Seattle Group Seeks Espresso Tax
By MELANTHIA MITCHELL
Associated Press Writer
SEATTLE (AP) — A proposed tax could hit Seattleites where it really hurts: their coffee mugs.
A group of child-care advocates, seeking more money for early education, filed an initiative Friday that would place a 10-cent city tax on Seattle's lifeblood — espresso drinks.
But in Seattle, where voters have already voted to tax tobacco, meals and hotel rooms, among other things, initial word of the proposal caused barely a jolt among the area's latte lovers.
"Coffee, in a way, it's kind of a luxury item," said Patty Grazini, who frequents the Diva Espresso Bar in Seattle's Greenwood district. "As long as the money went to the programs it was supposed to, I would support it."
The Early Learning and Care Committee, which is made up of parents, teachers and child-care directors, expects the tax would raise $7 million to $10 million a year in this coffee-addicted city.
The money would be used to increase wages for child-care teachers, help low- and middle-income families obtain quality child care and increase the amount of high-quality care available in Seattle, said Lisa Moy, campaign manager of the initiative.
The committee has until early August to collect the 17,228 valid signatures needed to get the initiative on November's ballot.
Melissa Petersen, barista at Diva Espresso, wasn't so sure the initiative was a good idea. Another 10 cents is a lot to ask for a drink that already can cost $3 to $4, she said.
"They've got a smoking tax, regular taxes, why not a yuppie tax?" Petersen said sarcastically.
Grazini, 50, averages about two cappuccinos a day and has no problem flipping the bistro an extra couple of dimes. The tax would bring the cost of her daily caffeine dosage to about $4.20, or an additional $73 a year.
Under the plan, drip coffee would not be taxed.
Moy said taxing espresso drinks is a guaranteed source of income in Seattle, where many residents can't get through the day without a caffeine hit.
"We know that the city of Seattle voters are dedicated to their children," Moy said. "This is one way they can enable children more access to quality pre-kindergarten care."
Since the tax would apply to businesses that gross more than $50,000 annually, Moy said Starbucks and Tully's Coffee — Seattle's main coffee purveyors — have been informed of the group's plan.
In a prepared statement, Starbucks said the company did not understand why the group "would recommend an additional consumer tax on espresso beverages, or any other single consumer product, to fund this initiative."
Company spokeswoman Audrey Lincoff would not comment further.
The tax would do little to affect business at Diva Espresso's four locations in Seattle, manager Stephen Johnson said.
"Regular customers would initially notice, but they would adapt to it very readily," Johnson said. "I think coffee's a pretty strong drug. People need their caffeine."
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On the Net:
Starbucks: http://www.starbucks.com/
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JUNE 04, 00:02 ET
State April Tax Revenues Fall
By ROBERT TANNER
AP National Writer
States' income tax revenue fell by more than a fifth in April compared with a year before, a bad sign for governors and lawmakers who already struggled to balance this year's budgets, a new report says.
The weak performance increases the likelihood that more states will need to consider mid-year spending cuts for the second year running, budget officials told the National Conference of State Legislatures, which conducted the survey with several other groups.
The report, released Tuesday, discovered widespread weakness in states' revenue from individual income tax filings, the largest single source of money for state governments. The findings include:
- Total individual income tax collections in April alone fell by 21.4 percent, or $8.5 billion, from April 2001. From January through April, collections fell by 14 percent, or $14.5 billion, compared with the year before.
- At least 40 states reported that personal income tax collections were below projections, 12 of them more than 10 percent below. Only two states, Georgia and West Virginia, reported they were on target or above.
- Income tax refunds increased by nearly 14 percent so far this year, with states paying out $2.5 billion more in refunds this year than last. Officials figured layoffs and reduced working hours spurred the rise in refunds.
"April sort of clinches it," said Arturo Perez, a senior analyst with the National Conference of State Legislatures. "The numbers don't reflect anything that would cheer a state official up."
Other sources of revenue — sales taxes and corporate taxes — have also been weak this year. A preliminary report found corporate income taxes fell by 18 percent in the first quarter.
Though the recession officially ended last year, economists say states' financial woes will continue as unemployment remains higher than in recent years. Most states have returned to their budgets and cut spending over the past year, and budget writers have adjusted their projections downward.
But the new report found that, for the overwhelming majority, even the conservative estimates weren't gloomy enough.
State are "looking now at a potentially out-of-balance budget in the upcoming year," Perez said. "There's a lot of misery shared among the states. This is not isolated to one or two states, or just one region of the country."
States have faced budget shortfalls in the billions of dollars over the fiscal year that ends for all but four states this month. Nearly all have rejected general tax increases, choosing instead a mix of spending cuts and targeted tax hikes, such as higher cigarette taxes or corporate taxes. Kansas, however, recently raised sales taxes.
State leaders are also seeking help from Washington, hoping that the federal government will take on a larger share of the cost of Medicaid, the health care program for the poor, and offer a multibillion dollar infusion through block grants.
The survey was conducted by the NCSL, the Federation of Tax Administrators, the National Association of State Budget Officers, and the Nelson A. Rockefeller Institute of Government.
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On the Net:
National Conference of State Legislatures: http://www.ncsl.org
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JUNE 04, 09:55 ET
Yugoslavs Protest New Taxes
BELGRADE, Yugoslavia (AP) — Thousands of taxi drivers and farmers blocked roads Tuesday in Belgrade and in western Serbia to protest a new tax imposed on the drivers and to demand a higher price for raspberries bought by the government.
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The uncoordinated protests brought traffic to a standstill in downtown Belgrade and closed a key highway connecting Yugoslavia with neighboring Bosnia.
They represented the latest outburst over government austerity measures designed to revive the economy ruined by the disastrous rule of former President Slobodan Milosevic. The country has $10 billion of foreign debt, inflation is running at 40 percent annually and unemployment stands at 30 percent.
The new tax for taxi drivers amounts to about $200 per year for each driver, about the same as the country's average monthly salary. The government has not said how much the new tax would generate, or what it would be used for.
"With such taxes, no one can makes ends meet," said taxi driver Zoran Ristic, a protest leader.
Belgrade police struggled with a huge traffic jam caused by the sudden taxi protest.
Near the city of Uzice, about 90 miles southwest of Belgrade, thousands of raspberry growers blocked the highway as part of their demand for a 25 percent increase in the state-guaranteed minimum price of raspberries.
Raspberries are one of Serbia's main exports. The government traditionally buys most of the harvest and sells the raspberries to other European countries. The raspberry farmers also threatened to block the main railway line linking northern Yugoslavia with the port city of Bar in Montenegro.
Yugoslavia is made up of Serbia and much smaller Montenegro
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JUNE 04, 19:22 ET
House OKs Tax Break Extensions
By CURT ANDERSON
AP Tax Writer
WASHINGTON (AP) — Tax breaks for Holocaust survivors and people who adopt children would be spared from a 2010 expiration date under two measures that easily passed the House on Tuesday.
The legislation would remove the Dec. 31, 2010 "sunset" date for two popular parts of the 10-year, $1.35 trillion tax cut enacted last year. The entire law is scheduled to expire on that date unless Congress makes it permanent.
House Republicans are pushing for a series of election-year votes on making individual parts of the tax cut permanent, including a vote planned for later this week on repeal of the estate tax. That effort draws much more opposition among Democrats, making it unlikely to win final approval this year by the Democratic-led Senate.
The Holocaust and adoption measures have better prospects.
There will be about 88,000 Jewish survivors of the Nazi Holocaust in 2010, according to congressional estimates. Restitution payments are currently excluded from income taxes for victims of the Holocaust, as well as their heirs or estates.
If the sunset date isn't lifted, tax would be imposed on those families beginning in 2011. The bill passed 392-1.
"Many families are dependent on those funds," said Rep. Ben Cardin, D- Md. "It's important that we resolve this now."
Likewise, last year's tax law increased tax credits to help people offset the costs of adopting children. If the sunset date is left in place, the credit would fall from $10,000 to $5,000 in 2011 and old income caps would return that prevented many families from taking advantage of the credit.
"We cannot allow this credit to lapse," said Rep. Dave Camp, R-Mich. "Temporary is not an option for adoption."
That bill passed the House by 391-1. The lone dissenting votes in both cases were cast by Rep. Charles Stenholm, D-Texas, who frequently argues against tax cuts or spending increases whose costs are not offset within the federal budget.
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On the Net: Congress: http://thomas.loc.gov
The bills are H.R. 4800 and H.R. 4823.
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June 5, 2002
Tax Report
by Tom Herman
The Wall Street Journal
Tax Professionals Handled 60% Of Individual Returns This Year
If you finally gave up and turned over your tax woes to a professional this year, you have lots of company.
A record 60% of all individual returns were signed by paid preparers, according to a new Internal Revenue Service study, which used a statistical sampling of returns. That's up from 57% in 2001, 51% in 1996 and about 46% in 1986, the year Congress passed a historic tax act designed to simplify the code.
Since then, Congress has been larding up the tax code with provisions designed to please various special-interest groups. President Bush's tax cut, enacted a year ago this week, drove a new wave of filers into the arms of professional preparers. Because of the law, the IRS added a "rate reduction credit" line on this year's tax return, which already has resulted in millions of taxpayer mistakes.
"It's a disgrace to have a tax system where this many people have to pay people" to prepare their returns, says Yale Law School professor Michael Graetz, a former Treasury official. "It simply increases their tax burden. It's really outrageous."
H&R Block, the nation's biggest tax preparer, responded to the new tax law by greatly increasing its advertising budget. "It took an act of Congress to pass 441 tax-law changes," one Block advertisement intoned. "Will it take an act of God to understand them?"
Even Americans filing simpler types of returns, such as the Form 1040EZ, are requiring more help. The survey found that more than 21% of all Form 1040EZ returns were signed by paid preparers this year, up from 17% the prior year, the IRS says.
At the same time, the number of people affected by the alternative- minimum tax, one of the most complex provisions in the tax world, rose sharply this year to an estimated 2.7 million from only about one million for 1999. The alternative-minimum tax, or AMT, was created decades ago after reports that some wealthy people had managed to avoid paying taxes legally through the use of credits, deductions and other items. As the White House budget noted earlier this year, "structural defects" in the AMT, including lack of indexing for inflation or adjustment for family size, have resulted in the tax affecting "millions of taxpayers to whom it was not intended to apply." The staff of Congress's Joint Committee on Taxation has called for complete elimination of the AMT.
If you are wondering how the AMT might affect you, try a handy calculator offered free of charge by TurboTax, the tax-preparation software that is part of Intuit Inc. Go to www.quicken.com/taxes/tools and look under "Tax Estimators and Evaluators" for the "AMT Evaluator," which asks: "Are you at risk for AMT? Find out with this tool. We'll evaluate your exposure to the AMT for 2002 through 2006."
Even former IRS officials find the tax code confusing. "No, I don't do my own return," says Randolph Thrower, a former IRS commissioner. "It's much too complicated for me."
An indication of just how fat the nation's tax laws and related material have become can be seen by glancing at the heavy tax volumes sold by CCH Inc., a Riverwoods, Ill., publisher of tax and other business information. In 1954, the nation's tax code, regulations and related material fit into 14,000 pages in nine volumes. By 1984, it was 26,300 pages in 14 volumes. For 2002, it was 52,310 pages in 25 volumes, a CCH spokesman says. And that's even before taking into account changes enacted in March of this year as part of the economic- stimulus package.
QUESTIONS GROW about the fate of proposed charitable-giving incentives.
Senate Finance Committee members are considering a controversial bill that includes a provision allowing taxpayers who take the standard deduction to deduct limited amounts of charitable donations. That would be in addition to claiming the standard deduction, a flat amount based on the taxpayer's filing status. Under current law, only taxpayers who itemize deductions can deduct charitable gifts. About two out of every three returns claim the standard deduction.
President Bush enthusiastically endorses the general concept, and the House already has approved a bill along these lines. But congressional staffers who once thought the idea would sail easily through the Senate Finance Committee now say it is much too close to call. Critics blast the change as unnecessary since the standard deduction was intended to include an assumed amount of charitable giving. Some lawyers say it would be impossible to police and thus would invite people to cheat.
"I wish this would quietly disappear," says Donald C. Alexander, a former IRS commissioner and now a Washington lawyer at Akin, Gump, Strauss, Hauer & Feld LLP. "It's a bad idea whose time has not yet come." Prospects for a large package of new charitable-giving incentives "are not bright," but a smaller package "might well be enacted."
SOME HIGH-INCOME taxpayers claim the standard deduction.
IRS statistics show that more than 10% of taxpayers with adjusted gross income between $100,000 and $200,000 for the year 2000 didn't itemize deductions, says Jim Seidel of RIA, a New York-based publisher of tax and other business information. Also, more than 7% of those with income of $200,000 or more didn't itemize.
Possible explanations: They may live in states with no income tax or a small one. They may have little or no mortgage-interest expense, and they may have "all or most of their medical expenses covered by health insurance of one kind of another," he says. They also may have made very small amounts of charitable contributions. Another factor is the overall limit on itemized deductions. This may spur some high-income taxpayers to take the standard deduction, instead.
Another possibility: Some people may not realize they could do better by itemizing, or they may prefer not to itemize because they fear it would increase their chances of getting audited.
REVENUES CONTINUE TO SLUMP from federal estate and gift taxes. In the seven months ended April 30, revenues totaled $16.2 billion. That was down from $17.8 billion a year ago, a Treasury publication says. The Treasury said individual income-tax revenues for those seven months fell to $536.5 billion from $659.1 billion. Corporate income-tax revenues fell to $88.2 billion from $103.3 billion.
BRIEFS: Reminder: New Jersey's tax amnesty expires Monday night. For details, see the state's Web site (www.njtaxamnesty.com) ... The amount of alternative- minimum tax paid by individuals for 2000 soared to a record $8.9 billion, up 49% from the prior year, an IRS publication reports.
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JUNE 06, 17:15 ET
House OKs GOP Measure on Estate Tax
By CURT ANDERSON
AP Tax Writer
WASHINGTON (AP) — The Republican-controlled House voted Thursday to permanently repeal the estate tax, turning aside a Democratic effort to retain the tax but limit its impact to a few thousand of the very wealthy.
The GOP bill, passed on a bipartisan 256-171 vote, would remove the Jan. 1, 2011, expiration or "sunset" date that blocks permanent repeal under current law. The entire 10-year, $1.35 trillion tax cut enacted one year ago this week — including repeal of the estate tax — will disappear in 2011 because of an arcane Senate budget rule.
Senate Democrats say they have the votes to defeat the estate tax measure when it comes up later this month, even though 41 House Democrats supported it. The House also voted 231-197 to defeat a Democratic alternative that would permanently raise the estate tax exemption from $1 million today to $3 million in 2003 but keep the tax at a maximum rate of 50 percent.
Aiming to remind voters of the big tax cut in this election year, House Republicans are staging a series of debates on removing the sunset date for some of its most popular parts. President Bush is traveling to Iowa on Friday to highlight the effort on the anniversary of his signing the tax cut into law.
"The job wasn't done completely enough for the American people," said House Majority Leader Dick Armey, R-Texas.
The estate tax is particularly odd, because it would gradually be reduced from 55 percent to 45 percent — with exemptions rising to $3.5 million — until it disappears for 2010 only. It would then be automatically resurrected the next year at higher, pre-2001 levels.
Sen. Rick Santorum, R-Pa., said lawmakers who oppose making repeal permanent are guilty of a "pro-suicide vote" because of the decisions people might contemplate in that single tax-free year. "You create some very strange things that could happen at the end of 2010," Santorum told reporters.
Although the day of reckoning is years away, Republicans said the bill would bring needed certainty to what is now a chaotic and costly estate planning situation. They said the nation's economic recovery got a key boost from the tax cut, including repeal of the estate tax, and that making it permanent will solidify those gains.
Beyond that, Republicans said killing off the tax is a matter of basic fairness that resonates with voters, particularly farmers and small business operators who can face selling off their hard-won assets to pay off the government.
"Only in our government are you given a certificate at birth, a license at marriage and a bill at death," said Rep. Sam Johnson, R-Texas. "It's tax, tax, tax — it's the Grim Reaper every day."
Of course, a future Congress could reimpose the tax — something that has happened several times in the past.
Democrats countered that their alternative would eliminate the tax beginning next year for more than 99 percent of all estates, retaining it for only the biggest inheritances. The tax only hits a tiny fraction of all estates in any event; in 1999, IRS statistics show that just over 49,000 estates paid $119 billion in taxes.
"Let's deal with this problem now and not go the repeal route later," said Rep. Earl Pomeroy, D-N.D., the alternative's chief sponsor.
Many Democrats accused the GOP of favoring the rich, calculating that former Enron Corp. chief executive officer Jeffrey Skilling would get a tax cut of $55 million — the equivalent of one year's Social Security taxes paid by more than 29,000 workers earning $30,000 a year.
"This is about pure greed," said Rep. Bill Pascrell Jr., D-N.J.
The GOP measure would add almost $100 billion to the 10-year cost of the tax cut, according to congressional estimates. Over the second decade, Democrats contend, the cost would balloon to $740 billion, siphoning money away from needs such as Social Security, Medicare, education and defense.
Senate Democrats, who have agreed to consider the legislation no later than June 28, say they have the votes to defeat it but plan to offer alternatives similar to that offered by Pomeroy. The Senate vote could be tricky for many Democrats who supported the tax cut last year and are up for re-election this year, including Sens. Tim Johnson of South Dakota and Jean Carnahan of Missouri.
"That's going to be a pretty hard position to defend," said Senate Minority Leader Trent Lott, R-Miss.
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The bill is H.R. 2143.
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On the Net:
Congress: http://thomas.loc.gov
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JUNE 06, 18:38 ET
Bush Admin. Opposes Democrats' Plan
By MELISSA B. ROBINSON
Associated Press Writer
WASHINGTON (AP) — The Bush administration told Congress on Thursday that adopting a Democratic proposal to stop U.S. companies from moving their headquarters overseas to avoid taxes could hurt the economy.
"Putting up a block in response to these transactions is something that's unlikely to work and likely to have harmful effects on the U.S. economy," Pamela Olson, the Treasury Department's acting chief of tax policy, told the tax-writing Ways and Means Committee.
"Companies will get around it," said Olson of the proposal by Democratic Reps. Jim Maloney of Connecticut and Richard Neal of Massachusetts. The measure would permanently remove the tax advantages of such relocations. She said that could be harmful if it results, for instance, in greater foreign ownership of U.S. companies.
Before lawmakers could thoroughly question Olson, the hearing degenerated into partisan name-calling over why Maloney was not allowed to testify.
Neal is a committee member, and Maloney is locked in one of the nation's most closely watched congressional races against a high- ranking committee Republican, Rep. Nancy Johnson of Connecticut. The lawmakers face each other in a redrawn district.
At one point, Rep. Pete Stark, D-Calif., accused Chairman Bill Thomas, R-Calif., of lacking "decency or courtesy" in denying Maloney's request.
"That remark does not need to have a response," retorted Thomas, who seemed exasperated by a stream of Democratic attacks and political maneuvers aimed at thwarting the hearing. He adjourned it shortly afterward.
Thomas said Maloney could submit written testimony, and that his request to testify orally was made after committee Democrats were told no lawmakers would be appearing as witnesses. Johnson played no role in Thomas' decision, her aides said.
The Neal-Maloney bill would require companies to continue paying U.S. taxes if they reincorporate in a foreign country and their stock remains substantially in the hands of former shareholders. Rep. Scott McInnis, R-Colo., another Ways and Means member, is pushing a similar approach.
The administration favors a temporary freeze on relocations to allow time to consider larger tax issues.
"A moratorium would be preferable to putting up a complete block," Olson said.
Johnson has proposed a moratorium on corporate relocations from Sept. 11, 2001, to Dec. 31, 2003, while lawmakers seek a long-term fix.
Thomas told reporters he favors a shorter moratorium of up to three months that Congress might be able to pass before the November elections.
Ingersoll-Rand Inc., Tyco International, Cooper Industries and The Stanley Works are among the high-profile firms that have reincorporated in Bermuda or are in the process of doing so. Stanley has estimated the move will save it $30 million a year in taxes.
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On The Net:
Ways and Means: http://waysandmeans.house.gov/
Stanley Works: http://www.stanleyworks.com/
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JUNE 07, 15:43 ET
Bush Seeks Eradication of Estate Tax
By SANDRA SOBIERAJ
Associated Press Writer
DES MOINES, Iowa (AP) — President Bush marked the anniversary of his tax-cut law on Friday and asked for help with the politically potent next phase of his tax agenda: making sure the estate tax "is forever buried."
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Bush cited improved national employment figures as proof the economy is strengthening since he signed the 10-year, $1.35 trillion tax package into law exactly one year ago. But more needs to be done, he said, especially for heartland farmers and ranchers.
"In order to make sure this economy is strong, we've got to make sure that the agricultural sector of our economy is strong," Bush said at the World Pork Expo.
"For the good of American agriculture, let's make sure that death tax is forever buried and forever done away with."
Fresh from unveiling plans for a massive restructuring of the federal counterterrorism bureaucracy, Bush breathed in smells of popcorn and pork sausage at the Iowa State Fairgrounds.
"It feels like I'm kind of getting closer to home, to be with people who make their living on the land," said the native Texan, a recreational rancher who, before politics, made his living in the businesses of oil and professional baseball.
After his speech, he put his arm around the Iowa Pork Queen, 19-year- old Dawn Kruger, and waved to the crowd. With his sleeves rolled up, he hit the picnic buffet. "OK," he said, "let's get eatin."'
Against stiff opposition from Democrats who control the Senate, Bush wants a permanent repeal of the estate tax, which he and other Republicans deride as the "death tax." The House voted 256-171 Thursday for permanent repeal, a popular stand among farmers in the electorally important Midwest and among the very wealthy who contribute to political campaigns.
Bush lost Iowa to Al Gore in 2000 by only a few thousand votes. In 2004, the state will hold the nation's first presidential nominating contest and, this year, could help the Republicans overturn the Democrats' one-vote majority in the Senate, with Rep. Greg Ganske trying to unseat Democratic Sen. Tom Harkin.
The tax-cut package Bush signed into law last year whittles back the estate tax until finally repealing it altogether — but for just one year — in 2010.
"Because of a quirk in the law, that repeal isn't permanent. It's hard for me to explain why they repealed it but didn't repeal it," Bush told visitors to the international livestock event.
In fact, White House and Republican negotiators bargained away a permanent estate-tax repeal during last year's debate in order to keep the tax package's price tag down and to avoid needing a 60-vote majority for passage in the Senate.
Despite Internal Revenue Service data showing fewer than 2 percent of estates actually pay the estate tax, farm lobbyists argue it threatens to wipe out family farming. Asset-rich but cash-poor farm families socked with the tax when a relative dies sometimes are forced to sell the family business to pay what they owe the government, lobbyists say.
Democrats complained that Bush's trip, which broke no new policy ground, was nothing more than a free campaign swing for Ganske who, along with three other Republicans in the Iowa congressional delegation, accompanied Bush from Washington aboard Air Force One.
"I don't know if they wanted a free ride or not, but they came," Bush cracked.
Outside the 4-H exhibition hall where he spoke, a knot of demonstrators greeted Bush's motorcade with signs that read "Where's Tom?" in protest of Harkin's exclusion from the official party accompanying Bush.
Harkin, attending on his own, said the White House told his staff he was purposefully not invited along on the official, taxpayer-funded trip — Bush's seventh to Iowa since becoming president.
"President Bush has always said he wants to be a unifier, so I'm somewhat surprised," Harkin told reporters.
Nearby, a series of pig races played off the day's political and tax- cutting themes.
Brother Elroy, a clown-imitating pig trainer, used a tax analogy to explain why the winning trophy — a cookie — was missing a bite: "I'm like the government," he shouted to about 100 spectators. "The pigs do all the work. I take 50 percent."
In the first 10-second race, a pig named George W. Bushhog narrowly edged out Al Boar in their turn around the sawdust-covered oval track. The presidential namesake still finished behind the race winner, Jesse "the Swine" Ventura, however.
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Tuesday April 16, 1:36 pm Eastern Time
Don't tell us how to tax, Bermuda tells U.S.
By Mairi Mallon
Reuters Business
NRSTA editor note: A dated story but one worthy of inclusion in this week's Tax News.
HAMILTON, Bermuda, April 16 (Reuters) - Responding to U.S. efforts to keep U.S. companies from reincorporating in Bermuda to cut taxes, Bermuda Premier Jennifer Smith said no country should tell another what to do about its taxes.
"We don't expect other countries to tell us how we should collect our tax, so I am not going to be in a position of commenting on how another country collects their tax," Tuesday's Royal Gazette newspaper quoted Smith as saying.
It was Smith's first public response to complaints by U.S. lawmakers about companies that move to the British colony to reduce their tax bills, a move some U.S. lawmakers characterized as choosing profits over patriotism.
Smith said international companies were drawn to Bermuda by its superior financial services and were not granted special concessions.
"We are not a tax haven. I think it is important to understand that Bermuda's tax system is over 100 years old and was designed to suit the needs of Bermudians," she told the newspaper in an interview.
"They (international companies) pay the same taxes that local businesses do, and in fact, because our taxes are based on consumption rather than company fees and licenses and other things, our customs duties are among the highest in the world, and they pay those, just as every one else does," Smith said.
U.S. Senate Finance Committee leaders said on Thursday that they would aggressively press for legislation that stops U.S. companies from moving their headquarters overseas.
"Our legislation ... is designed to put the brakes on the potential rush to move U.S. corporate headquarters to tax havens," said committee chairman Rep. Max Baucus, a Montana Democrat.
U.S. lawmakers have introduced two bills to the House of Representatives seeking to restrict the flow of companies offshore, singling out Bermuda, an Atlantic island 560 miles (900 km) east of North Carolina, as the tax haven of choice.
The bills aim to levy U.S. taxes on all income, including foreign revenues and sales, earned by corporations that reincorporate outside of the United States.
Baucus said he plans to bring the bill up for a vote soon and was "quite confident" it can be passed into law this year.
Companies argue that they must move offshore to stay competitive because the United States, unlike other countries, taxes worldwide income.
The debate has focused on Bermuda-based companies such as Tyco International Ltd., Global Crossing Ltd., and Ingersoll-Rand Co Ltd.
Shareholders at U.S. toolmaker Stanley Works and U.S. oil services company Weatherford International are expected to vote soon on proposed moves to Bermuda.
Leucadia National Corp., a U.S. holding company for insurance, banking and manufacturing units, said on Friday it also was looking to move to Bermuda to slash its tax bills.
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