Analysis: Democrats' discord undercuts Obama estate tax push

 Divisions among Democrats are undermining President Barack Obama's push to raise the U.S. estate tax on inherited wealth, just weeks before the arrival of the "fiscal cliff" could drive the present estate tax rate even higher than Obama proposes.
Action on the estate tax could be postponed. But in his successful re-election campaign, Obama called for wealthy Americans to pay more in taxes - and it is overwhelmingly the wealthy who pay the estate tax.
The outcome may hinge on whether Obama insists on his estate tax proposal - or something close to it - as forcefully as he has insisted on raising individual income tax rates for high income-earners, or whether he lets the issue be put off.
If a single facet of the complicated partisan stand-off over taxing the wealthy best captures Capitol Hill's fiscal gridlock, it may be the estate tax - a long-standing and volatile issue - that may finally be coming to a head.
"If you look at where the public is on tax issues compared to the last time this was debated - it is night and day," said Frank Clemente, campaign manager for left-leaning Americans for Tax Fairness. "They are deep into this tax fairness position."
The "fiscal cliff" is a collection of federal tax increases and automatic government spending cuts that, if allowed to take effect as scheduled early in 2013, could push the U.S. economy into recession, according to economists' forecasts.
Part of the picture is the estate tax.
Under laws signed a decade ago by former Republican President George W. Bush, the estate tax is applied to inherited assets at 35 percent after a $5 million exemption. That means a deceased person can pass on an inheritance of up to $5 million before any tax applies.
Inherited wealth passed to a spouse or a federally recognized charity is generally not taxed.
Obama wants to raise the rate to 45 percent after a $3.5 million exemption. If the Bush rates are allowed to expire and Congress does nothing, the rate will shoot up next year to the pre-Bush levels of 55 percent after a $1 million exemption.
SCHUMER ON ESTATE TAX
New York Senator Charles Schumer on Thursday said the Democrats' proposal to avert the "fiscal cliff" involves $1 trillion in immediate deficit reduction that includes new revenue from raising the estate tax to the level proposed by Obama.
No less a power broker than Democratic Senate Finance Committee Chairman Max Baucus said this week, however, that he wants to hold the estate tax steady at current rates.
Baucus is up for re-election in 2014 from Montana. He says ranch and farm owners in his state would stand to lose if federal taxes rose on passing property to heirs.
"Rural Montana is much different than urban America," Baucus told Reuters in a brief interview in the U.S. Capitol.
He told a Montana newspaper on Sunday that he would even support scrapping the estate tax altogether, as most Republicans favor. A spokesman for Baucus - the Senate's top tax law writer - said he will seek as much estate tax "relief" as he can get.
At least three other rural-state Democratic senators have proposed extending current estate tax rates: Claire McCaskill of Missouri, Jon Tester of Montana and Mark Pryor of Arkansas.
Spokesmen for Pryor and McCaskill said everything is on the table as Congress struggles to deal with the "fiscal cliff."
But one thing is clear: the voice of farming lobbyists is registering with Democrats on the volatile estate tax issue, although it is only marginally about farms and ranches.
BEYOND FARMS AND RANCHES
The estate tax's impact extends beyond farmers and ranchers. It applies mostly to very wealthy Americans, whose taxes have been specifically targeted for increase by a president whom voters returned to the White House just three weeks ago following a tough campaign in which taxes were a key topic.
Of the 3,600 estates subject to the estate tax this year, only 100 are classified as farming estates, according to the congressional Joint Committee on Taxation.
The wealthiest 10 percent of Americans pay nearly all of the estate tax under current rates, according to the Tax Policy Center, a non-partisan fiscal policy think tank.
The number of estates subject to the tax would double under the plan proposed by Obama. About 300 farming estates would be subject to the tax under Obama's terms, which would raise about $100 billion in new revenue for the government over 10 years.
Republicans have benefited previously from Democratic division over the tax. In July, Senate Democrats shelved a plan to raise the estate tax with a symbolic extension of the Bush tax rates for the middle-class.
A senior Senate Democratic aide said the tax was pulled from the bill because Obama felt strongly about boosting the tax. It is unclear how hard he will fight for his position this time.
BY ANY OTHER NAME
The divide between the political parties over the tax is so wide that they cannot even agree on a name for it. Democrats call it the estate tax, as it is described in law.
Republicans, who generally want to repeal it, have another, more provocative name. They call it the "death tax" and characterize it as a penalty on being wealthy and successful.
First enacted nearly a century ago to combat the rise of dynastic wealth and check income disparity, the estate tax is the most progressive tax there is. That means it hits the wealthy much more than lower income groups.
It was a Republican president, Teddy Roosevelt, that proposed the first permanent inheritance tax, arguing that inheritance of "enormous fortunes" does a society no good.
"No advantage comes either to the country as a whole or to the individuals inheriting the money by permitting the transmission in their entirety of the enormous fortunes which would be affected by such a tax," Roosevelt said.
Another decade passed before it was adopted in 1916, partly to fund World War I. The rate has waxed and waned, hitting a high of 77 percent prior to World War II.

Read More..

Canadian year-to-date budget deficit narrows in September

 Canada's federal budget deficit dropped in the first six months of the fiscal year, falling to C$8.9 billion ($9.0 billion) in April to September from a C$11.8 billion shortfall in the same period of last year, the Department of Finance said on Friday.
The monthly deficit in September fell slightly to C$2.69 billion from C$2.75 billion in September 2011.
Revenues in the first six months of the fiscal year were up by 2.8 percent, compared with the same period in 2011, reflecting higher income tax revenues, excise taxes and duties, the finance department said.
Program expenses rose by 1.4 percent, mainly due to higher transfer payments.
September revenues fell by 0.1 percent from September 2011 while program expenses increased by 0.6 percent. Public debt charges fell by 7.6 percent.

Read More..

Number of ND 'income millionaires' jumps by 102

A record number of North Dakotans reported seven-figure incomes last year, many of whom are benefiting from the state's oil bonanza, the state Tax Department says.
Figures released to The Associated Press show a record 634 people reported incomes of more than $1 million on their 2011 individual tax returns, up from 532 in 2010 and 384 in 2009. In 2006, while North Dakota's oil boom was in its infancy, there were 339 so-called "income millionaires."
About 90 percent of the drilling in western North Dakota occurs on private land.
Tax Department analyst Kathy Strombeck said the increase in the number of North Dakotans with million-dollar incomes comes largely from royalties paid to mineral owners by oil companies.
"Oil has a lot to do with it," she said. "I imagine we'll see growth for a while as we ratchet up projection."
Through September, North Dakota already has set an oil production record for the fifth consecutive year and the state is on pace to best the previous mark by more than 50 million barrels. The state Department of Mineral Resources said crude production through September totaled more than 173.9 million barrels, up from the record 152.9 million barrels set last year.
Tax Department records show the average adjusted gross income in the state increased from $53,036 in 2010 to $60,947 last year. The average adjusted gross income on 2006 returns was about $43,300.
The number of returns has jumped from 339,000 in 2006 to 403,625 last year. The total reported income has increased from $14.6 billion to $21.9 billion during those years, data show.
Tax Commissioner Cory Fong said the higher incomes and the increase in the number of people filing tax returns in the state "adds to the narrative of what we've got going on here in North Dakota."
The oil industry has helped grow wages throughout the state and created hundreds of high-paying jobs. It also has an effect on other industries, including wholesale trade and manufacturing, he said.
"In a way, it's lifting all boats," Fong said.

Read More..

Obama says Republican "fiscal cliff" plan out of balance

 President Barack Obama rejected a Republican proposal to resolve a looming fiscal crisis on Tuesday as "still out of balance" and insisted any deal must include a rise in income tax rates on the wealthiest Americans.
Obama told Bloomberg Television that the Republicans' reliance on eliminating tax deductions instead of letting taxes rise on Americans making more than $250,000 a year would not raise enough money to fund the government.
House of Representatives Speaker John Boehner of Ohio, the top Republican in Congress, laid out a proposal on Monday that called for spending cuts but did not give any ground on Obama's call for an increase in tax rates for the top 2 percent of U.S. earners.
"Unfortunately, the Speaker's proposal right now is still out of balance. You know, he talks, for example, about $800 billion worth of revenues, but he says he's going to do that by lowering rates. And when you look at the math, it doesn't work," Obama said.
Obama, who won re-election last month, said it was important for Republicans to acknowledge that tax rates had to rise for top earners to raise revenue sufficient to balance spending cuts.
"We're going to have to see the rates on the top 2 percent go up. And we're not going to be able to get a deal without it," he said.
Obama said on Tuesday that while tax rates must go up for a "fiscal cliff" deal, it may be possible to lower rates at the top end of the scale late next year as part of tax reforms that would close loopholes and limit deductions.
"Let's let those go up," Obama told Bloomberg in an interview, referring to tax rates for the wealthiest Americans.
"And then let's set up a process with a time certain, at the end of 2013 or the fall of 2013, where we work on tax reform, we look at what loopholes and deductions both Democrats and Republicans are willing to close, and it's possible that we may be able to lower rates by broadening the base at that point."
Obama acknowledged there were more spending cuts that could be made and he pledged to work with Boehner to trim what he called excessive healthcare costs in the budget but that a deal was not possible without raising tax rates on the wealthy.
"There's probably more cuts that we can squeeze out, although we've already made over $1 trillion worth of spending cuts," he said.
Obama said there was not enough time this year to come up with an overhaul of the U.S. tax system and entitlement programs that Republicans want as a condition for an agreement to avoid the so-called fiscal cliff, a combination of tax hikes and spending cuts set to start in 2013 that economists predict will throw the economy into depression.
He said that despite weaknesses in Europe and Asia, he believed the U.S. economy is "poised to take off."
Obama added he is considering bringing a top business executive onto his economic team, but that the Senate confirmation process can be so difficult that some business executives shy away from government service.

Read More..

Republicans see some leverage in "fiscal cliff" talks

U.S. Republicans may have some leverage in their fiscal cliffhanger with President Barack Obama: the threat of forcing a disproportionate number of Democrats to pay the so-called alternative minimum tax.
Under U.S. law, taxpayers each year must pay the greater of regular federal income tax, or the AMT. The latter requires taxpayers to give up certain tax breaks, typically exemptions and deductions for state and local taxes and medical costs.
Only about 4 million taxpayers pay the AMT because Congress routinely passes a law to adjust for inflation, to spare middle-income and upper-middle income taxpayers. Without this legislative fix, called a "patch" by lawmakers, up to 33 million taxpayers will have to pay an AMT liability for 2012, according to the Internal Revenue Service.
That is one in five taxpayers.
The number of taxpayers affected by the AMT would jump because the AMT exemption amounts and income brackets do not automatically rise with inflation and also because across-the-board individual tax cuts a decade ago did not cut AMT rates.
States with the wealthiest taxpayers and the steepest state taxes, which typically cannot be deducted under the AMT, include New York, California and Illinois - Democratic strongholds.
That may make the threat of a lapse one of the Republicans' strongest cards after Obama's re-election last month on a theme of tax fairness.
"The AMT is one of the more significant pieces of leverage that the Republicans have," said Evan Liddiard, a former tax adviser to Orrin Hatch, the top Republican on the Senate Finance Committee. "It will pinch harder in the blue states."
That may make Republicans less likely to agree to a bill that addresses only the AMT.
Obama's Democrats and Republicans, led by House of Representatives Speaker John Boehner, have been battling while trying to keep from falling over a $600 billion "fiscal cliff" - a combination of tax increases and spending cuts due to be implemented early next year.
Now at a standstill, talks on how to avert the fiscal cliff have been largely focused on whether to renew low tax rates for the wealthiest taxpayers along with everyone else.
In a brief interview in the Capitol, Hatch said voters in the Democratic-leaning states will not be amused if their taxes go up unexpectedly.
"When they find out they are going to get hammered because of the AMT and the lack of plan by this administration to resolve that problem, yes, I think that will cost them (the Democrats) a few votes," Hatch said.
Because the latest AMT patch expired in 2011, it is in some ways more urgent to address the AMT than the Bush-era tax cuts expiring at the end of December.
Congress last patched the AMT in the lame-duck session in 2010. A bipartisan bill passed by the Senate finance committee to patch AMT for 2012 and 2013 was estimated to cost $132.2 billion.
The cost is one reason the AMT never gets patched permanently. Republicans generally want to scrap the AMT altogether; Obama's latest budget calls for adjusting it for inflation.
IRS WARNINGS
Further complicating the AMT picture is the chaos predicted for the tax-filing season due to begin on January 22, the first working day after Obama's inauguration ceremony in Washington.
A letter from the tax-collecting IRS Commissioner Steve Miller on potential agency problems related to the fiscal cliff focuses almost exclusively on the AMT.
Failure to "patch" the AMT could lead to 60 million taxpayers not being able to file tax returns or get a refund, in addition to a software nightmare for the IRS computer systems.
Miller wrote lawmakers on November 13 warning them of serious repercussions for taxpayers, including 28 million with a "very large unexpected tax liability," and delays in refunds for millions.
"Consistent with past practice, I have instructed IRS staff again this year to leave our core systems "as-is" with respect to the AMT, and hold off on the substantial design and engineering work" required otherwise, he wrote.
Miller last briefed the Senate Finance Committee about the need for action late last month, according to a Senate source.
Representative Richard Neal, a senior Democrat on the Ways and Means Committee who represents parts of Massachusetts, said fixing the AMT was an absolute must.
"It has to be done. It reaches too many people if it's not," Neal said. "I think it is again being used as (a) bargaining (chip)."
Republicans say they are holding out for a bigger deal.
"That is not going to solve the fiscal cliff," said Republican Representative Pat Tiberi, who leads the revenue sub-panel of the tax-writing House Ways and Means Committee.
"It is a very important part of the tax code but once you start picking winners and losers in the tax code, how do you get ... the big deal done?

Read More..

Buying your own botnet costs as little as $250

Botnets used to be the exclusive domain of high-powered hackers looking to rake in cash from spam operations or to conduct highly effective DDoS attacks. But now Symantec has found that botnets are increasingly becoming available to less sophisticated hacker wannabes and are being sold for as little as $250. [More from BGR: BlackBerry 10 browser smokes iOS 6 and Windows Phone 8 in comparison test [video]] After trolling around on some of the darker corners of the Internet, Symantec researchers stumbled upon a seller marketing a “Zeus Fully Setup Botnet + Bulletproof Hosting” for $250 that includes source code, binaries, user guides and a control panel. Symantec also found other purported botnets on sale for as much as $1,000, although the firm believes that at least some of these advertised botnets are scams. [More from BGR: Google Maps causes huge spike in iOS 6 adoption] Even so, the company says the rise of for-sale botnets is significant because “previously, it was necessary to be a member of an exclusive community to purchase these files, but it appears that it is now getting easier.”

Read More..

Samsung will patch malware exploit affecting Galaxy S III and Galaxy Note II

Samsung (005930) Galaxy S III and Galaxy Note II owners had a big scare last week when it was discovered the smartphones are vulnerable to app-based attacks stemming from a security hole with their Exynos-4 processors. Samsung confirmed to Android Central that it has investigated the “potential security issue” and re-states that the “issue may arise only when a malicious application is operated on the affected devices; however, this does not affect most devices operating credible and authenticated applications.” Nonetheless, Samsung will be releasing a software update “to address it as quickly as possible.” Samsung’s swift action is reassurance that it values the more than 30 million Galaxy S III and more than 5 million Galaxy Note II customers it has racked up this year.

Read More..

Kodak in $525 million patent deal, eyes bankruptcy end

Eastman Kodak Co agreed to sell its digital imaging patents for about $525 million, a key step to bringing the photography pioneer out of bankruptcy in the first half of 2013.
The deal for the 1,100 patents allows Kodak to fulfill a condition for securing $830 million in financing.
The patent deal was reached with a consortium led by Intellectual Ventures and RPX Corp, and which includes some of the world's biggest technology companies, which will license or acquire the patents.
Those companies are Adobe Systems Inc, Amazon.com Inc, Apple Inc, Facebook Inc, Fujifilm, Google Inc, Huawei Technologies Co Ltd, HTC Corp, Microsoft Corp, Research In Motion Ltd, Samsung Electronics Co Ltd and Shutterfly Inc, according to court documents.
Kodak still must sell its personalized and document-imaging businesses as part of the financing package, and also has to resolve its UK pension obligation.
Kodak said the patent deal puts it on a path to emerge from Chapter 11 in the first half of 2013.
"Our progress has accelerated over the past several weeks as we prepare to emerge as a strong, sustainable company," said Antonio Perez, chairman and chief executive of the Rochester, New York-based company.
The patent portfolio was expected to be a major asset for Kodak when it filed for bankruptcy in January. An outside firm had estimated the patents could be worth as much as $2.6 billion.
Kodak's patents hit the market as intellectual property values have soared and technology companies have plowed money into patent-related litigation.
For example, last year Nortel Networks sold 6,000 wireless patents in a bankruptcy auction for $4.5 billion and earlier this year Google spent $12.5 billion for patent-rich Motorola Mobility.
But Kodak's patent auction dragged on beyond the initial expectation that it would be wrapped up in August. One patent specialist blamed those early, overly optimistic valuations, which he said encouraged Kodak's team to set their sights too high.
"Unfortunately (Kodak management) was misled into thinking it was worth billions of dollars and it wasn't," said Alex Poltorak, chairman of General Patent Corp, a patent licensing firm. "I think they sold them at a very good price."
He said after Google acquired Motorola, the search engine company no longer needed patents at any price, deflating the intellectual property market.
Kodak traces its roots to the 19th century and invented the handheld camera. But it has been unable to successfully shift to digital imaging.
It will likely be a different company when it exits bankruptcy, out of the consumer business and focused instead on providing products and services to the commercial imaging market.
The patent sale is subject to approval by the U.S. Bankruptcy Court in Manhattan.
The Kodak bankruptcy case is in Re: Eastman Kodak Co. et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202.

Read More..

Kodak acuerda venta patentes por 525 mln dlr, busca fin bancarrota

 La firma Eastman Kodak Company acordó vender sus patentes de imágenes digitales en una operación valuada en 525 millones de dólares, un paso clave para que la empresa pionera de la fotografía pueda salir de la bancarrota en el primer semestre del 2013.
El acuerdo por 1.100 patentes permite a Kodak cumplir una condición para conseguir 830 millones de dólares de financiamiento.
El acuerdo sobre patentes se logró con un consorcio liderado por Intellectual Ventures y RPX Corp, que incluye a algunas de la compañías de tecnología más grandes del mundo, que comprarán o licenciarán las patentes.
Esas compañías son Adobe Systems Inc, Amazon.com Inc, Apple Inc, Facebook Inc, Fujifilm, Google Inc, Huawei Technologies Co Ltd, HTC Corp, Microsoft Corp, Research In Motion Ltd, Samsung Electronics Co Ltd y Shutterfly Inc, según documentos de la corte.
Kodak aún debe vender su negocio de imágenes personalizadas y de documentos como parte del paquete de financiamiento, y además debe resolver sus obligaciones de pensiones en el Reino Unido.
La compañía dijo que el acuerdo de patentes la pone en camino a salir de la bancarrota en la primera mitad del 2013.
"Nuestros avances se han acelerado durante las últimas semanas a medida que nos preparamos para surgir como una compañía sólida y sostenible", dijo Antonio Pérez, presidente ejecutivo de la firma con sede en Rochester, Nueva York.
Cuando Kodak solicitó la bancarrota en enero, se esperaba que la cartera de patentes fuera un enorme activo para la empresa. Una compañía externa había estimado que las patentes pudiesen valer hasta 2.600 millones de dólares.
Las patentes de Kodak salieron al mercado en momentos en que los valores de la propiedad intelectual se han disparado y las compañías de tecnología han destinado mucho dinero a litigios legales relativos a patentes.
Por ejemplo, Nortel Networks vendió el año pasado 6.000 patentes inalámbricas en una subasta por bancarrota por 4.500 millones de dólares y anteriormente este año Google gastó 12.500 millones de dólares por Motorola Mobility, que tiene una amplia cartera de patentes.
Pero la subasta de patentes de Kodak se prolongó más allá de las expectativas iniciales, que apuntaban a una conclusión en agosto. Un especialista en patentes culpó a las estimaciones iniciales extremadamente optimistas, que dijo alentaron al equipo de Kodak a poner sus metas demasiado altas.
"Lamentablemente (la gerencia de Kodak) fue engañada y creyó que valía miles de millones de dólares, pero no era así", dijo Alex Poltorak, presidente de General Patent Corp, una firma de licencias de patentes. "Creo que las vendieron a un muy buen precio", agregó.
El dijo que después de que Google compró a Motorola, la compañía de búsquedas en internet ya no necesitaba patentes a ningún precio, lo que hizo caer los precios del mercado de propiedad intelectual.
Las raíces de Kodak se remontan al Siglo XIX e inventó la cámara portátil. Pero no ha podido girar con éxito a la fotografía digital.
Posiblemente será una compañía diferente cuando salga de la bancarrota, fuera del negocio para los consumidores y concentrada, en cambio, en brindar productos y servicios al mercado de imágenes comerciales.
Los acuerdos están sujetos a la aprobación de la Corte de Bancarrota de Estados Unidos en Manhattan.

Read More..

Kodak sells digital imaging patents for $525M

ROCHESTER, N.Y. (AP) — Eastman Kodak is selling its digital imaging patents for about $525 million, money the struggling photo pioneer says will help it emerge from bankruptcy protection in the first half of next year.
Apple Inc., Google Inc., Samsung Electronics Co., Research In Motion Ltd., Microsoft Corp., China's Huawei Technologies, Facebook Inc. and Amazon.com Inc. are among the 12 companies paying to license the 1,100 patents, according to court filings. Patents have become very valuable to digital device makers, who want to protect themselves from intellectual property lawsuits. But Kodak, which has been trying to make the sale happen for more than a year, wound up receiving substantially less money than had been expected.
Rochester, N.Y.-based Eastman Kodak Co. said Wednesday that the patent sale will help it repay a substantial amount of a loan it received under the bankruptcy process. It also satisfies a key condition of a new, cheaper $830 million loan package, which required that the patents be sold for at least $500 million.
Founded in 1880, Kodak filed for Chapter 11 bankruptcy protection in January after a long struggle to stay relevant. First came competition from Japanese companies, then the shift from film to digital photography over the past decade. Kodak failed to keep up. The once-mighty company, whose workforce peaked at 145,300 in 1988, said at the end of September that it expected to wind up with 13,100 employees after another round of job cuts.
Since filing for bankruptcy protection, Kodak has sold off several businesses, such as its online photo service, and said it would shut down other divisions, including the manufacturing of digital cameras. The company intends to focus on commercial and packaging printing. It sees home photo printers, high-speed commercial inkjet presses, software and packaging as the core of its business as it emerges from bankruptcy.
Kodak began mining its patent portfolio for license revenue in 2008. In January 2010, it sued Apple and RIM, saying that smartphone makers infringed its patent for technology that lets a camera preview low-resolution versions of a moving image while recording still images at higher resolutions.
But by July 2011, it was trying to sell its 1,100 digital imaging patents. Analysts initially thought the portfolio could fetch between $2 billion and $3 billion. But Kodak struggled to find a buyer.
The 12 licensees for Kodak's imaging patents were organized by Intellectual Ventures and RPX Corp. Kodak spokesman Christopher Veronda said each licensee will pay a portion of the total cost and then have access to all the patents. The deal also includes an agreement to settle patent-related litigation.
The sale represents "another major milestone toward successful emergence" from bankruptcy, said Antonio M. Perez, Kodak's chairman and CEO, in a statement. "Our progress has accelerated over the past several weeks as we prepare to emerge as a strong, sustainable company."
Kodak will keep ownership of about 9,600 patents, focused mostly on commercial imaging and printing technologies.

Read More..