White House slashes deficit forecast

[obby]

OMG,,Tax cuts do work!!! LOL funny,,,they always have. Every time it’s been tried. LOL

White House slashes deficit forecast

Says higher tax revenues from boosted economic growth will reduce gap by nearly $100 billion.

July 13, 2005: 12:34 PM EDT

WASHINGTON (Reuters) - The White House Wednesday slashed its forecast for the fiscal 2005 budget deficit by nearly $100 billion after the government raked in unexpectedly large tax revenues in recent months.

The Bush administration projected a deficit of $333 billion for the fiscal year ending Sept. 30, according to the Office of Management and Budget's "midsession" update.

President Bush, at a meeting with his Cabinet, hailed the numbers and said he could cut the deficit gap in half sooner than his earlier promise of 2009.

"I told the Congress and told the country we'd cut the deficit in half by 2009," Bush told reporters during the meeting.

"We're ahead of projections now. These numbers indicate that we're going to cut the deficit in half faster than the year 2009 so long as Congress holds the line on spending," he added.

[bigpoppanils]

OMG,,Tax cuts do work!!! LOL funny,,,they always have. Every time it’s been tried. LOL

IRS Audit Crackdown on Companies Increases U.S. Tax Receipts

July 12 (Bloomberg) -- President George W. Bush's Internal Revenue Service deserves as much credit as his economic policies for a surge in corporate tax receipts that may narrow this year's budget deficit by as much as $90 billion.

Corporate tax receipts surged 43.7 percent to $189.4 billion in 2004, and tax lawyers familiar with Internal Revenue Service policies say a large portion of that is due to increased corporate audits, IRS Commissioner Mark Everson's top priority.

``There's no doubt about it, the IRS auditors are more aggressive,'' said former IRS Commissioner Larry Gibbs, who now advises companies undergoing tax audits as a partner with the Washington law firm Miller & Chevalier. ``I think there's little doubt that they're showing more revenue from compliance activities.''

The Bush administration has attributed the increased tax revenue to the economic growth produced by the president's first-term tax cuts of $1.85 trillion. The deficit will likely shrink by about $90 billion this year to $325 billion, according to the Congressional Budget Office and private forecasters such as Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut.

``The continued and growing strength of the economy is further evidenced this week in the high level of receipts coming into the Treasury,'' Secretary John Snow said June 16, when the government announced it had received a one-day record of $61 billion in tax revenue the day before.

White House Budget Director Joshua Bolton will release the government's revised estimate for the fiscal 2005 budget deficit tomorrow.

Single-Day Records

This year is likely to mirror 2004, in that most of the additional revenue pouring into the Treasury is coming from corporate coffers. Corporate tax receipts set single-day records on Dec. 15, 2004, and June 15 of $46 billion and $49 billion, respectively. That was up from $36.7 billion and $37 billion on December 15, 2003, and June 15, 2004, respectively.

The IRS has not yet broken down how much additional revenue its increased audits have yielded this year, spokesman Terry Lemons said. In the fiscal year ending Sept. 30, 2004, when the deficit rose to $412 billion, expanded audits boosted collection of unpaid taxes by 14.6 percent to $43.1 billion.

Rising corporate tax receipts this year also may be due to greater profitability and companies taking advantage of a one- time opportunity to repatriate foreign earnings at a drastically reduced tax rate, Congressional Budget Office Director Douglas Holtz-Eakin said. The Bush administration opposed the repatriation tax break.

Renewed Pressure

Lawyers who represent companies before the IRS say their clients are feeling renewed pressure from the tax collector. Under Everson, the agency is trying to reduce the length of tax disputes, which can drag on for eight years or more.

``The IRS has made a big push to bring audits more up to date,'' said Timothy McCormally, executive director of Tax Executives Institute, an association of tax officials from the 1,000 largest U.S. companies. ``Corporate taxpayers are settling cases and years on an accelerated basis.''

Everson has made increasing audits of high-income individuals and corporations a top priority since he was sworn in on June 11, 2003. He also has diverted more IRS resources to combating abusive tax shelters, a campaign that some analysts said has made some companies unwilling to contest the IRS when it labels a transaction aggressive.

Focus

Deborah Nolan, the IRS official in charge of auditing large and midsize businesses, said companies are more likely to settle because the agency has directed auditors to focus more on high- risk areas such as tax shelters and transfer pricing arrangements, which have more money at stake. Companies can use transfer pricing to inflate prices of goods sold between international subsidiaries to reduce taxable income.

The IRS increased audit coverage of corporations in 2004 and instructed agents to issue more summonses for documents when they find corporate taxpayers to be uncooperative, she said. The agency is also making use of new tools, including a more detailed tax form called the Schedule M-3, on which companies must reconcile differences between income reported on financial statements and that reported to the tax collector. The agency also is assessing more penalties.

The result, Nolan said, is more settlements by companies and more taxes paid as a percentage of work hours put in by IRS agents.

`Environment Has Changed'

``I do believe that the environment has changed in corporate governance,'' Nolan said in an interview. ``The consequences and the balance of risk has shifted.''

Companies including Verizon Communications Inc., Toys ``R'' Us Inc., Martha Stewart Living Omnimedia Inc., Hartford Financial Services Group Inc., Caterpillar Inc. and AMR Corp. announced settlements with the IRS last year in financial disclosure filings.

Many of the companies describe the settlements as having a favorable effect on the bottom line because settlements with the tax collector usually result in lower taxes due than the amount companies place into a reserve account pending resolution of the issue. There was no indication in any of the filings that tax shelters were involved.

Tax shelters are sophisticated financial transactions designed to reduce or avoid taxes. Some are legal, while others skirt the boundary of the law. The IRS keeps a list of specific tax shelters it has outlawed, though IRS auditors have challenged some transactions that aren't specifically listed as improper, said Gibbs, a former IRS commissioner.

Negative publicity over corporate tax shelters has cowed some companies from litigating tax assessments even on legitimate tax positions involving leveraged leases of equipment and tax credits claimed for research expenses, he said.

``Companies do not want to get into the business of being called tax shelter abusers,'' Gibbs said.

Tax Audits

Donald C. Alexander, a former IRS commissioner who now counsels companies undergoing tax audits as a partner with the Washington law firm Akin, Gump, Strauss, Hauer & Feld, agrees that IRS audits have increased to the point that they are contributing to a rise in corporate tax receipts.

``It's having a decided effect,'' Alexander said.

Alexander said the IRS is simultaneously playing ``catch- up'' with some companies by settling longstanding disputes to collect some money while also trying to entice companies entering the current audit cycle to pay now by settling issues before they arise.

``What's paid now is closer to what should be paid,'' Alexander said.

Some Revenue

The Treasury's inspector general for tax administration warned in February that the IRS may forgo some revenue by trying to close audits quickly and by focusing heavily on areas such as tax shelters.

In a Feb. 18 report, Deputy Inspector General for Audit Pamela J. Gardiner said one particular audit program, called the ``Limited Issue Focused Examination,'' would sacrifice about $349 million a year in additional taxes by focusing only on a few critical issues.

``The business results from these cases are a concern because the statistics show LIFE cases are generating significantly less additional recommended taxes than other large business examinations, which could affect tax revenues,'' Gardiner wrote.

Nolan acknowledged that some money would not be collected. ``Did we get to the last penny? No, we do not,'' she said. By focusing on high-risk areas, ``It does enable us to get the substantially correct tax and move on to the next taxpayer and get their substantially correct tax.''

http://quote.bloomberg.com/apps/news?pid=10000103&sid=ahSQpw4Yw0JQ&refer=news_index#

[bigpoppanils]

"We're ahead of projections now. These numbers indicate that we're going to cut the deficit in half faster than the year 2009 so long as Congress holds the line on spending," he added.

so what happens in 2010 when the tax cuts become permanent?