis for the Center on Budget and Policy Priorities. The new estimates are much smaller than other frequently cited figures on the tax's impact. Only 4 percent of people with employer-sponsored coverage will be enrolled in plans whose projected costs exceed the thresholds of $10,200 for individuals and $27,500 for families, starting in 2018, the Treasury's Office of Tax Analysis estimated. Even this figure overstates the tax's effect, however, because the tax applies only to the portion of plan costs over the thresholds. That's just 1 percent of plan costs in 2018, Treasury finds. These estimates are smaller than those at the time when Congress was considering the excise tax in 2009 and 2010.

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Democrats offer nothing much on tax reform
Jeremy Scott of Tax Analysts wrote that what was missing from Tuesday night's first Democratic presidential debate was an emphasis on taxes or tax reform, showing again that any hopes for an overhaul of the code rely on a Republican victory in 2016. While Democratic voters do care about taxes – they want punitive taxes on corporations that invert and they want the tax code to stop favoring foreign income – what they don't really care about is traditional tax reform, Scott said. “Tuesday showed us that a Democratic president is almost certainly not going to make a comprehensive tax proposal the centerpiece of their first 100 days,” he added. “It doesn't matter if it's Clinton or Sanders (or even O'Malley, Webb, or Chafee). Like on other issues, this is the polar opposite of a likely GOP winner. It would be a shock if a Republican president – no matter who it is – didn't make a tax reform plan a major part of the first year's agenda.”

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Starbucks, Fiat decisions seen in first wave of EU tax cases
Starbucks Corp. and a Fiat Chrysler Automobiles NV unit are set to be first in the firing line as European Union (EU) regulators issue a series of rulings over tax breaks for global companies, including Apple Inc., wrote Stephanie Bodoni and Gaspard Sebag of Bloomberg. The EU may issue decisions against Starbucks and Fiat as soon as next week following a two-year probe into how the companies may have gotten unfair tax treatment from Dutch and Luxembourgish authorities. Decisions on whether Apple and Amazon.com Inc. got sweetheart tax deals from Ireland and Luxembourg are expected at a later date. The widespread nature of corporate tax avoidance in Luxembourg was highlighted in late 2014 when thousands of pages of secret fiscal deals the tiny nation struck with companies from around the world, including PepsiCo Inc. and Walt Disney Co., were leaked by an international consortium of journalists.

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Investor seeks to hold Ernst & Young liable for Madoff losses
Ernst & Young failed to serve as a gatekeeper for a Washington investment firm that sank millions of dollars into Bernard Madoff's investment firm and should be held liable for its losses, the firm's lawyer told a jury on Wednesday, wrote Jacqueline Palank of the Wall Street Journal. “I'm going to prove to you that Ernst & Young had a job. I'm going to prove to you that Ernst & Young didn't do their job,” said Steven Thomas, a lawyer representing FutureSelect Portfolio Management Inc. Court papers show FutureSelect invested nearly $200 million in feeder funds that pooled investors' cash and funneled it Madoff's way, until his arrest in 2008 exposed a massive Ponzi scheme in which investors lost some $17 billion. James Bennett, an attorney for Ernst & Young, told the jury that the audit firm did its job, adding, “We sympathize with anybody who lost money as a result of that fraud. But Ernst & Young is not the cause of those losses.”

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Quick Links

  • MetLife declines after accounting blunder tied to annuities (Bloomberg)
  • Looming tax on high-end health plans draws heavy fire (NPR)
  • Don't repeal the ‘Cadillac tax' – modify it (The Hill)
  • Mylan CEO Heather Bresch: We needed tax inversion in order to grow (Fortune)
  • 52 groups press Senate to close carried interest tax loophole (ThinkAdvisor)
  • Analysts say Trump plan likely to delight, not irk fund managers (Tax Analysts)
  • Details and analysis of Senator Rick Santorum's tax plan (Tax Foundation)
  • Santorum 20/20 flat tax might be hard on many small businesses (Forbes)
  • Excuse me, Democrats: Bush's tax cuts made income taxes more progressive (Washington Examiner)
  • Three rules for navigating the global tax maze (CFO)
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