Obama's re-election and a path to a tax code revamp

U.S. President Barack Obama and his family walk onstage during his election night victory rally in Chicago, November 6, 2012. (L-R) Daughters Malia, Sasha, First lady Michelle Obama and the President.

Credit: Reuters/Jason Reed

By Kim Dixon

WASHINGTON | Wed Nov 7, 2012 1:48am EST

WASHINGTON (Reuters) - Now that President Barack Obama has clinched a second term, will he embrace one of the most politically vexing tasks on his to-do list - streamlining the mind-numbing U.S. tax code?

Backers of a top-to-bottom overhaul hope so, with momentum building for such a feat, last accomplished under President Ronald Reagan in 1986. It will be Obama's choice, those in both parties agree, to make a bold proposal and use his bully pulpit to push it through.

"You need presidential leadership," said Michael Mundaca, who was Obama's assistant treasury secretary for tax before returning to Ernst & Young. "You need the power of the Treasury tax policy and White House economic team and the IRS (tax-collecting Internal Revenue Service) to do something this massive."

Obama, who defeated Republican Mitt Romney for re-election, is among those in both parties who say the tax system is overly complex and stifles growth.

Raising new revenue will be a major challenge of Obama's second term, with a deficit topping $1 trillion. Many say a tax code rewrite is a place to get it but the battle will be uphill, with interests from homeowners to union workers to insurance companies all fighting to keep their benefits.

Not to mention a Republican-controlled U.S. House of Representatives, home to the tax-writing Ways and Means Committee. Many Republicans dispute that new revenue is needed at all.

Besides the deficit push, congressional hearings by the dozens and circulation of reform blueprints have prompted some analysts to predict the odds are the best in decades for a major revamp in the next few years.

The president's critics argue that he has failed to take the lead, for example, by not endorsing the Simpson-Bowles deficit panel's recommendations, which included options for major changes.

Jared Bernstein, a former Obama economic adviser, points to Obama's budget proposals of recent years. Obama backed trimming tax deductions to a maximum of 28 percent of income for the wealthy and sought changes to the tax treatment of debt as one way to pay for a cut in the corporate tax rate.

"He actually has a fairly extensive paper trail on tax reform," Bernstein said before Tuesday's elections.

The tax code was last significantly scrubbed clean in 1986, with a significant push by Reagan in his second term. Reagan directed his Treasury Department to prepare a proposal but cleverly pursued it only after he was safely re-elected.

Skeptics and some Republicans caution that Obama will face the same predicament that has dogged him for the last two years: Republicans kept control of the U.S. House of Representatives and the Senate remains closely divided but controlled by Democrats, according to late projections.

Regardless, a 1986-like revamp will be an uphill climb, analysts agree.

(Editing by Howard Goller, Bill Trott and Bernard Orr)

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Harsher energy regulations coming in Obama's second term

n">(Reuters) - Energy companies likely will see more regulation in President Barack Obama's second term, with less access to federal lands and water even as the administration promotes energy independence.

With a pledge to cut oil imports by half by 2020, Obama during the campaign advocated what he called an "all of the above" approach to developing a range of domestic energy sources. He said, however, that he would roll back subsidies for oil companies and reduce the nation's reliance on oil by mandating production of more fuel-efficient vehicles.

"You are going to have less access to federal lands and tougher government agencies," said Dan Pickering, chief investment officer at TPH Asset Management in Houston.

Obama's energy strategy over the last four years has shifted away from focusing on climate change after a bill establishing a cap-and-trade system to curb carbon emissions died in the Senate in 2010 after a bitter partisan fight. The president's green policies also suffered a major setback when solar power company Solyndra collapsed last year after receiving a $535 million loan guarantee, unleashing a political firestorm.

Obama's team of energy advisers include Energy Secretary Steven Chu, a Nobel prize-winning scientist who specializes in alternative and renewable energy technologies but who regularly talks up the government's role in developing hydraulic fracturing technology. His top White House energy adviser is Heather Zichal, who has been an advocate for creating green jobs and tackling climate change by reducing dependence on oil.

Obama has pledged more support for development of renewable energy technologies like solar and wind, but he will need the support of Congress to extend or renew tax breaks that have underpinned the growth of those industries.

"Obama can love solar as much as he wants, but I don't know that a whole lot more is going to happen in terms of new, constructive policy," said Morningstar energy analyst Stephen Simko.

Perhaps most importantly, however, renewable energy faces major obstacles unrelated to policy, such as stiff competition from low-priced natural gas, a lack of infrastructure to connect large projects to the grid, and a global glut of solar panels that is putting their manufacturers out of business.

Here are more details on how companies in various energy sectors will fare under President Obama's second term:

HEAT TO RISE ON OIL AND GAS

Obama is expected to tighten rules and regulations governing energy exploration, actions that may add billions in costs for oil and gas companies.

ClearView Energy Partners analysts, in Washington, expect the president to "continue prosecuting energy policy through regulation and administrative action, with only the courts as a check on that agenda," according to a note sent to clients last week.

Tougher restrictions are expected for companies drilling on federal lands as well as more rules governing water management and methane emissions. Any new rules related to hydraulic fracturing may drive up costs for active drillers including Chesapeake Energy Corp and Exxon Mobil Corp.

Still, throughout the campaign and during the debates, Obama has touted the benefits of increasing production of cleaner burning natural gas, winning him praise from America's Natural Gas Alliance, an industry lobby group.

Obama has also pledged to eliminate more than $46 billion in subsidies for fossil fuel companies, a plan the industry has vigorously protested.

While the Obama Administration has put approval of TransCanada's Keystone XL pipeline on hold, eventual approval is expected, an action that will increase the flow of cheaper crude oil from Canada to refineries on the Gulf Coast at Port Arthur, Texas.

Companies with refineries in Port Arthur or in nearby Beaumont include Valero Energy Corp, Shell, France's Total and Exxon Mobil Corp.

"WAR ON COAL" - PART II

Obama is deemed by opponents to have waged a "war on coal" over the past four years, particularly through stricter Environmental Protection Agency regulation.

Hal Quinn, president of the National Mining Association, criticized Obama for not living up to a 2008 promise to develop clean coal technology. "Current administration policies virtually preclude the construction of new, cleaner coal-based plants that are the necessary platform for the technology the president advocated," Quinn said. "These same policies have skewed the market against coal."

The U.S. Chamber of Commerce pointed to estimates of up to 33 gigawatts of coal-fired electricity generation due to be retired - about 3 percent of total U.S. power capacity. While tougher regulation has played a part, cheap natural gas as an alternative power source is also driving that change.

CHEMICALS BRACE FOR HIT

Obama is likely to implement several long-delayed, controversial emissions regulations for industrial boilers that are commonly used by chemical producers.

The centerpiece provision, known as Boiler MACT (Maximum Achievable Control Technology), had been first proposed in 2004 but was effectively shot down by courts before being revived by the Environmental Protection Agency in 2011.

It has been winding its way through courts again, and the EPA is due to issue new rules by December.

Obama's victory could embolden EPA Administrator Lisa Jackson to further tighten Boiler MACT regulations next month on limits for dioxin, mercury and carbon monoxide emissions. It is not clear if Jackson will stay at the agency in Obama's second term.

"While we don't agree with some of the provisions (of Boiler MACT), we think that it will be pushed through more readily than if Romney had won," said Lawrence Sloan, president of the Society of Chemical Manufacturers and Affiliates, an industry trade group.

(Reporting by Anna Driver, Ernest Scheyder, Braden Reddall and Nichola Groom; Writing by Nichola Groom; Editing by Patricia Kranz and Richard Chang)

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Obama's allure fades among venture capitalists

U.S. President Barack Obama pauses as he delivers a statement on the Hurricane Sandy situation from the press briefing room of the White House in Washington, October 29, 2012.

Credit: Reuters/Jason Reed

By Sarah McBride

SAN FRANCISCO | Mon Oct 29, 2012 3:50pm EDT

SAN FRANCISCO (Reuters) - Venture capitalists are proving a less reliable source of cash for President Barack Obama during this election, according to fundraising data, even though he has raised a record amount of cash overall.

Through September 30, Obama collected $552,758 from these deep-pocketed investors who provide startup money to firms, less than half his total through that time in 2008.

Romney has raised $860,827 from venture capitalists, an indication of his support amongst the investment community in the neck-and-neck race, according to data from the Center for Responsive Politics.

Most of the venture capitalists who gave to Obama last election but not this year did not comment for this article, making it hard to know their exact reasoning. Generally speaking, many venture capitalists say they are disappointed with Obama's support of technology.

And this time, Obama is up against a candidate with years running private-equity firm Bain Capital.

"He completely understands what it's like to be in business, which makes him very attractive to people like me," said Marc Andreessen, co-founder of venture-capital firm Andreessen Horowitz, on CNBC earlier this year, to explain his switch in allegiance to Romney.

Andreessen, who backed Obama four years ago, has given $5,000 each to Romney and his vice presidential nominee, Paul Ryan; $100,000 to the pro-Romney group Restore Our Future; and tens of thousands to other Republican candidates and groups. Records show no donations to Obama. A spokeswoman for Andreessen declined to comment.

Bob Nelsen, co-founder of Arch Venture Partners in Seattle, said he switched from supporting Obama financially in 2008 to supporting Romney in 2012 because his primary loyalty is not to any one politician. Instead, it is to the technology economy, which he wishes the administration had supported more.

"The first time around there was a lot of emotion and hope, and now it's a lot about rationality and deeds," he said. "Show me the deeds, show me the leadership." He has given a total of $5000 to Romney.

Though Romney is handily beating Obama in venture capitalist fundraising, the two candidates are running a close race in terms of overall cash gathered.

Obama's campaign and allied Democratic Party organizations have raised about $988 million over the course of the campaign. The Romney campaign and related Republican party organizations have raised $919.4 million.

Raising Romney's appeal with venture capitalists may be his support for capping the U.S. capital-gains tax on investment income at 15 percent. Obama wants to raise it for wealthier taxpayers.

Obama also wants to eliminate a tax break many venture capitalists benefit from known as the carried-interest tax break. That break affects taxes on their share of the profits from their investments, known as carried interest. Venture capitalists pay the capital-gains rate on carried interest instead of income taxes, which would typically be higher.

Individually, several prominent venture capitalists who gave to the Obama campaign in the 2008 cycle seem to have taken a pass this time, with their names not appearing on lists of donors made available by the Federal Elections Commission.

Names in that category include Accel Partners' Jim Breyer, a noted early Facebook backer; Kleiner Perkins Caufield & Byers' Ted Schlein, who backed Jive Software; and the Foundry Group's Brad Feld, co-founder of start-up program TechStars. Bryer, Feld and Schlein did not respond to emailed requests for comment.

Last time, Obama's VC donations totalled $1.2 million while challenger John McCain's totalled $574,250. Comparisons with that race are not clear cut because McCain accepted public financing. That limits the types of contributions a candidate can take.

The industry's money moves may not all come down to the issues, said Mark Heesen, head of the National Venture Capital Association. He believes that by their nature, venture capitalists constantly think about disrupting the status quo.

"Your mindset is to look at the challenger as opposed to the incumbent," he said. "That is ingrained in a venture capitalist."

(Reporting By Sarah McBride. Editing by Karey Wutkowski, Jonathan Weber and Andrew Hay)

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