Some Republicans are floating the possibility of putting forward a counterproposal that addresses more traditional infrastructure needs and removes the corporate tax increases. Senator Shelley Moore Capito of West Virginia suggested that such a proposal could be between $600 billion and $800 billion.
“I think the best way for us to do this is hit the sweet spot of where we agree, and I think we can agree on a lot of the measures moving forward,” Ms. Capito said on CNBC on Wednesday. She suggested that Democrats save proposals with less bipartisan support for the fast-track budget reconciliation process, which would allow the legislation to pass with a simple majority.
“If there are other things they want to do — they being the Democrats or the president — want to do in a more dramatic fashion that can’t attract at least 10 Republicans, that’s, I think, their reconciliation vehicle,” Ms. Capito added.
But several liberals have signaled a reluctance to whittle down Mr. Biden’s plan, with Senator Bernie Sanders of Vermont, the chairman of the Senate Budget Committee, telling reporters that the tentative price range “is nowhere near what we need.”
The Biden administration is rolling out its infrastructure plans from a position of relative strength. Voters generally give Mr. Biden high marks for his performance in office, at least in comparison with Mr. Trump’s consistently low approval ratings, and Americans are becoming more optimistic about the economy in particular. Measures of consumer sentiment have been rising in recent months; SurveyMonkey’s consumer confidence index, which is based on five questions about people’s personal finances and economic outlook, rose in April to its highest level in six months.
But views of the economy remain starkly divided along partisan lines. Confidence among Democrats jumped when Mr. Biden was elected and has continued to rise since. Republicans, who had a rosier view of the economy than Democrats throughout Mr. Trump’s time in office, have turned pessimistic since the election.
About the survey: The data in this article came from an online survey of 2,640 adults conducted by the polling firm SurveyMonkey from April 5 to 11. The company selected respondents at random from the nearly three million people who take surveys on its platform each day. Responses were weighted to match the demographic profile of the population of the United States. The survey has a modeled error estimate (similar to a margin of error in a standard telephone poll) of plus or minus three percentage points, so differences of less than that amount are statistically insignificant.
The United States is losing approximately $1 trillion in unpaid taxes every year, Charles Rettig, the Internal Revenue Service commissioner, estimated on Tuesday, arguing that the agency lacks the resources to catch tax cheats.
The so-called tax gap has surged in the last decade. The last official estimate from the I.R.S. was that an average of $441 billion per year went unpaid from 2011 to 2013. Most of the unpaid taxes are the result of evasion by the wealthy and large corporations, Mr. Rettig said.
“We do get outgunned,” Mr. Rettig said during a Senate Finance Committee hearing on the upcoming tax season.
Senator Ron Wyden of Oregon, the Democratic chairman of the committee, called the $1 trillion tax gap a “jaw-dropping figure.”
spending proposal that the Biden administration released last week asked for a 10.4 percent increase above current funding levels for the tax collection agency, to $13.2 billion. The additional money would go toward increased oversight of tax returns of high-income individuals and companies and to improve customer service at the I.R.S.
The Biden administration has unveiled its corporate tax overhaul, intended to raise $2.5 trillion over 15 years to pay for an infrastructure program. “Debate is welcome. Compromise is inevitable. Changes are certain,” President Biden said, but he stressed that “inaction is not an option.”
“America’s corporate tax system has long been broken,” the Treasury secretary Janet Yellen wrote in a Wall Street Journal op-ed coinciding with the plan’s release. In addition to raising the headline corporate tax rate, the administration’s proposal takes aim at companies that shift profits abroad, especially to low-tax havens like Bermuda or Ireland. Some of the changes could be enacted by regulation, but things like raising the corporate tax rate will need the approval of Congress.
What’s in the plan? Here are the main provisions:
Raise the corporate tax rate to 28 percent. The increase from 21 percent would put the U.S. more in line with other big countries and, the administration says, lift corporate tax receipts that have fallen to their lowest levels as a share of the economy since World War II.
global minimum tax rate by midyear, but previous efforts have faltered when it came to nailing down the details.
Punish companies that headquarter in low-tax countries. A provision in the plan would target “inversions,” where American companies merge with a foreign entity in order to move headquarters to a low-tax country.
Replace fossil-fuel tax subsidies with clean-energy incentives. Previous attempts to eliminate subsidies on oil and gas met with stiff industry and congressional opposition.
Beef up the I.R.S. The agency’s enforcement budget has fallen by 25 percent over the past decade, and the proposal would bolster the budget for experts in complex corporate litigation.
What effect would it have? A Wharton School budget model concluded that the corporate tax rate increase would “not meaningfully affect the normal return on investment,” but when combined with the proposed minimum tax on book income, business investment would fall somewhat. All told, by 2050 the tax provisions would reduce government debt by more than 11 percent from the current baseline, but also reduce G.D.P. by 0.5 percent over that period.
“I’m actually OK at 28 percent.”
“I think there could be bipartisan interest in about half of what the president proposed on the spending side, but of course the corporate tax increases would be a non-starter,” Rohit Kumar, the head of PwC’s Washington tax policy group and a former aide to Senator Mitch McConnell, told DealBook. He’s not convinced there’s even enough support among Democrats for tax increases.
For more on this, see our sister newsletter, The Morning: “Corporate Taxes Are Wealth Taxes”
HERE’S WHAT’S HAPPENING
The counting of votes in the Amazon union drive begins soon. The union seeking to represent workers at a warehouse in Alabama said that 3,215 ballots were cast, representing 55 percent of eligible workers. The hand count of the ballots will begin either later today or tomorrow.
Britain curbs the use of AstraZeneca’s vaccine for people under 30. The decision came as regulators increasingly suspect a link between the shot and rare blood clots. While Britain has enough vaccines from other makers to avoid a slowdown in its inoculation efforts, the concerns may dent vaccination efforts in developing countries.
Senator Mitch McConnell walks back his comments on companies and politics, sort of. The minority leader conceded that his criticism of companies for speaking out against voting restrictions was not spoken “artfully.” (Democrats noted that Republicans have benefited from corporate donations.) “They are certainly entitled to be involved in politics,” Mr. McConnell said.
Tencent’s biggest shareholder sells a slice of its holdings for $14.7 billion. Prosus, the Europe-based tech investor, sold 2 percent of its stake in the Chinese tech giant in the biggest-ever block trade (breaking its own record). Prosus still owns a 29 percent stake in the company.
hadn’t told top executives or his board of the arrangement. He is accused of having the gun-rights group file for Chapter 11 to stymie an investigation by New York State’s attorney general.
Acres of empty desks
Many parts of the economy have held up during the pandemic — but corporate real estate isn’t one of them. Landlords and cities are worried that remote working will irreversibly sap demand for office space, The Times’s Peter Eavis and Matthew Haag report.
The numbers are grim for landlords. The national office vacancy rate in city centers has hit 16.4 percent, according to Cushman & Wakefield, a decade-long high. In Manhattan alone, over 17 percent of all office space is available, the most in over 30 years. And rents on existing space could also face pressure from new buildings coming online, representing 124 million square feet.
Some are staying hopeful. Landlords like Boston Properties and SL Green haven’t suffered big financial losses from the pandemic, thanks to many tenants being locked into long leases. They’re also betting many companies want their workers to meet in person to better collaborate and train younger employees.
The final damage won’t be known for some time. Companies are still trying to figure out their real estate needs, based on their work policies: While Amazon expects a return to an “office-centric culture,” JPMorgan Chase’s Jamie Dimon said that the bank may need only 60 seats for every 100 employees after the pandemic.
“We are just going to be bleeding lower for the next three to four years to find out what the new level of tenant demand is,” Jonathan Litt, the chief investment officer of Land & Buildings, told The Times.
“Even though I’m sort of a pro-crypto, pro-Bitcoin maximalist person, I do wonder whether at this point Bitcoin should also be thought in part of as a Chinese financial weapon against the U.S.”
— Peter Thiel, the tech investor, on how cryptocurrency threatens the U.S. dollar. “China wants to do things to weaken it, so China’s long Bitcoin,” he added.
Florida and Texas banned them. Airlines, universities, event venues and other businesses are also testing various methods of vaccine verification. The starkly different approaches reflect a wider national and global debate on proof of health in the pandemic era.
“There are a lot of ways it could be done badly,” Jay Stanley of the American Civil Liberties Union told DealBook, but he suggested a “narrow path” to a certification system that could work. The ideal system would be paper-based with a digital supplement, Mr. Stanley argues, so that people who lack access to technology aren’t disadvantaged. Encrypted data would be stored on a decentralized network, protected with a public key for vaccine providers and private keys for users to ensure privacy. Fairness also demands a standardized approach, rather than the current variety of systems, which could result in “a mess for civil liberties, equity and privacy,” he said.
The Biden administration has said it won’t mandate vaccine passports, a point it reiterated this week, but it is working on standards the private sector can adopt. New York partnered with IBM on the state’s opt-in Excelsior Pass, which allows access to restricted activities and venues.
The certificates can raise a slew of social and legal issues, depending on who is asking for proof of vaccination and why, according to the Stanford law professor David Studdert. Government mandates trigger more concerns than opt-in programs, he noted, and companies will have different considerations if they seek certification from customers or workers. Given all the variations, he said, “within reason” the market should decide what works, and officials should avoid both mandates and bans: “Different communities and employers have a different tolerance for risk.”
More on vaccine passports:
THE SPEED READ
A top S.E.C. official warned of “significant and yet undiscovered issues” with SPACs, the latest words of caution from the regulator about blank-check funds. (WSJ)
Twitter is said to have held talks to buy Clubhouse for $4 billion, though negotiations aren’t currently active. (Bloomberg)
Shares in Deliveroo rose after retail investors were allowed to start trading in the food delivery service. (CNBC)
Politics and policy
China is offering tax breaks and other perks to financiers in Hong Kong to keep them from leaving the territory. (NYT)
A federal official warned last June that Emergent BioSolutions, the company behind the Johnson & Johnson vaccine mix-up, lacked trained staff and had problems with quality control. (NYT)
Uber and Lyft are “throwing money” at drivers to bring them back to work. (FT)
Within weeks, Apple will roll out new privacy notifications for apps, which companies like Facebook have argued would harm their businesses. (Reuters)
“No publicly traded company is a family. I fell for the fantasy that it could be.” (NYT Op-Ed)
Best of the rest
How the pandemic pummeled the world’s most famous shopping streets. (Quartz)
Former employees of Marcus, the consumer lender that is key to Goldman Sachs’s future, reportedly say they were burned out by an ambitious product launch schedule. (Insider)
All about muons, the subatomic particles that seem to disobey the known laws of physics. (NYT)
We’d like your feedback! Please email thoughts and suggestions to firstname.lastname@example.org.
The sharp rise in bond yields is forcing traders to consider that they may be holding two irreconcilable ideas in their heads.
One is that the Federal Reserve has no real control over bond market interest rates. The other is that the Fed can keep the stock market aloft as long as it tries to control interest rates.
The resilience of share prices — the S&P 500 rose 5.8 percent in the first quarter — suggests that those two ideas can coexist. But if yields continue to rise, the impact on companies, consumers and homeowners and the appeal that fatter bond yields may have to investors could produce a reckoning for stocks.
“The bond market is at an inflection point that eventually is going to be recognized by the stock market,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. “Over the last 30 years, the bond market has only gone one way, but a change is occurring now, and it’s likely to be an abrupt one.”
CRB index, which measures a basket of commodities, rose 52 percent in the 12 months through March. Home prices rose 6 percent last year, according to the Federal Reserve Bank of St. Louis.
$1.9 trillion bill last month to help the economy after the ravages wrought by the pandemic, President Biden proposed spending $2 trillion more on infrastructure projects, albeit over several years.
That $4 trillion, give or take, would be “going into an economy saturated with $6 trillion of stimulus spending from the Trump administration,” Mr. Sri-Kumar said. So much spending is likely to push up inflation and bond yields, he said.
Michael Hartnett, chief investment strategist at Bank of America Global Research, does not expect such concerns to diminish soon.
Because of such factors as “new central bank mandates, excess fiscal stimulus,” as well as “less globalization, fading deflation from disruption, demographics, debt, we believe inflation rises in the 2020s and the 40-year bull market in bonds is over,” Mr. Hartnett said in a report.
Commodities and other hard assets should outperform in the long term, in his view, along with shares of smaller companies, value stocks and foreign stocks. The dollar, shares of big companies and bonds should do worse.
David Giroux, a portfolio manager and head of investment strategy at T. Rowe Price, said he is worried that the bill will come due for much of the government spending.
“There’s a high likelihood we will have higher corporate taxes next year,” Mr. Giroux said. “That will be a headwind for corporate earnings.”
That persuades him to avoid shares of economically sensitive companies for which “a lot of really good news is already priced in.”
He prefers “stocks with really good business models that have been left behind,” including technology giants that are off their highs, such as Amazon and Google, and companies like utilities. Other favorites include regional banks such as PNC and Huntington Bancshares.
Ms. Bitel at William Blair foresees long-term higher returns by big growth stocks. But she throws in an immense caveat: Because rising interest rates tend to force down valuations, especially on the most expensive segments of the market, there could be a sharp decline before the erstwhile Wall Street darlings excel again.
“Retail investors will be able to buy their favorite growth stocks at a 40 percent discount, but that leadership will resume,” she said, emphasizing that the 40 percent was a ballpark figure.
Ms. Bitel also suggested holding foreign stocks, in particular shares of Chinese health care companies and Japanese software companies.
Mr. Paolini recommends banks, energy and real estate, and said he is avoiding carmakers, industrial companies and home builders.
Considering the investment landscape more broadly, he said, “The outlook for the next one to three years is quite good.” Then he seemed to try to talk himself out of that belief.
“The idea that you can simply print money and everything is fine isn’t sustainable,” Mr. Paolini said. “At some point, we will realize too much has been done and the market is too high, and the situation will change quite fast. I don’t know what that level is or how far away we are from it.”
Republican senators, singed by their experience on the pandemic aid bill, responded to Mr. Biden’s gestures to bipartisanship by issuing a chilly statement saying that the last time he made a public plea to work together, “the administration roundly dismissed our effort as wholly inadequate in order to justify its go-it-alone strategy.”
In an appearance on “Fox News Sunday,” Senator Roy Blunt, Republican of Missouri, pushed the administration to negotiate an infrastructure measure that would represent about 30 percent of the $2.25 trillion being proposed, before turning to budget reconciliation for any additional spending increases.
“My advice to the White House has been, take that bipartisan win, do this in a more traditional infrastructure way and then if you want to force the rest of the package on Republicans in the Congress and the country, you can certainly do that,” Mr. Blunt said.
Importantly, Republicans have no interest in the corporate tax increase that would essentially undo their most significant legislative achievement of the Trump era. Neither do business groups, which have helped broker some bipartisan compromises on economic issues in the past but have lost some power in recent years as populist impulses have swept both parties.
Senator Mitch McConnell, the Kentucky Republican and minority leader, called the tax proposal “an effort to rewrite the 2017 tax bill,” which itself passed via budget reconciliation with no Democratic votes.
The Trump tax law “in my view was principally responsible for the fact that in February 2020 we had the best economy of 50 years,” Mr. McConnell said. “But they are going to tear that down.”
Still, business lobbyists and some lawmakers remain hopeful that Mr. Manchin’s appeal could prod Mr. Biden and congressional leaders toward a set of mini-compromises on infrastructure. Such deals could including spending big on research and development for emerging industries, like advanced batteries, in the supply chain bill, which carries bipartisan sponsorship in the Senate. They could also include spending a few hundred billion dollars on highways and other surface transportation projects. That could satisfy at least some of Mr. Manchin’s quest for bipartisanship and give both parties the ability to claim victory.
The main cause of the radical decline in tax rates for very wealthy Americans over the past 75 years isn’t the one that many people would guess. It’s not about lower income taxes (though they certainly play a role), and it’s not about lower estate taxes (though they matter too).
The biggest tax boon for the wealthy has been the sharp fall in the corporate tax rate.
In the 1950s, ’60s and ’70s, many corporations paid about half of their profits to the federal government. The money helped pay for the U.S. military and for investments in roads, bridges, schools, scientific research and more. “A dirty little secret,” Richard Clarida, an economist who’s now the vice chairman of the Federal Reserve, once said, “is that the corporate income tax used to raise a fair amount of revenue.”
paid zero federal income taxes last year, according to the Institute on Taxation and Economic Policy. Among them: Archer-Daniels-Midland, Booz Allen Hamilton, FedEx, HP, Interpublic, Nike and Xcel Energy.
Alan Rappeport and Jim Tankersley of The Times write.
The justification for the tax cuts has often been that the economy as a whole will benefit — that lower corporate taxes would lead to company expansions, more jobs and higher incomes. But it hasn’t worked out that way. Instead, economic growth has been mediocre since the 1970s. And incomes have grown even more slowly than the economy for every group except the wealthy.
Gabriel Zucman, an economist and tax specialist at the University of California, Berkeley, told me. “The main reason why the U.S. tax system was so progressive before the 1980s is because of heavy taxes on corporate profits.”
President Biden is now trying to reverse some (but by no means all) of the decline in corporate taxes. His plan would raise the corporate tax rate, punish companies that move profits overseas and introduce a rule meant to prevent companies from paying zero taxes, among other things. The money would help pay for his infrastructure plan. “It’s honest, it’s fair, it’s fiscally responsible, and it pays for what we need,” Biden said at the White House yesterday.
Experts and critics are already raising legitimate questions about his plan, and there will clearly be a debate about it. Biden said he was open to compromises and other ideas.
But one part of the criticism is pretty clearly inconsistent with the facts: The long-term decline in corporate taxes doesn’t seem to have provided much of a benefit for most American families.
For more: If you haven’t yet listened to yesterday’s episode of “The Daily” — in which Jesse Drucker explains how Bristol Myers Squibb has avoided taxes — I recommend it.
THE LATEST NEWS
She died at 88.
ARTS AND IDEAS
swelling anti-Asian violence and harassment in the U.S., nearly 30 Asian and Asian-American photographers shared what love looks like in their lives.
some time with the photo essay here.
PLAY, WATCH, EAT
What to Cook
sheet-pan jerk salmon cooks quickly. For more dinnertime inspiration, see the 17 best recipes the NYT cooking team made last month.
In the Garden
Make friends with fungi, both the kind you plant and those that seem to pop up on their own.
What to Read
“First Person Singular,” Haruki Murakami’s new story collection, allows the author’s “own voice — or what sounds like his own voice, wonderfully translated by Philip Gabriel — to enter the narratives,” David Means writes in a review.
The late-night hosts talked about Representative Matt Gaetz.
Now Time to Play
predicted that the new name was “not likely to be forgotten.”
You can see today’s print front page here.
Today’s episode of “The Daily” is about the Chauvin trial. On “Sway,” Diana Trujillo discusses the future of space travel.
Lalena Fisher, Ian Prasad Philbrick, Tom Wright-Piersanti and Sanam Yar contributed to The Morning. You can reach the team at email@example.com.
Sign up here to get this newsletter in your inbox.
WASHINGTON — The Biden administration unveiled a tax plan on Wednesdaythat would increase the corporate tax rate in the U.S. and limit the ability of American firms to avoid taxes by shifting profits overseas.
Much of the plan is aimed at reversing a deep reduction in corporate taxes under President Donald J. Trump. A 2017 tax bill slashed the corporate rate to 21 percent from 35 percent and enacted a series of other provisions that the Biden administration says have encouraged firms to shift profits to lower-tax jurisdictions, like Ireland.
Some of the provisions in President Biden’s plan can be enacted by the Treasury Department, but many will require the approval of Congress. Already, Republicans have panned the proposals as putting the U.S. at a disadvantage, while some moderate Democrats have indicated they may also want to see some adjustments, particularly to the proposed 28 percent corporate tax rate.
Administration officials estimate the proposals will raise a total of $2.5 trillion in new tax revenue over a 15 year span. Analysts at the University of Pennsylvania’s Penn Wharton Budget Model put the estimate even higher, estimating a 10-year increase of $2.1 trillion, with about half the money coming from the plan’s various changes to the taxation of multinational corporations.
Organization for Economic Cooperation and Development.
The administration sees raising the rate as a way to increase corporate tax receipts, which have plunged to match their lowest levels as a share of the economy since World War II.
Ensure big firms pay at least 15 percent in taxes
Many large companies pay far less than the current tax rate of 21 percent — and sometimes nothing. Tax code provisions allow firms to reduce their liability through deductions, exemptions, offshoring and other mechanisms.
The Biden plan seeks to put an end to big companies incurring zero federal tax liability and paying no or negative taxes to the U.S. government.
the so-called global intangible low-taxed income (or GILTI) tax to 21 percent, which would narrow the gap between what companies pay on overseas profits and what they pay on earned income in the U.S.
And it would calculate the GILTI tax on a per-country basis, which would have the effect of subjecting more income earned overseas to the tax than under the current system.
Punish U.S. companies that headquarter in low-tax countries
A provision in the plan known as SHIELD (Stopping Harmful Inversions and Ending Low-tax Developments) is an attempt to discourage American companies from moving their headquarters abroad for tax purposes, particularly through the practice known as “inversions,” where companies from different countries merge, creating a new foreign firm.
Under current law, companies with headquarters in Ireland can “strip” some of the profits earned by subsidiaries in the United States and send them back to the Ireland company as payment for things like the use of intellectual property, then deduct those payments from their American income taxes. The SHIELD plan would disallow those deductions for companies based in low-tax countries.
Push for a global agreement to end profit shifting
The Biden administration wants other countries to raise their corporate tax rates, too.
The tax plan emphasizes that the Treasury Department will continue to push for global coordination on an international tax rate that would apply to multinational corporations regardless of where they locate their headquarters. Such a global tax could help prevent the type of “race to the bottom” that has been underway, Treasury Secretary Janet Yellen has said, referring to countries trying to outdo one another by lowering tax rates in order to attract business.
Republican critics of the Biden tax plan have argued that the administration’s focus on a global minimum tax is evidence that it realizes that raising the U.S. corporate tax rate unilaterally would make American businesses less competitive around the world.
Replace fossil fuel tax subsidies with clean-energy incentives
The president’s plan would strip away longstanding subsidies for oil, gas and other fossil fuels and replace them with incentives for clean energy. The provisions are part of Mr. Biden’s efforts to transition the U.S. to “100 percent carbon pollution-free electricity” by 2035.
The plan includes a tax incentive for long-distance transmission lines, would expand incentives for electricity storage projects and would extend other existing clean-energy tax credits.
A Treasury Department report estimated that eliminating subsidies for fossil fuel companies would increase government tax receipts by over $35 billion in the coming decade.
“The main impact would be on oil and gas company profits,” the report said. “Research suggests little impact on gasoline or energy prices for U.S. consumers and little impact on our energy security.”
Doing away with fossil fuel subsidies has been tried before, with little success given both industry and congressional opposition.
Beef up the Internal Revenue Service
The Internal Revenue Service has struggled with budget cuts and slim resources for years. The Biden administration believes better funding for the tax collection agency is an investment that will more than pay for itself. The plan released on Wednesday includes proposals to bolster the I.R.S. budget so it can hire experts to pursue large corporations and ensure they are paying what they owe.
The Treasury Department, which oversees the I.R.S., noted in its report that the agency’s enforcement budget has fallen by 25 percent over the last decade and that it is poorly equipped to audit complex corporate filings. The agency is also unable to afford engaging in or sustaining multiyear litigation over complex tax disputes, Treasury said.
As a result of those constraints, the I.R.S. tends to focus on smaller targets while big companies and the wealthiest taxpayers are able to find ways to reduce their tax bills.
The Biden administration unveiled its plan to overhaul the corporate tax code on Wednesday, offering an array of proposals that would require large companies to pay higher taxes to help fund the White House’s economic agenda.
The plan, if enacted, would raise $2.5 trillion in revenue over 15 years. It would do so by ushering in major changes for American companies, which have long embraced quirks in the tax code that allowed them to lower or eliminate their tax liability, often by shifting profits overseas. The plan also includes efforts to help combat climate change, proposing to replace fossil fuel subsidies with tax incentives that promote clean energy production.
Some corporations have expressed a willingness to pay more in taxes, but the overall scope of the proposal is likely to draw backlash from the business community, which has benefited for years from loopholes in the tax code and a relaxed approach to enforcement.
Treasury Secretary Janet L. Yellen said during a briefing with reporters on Wednesday that the plan would end a global “race to the bottom” of corporate taxation that she said has been destructive for the American economy and its workers.
global minimum tax to 21 percent and toughening it, to force companies to pay the tax on a wider span of income across countries.
That, in particular, has raised concerns in the business community, with Joshua Bolten, chief executive of the Business Roundtable, saying in a statement this week that it “threatens to subject the U.S. to a major competitive disadvantage.”
The plan would also repeal provisions put in place during the Trump administration that the Biden administration says have failed to curb profit shifting and corporate inversions, which involve an American company merging with a foreign firm and becoming its subsidiary, effectively moving its headquarters abroad for tax purposes. It would replace them with tougher anti-inversion rules and stronger penalties for so-called profit stripping.
The plan is not entirely focused on the international side of the corporate tax code. It tries to crack down on large, profitable companies that pay little or no income taxes yet signal large profits to companies with their “book value.” To cut down on that disparity, companies would have to pay a minimum tax of 15 percent on book income, which businesses report to investors and which are often used to judge shareholder and executive payouts.
One big beneficiary of the plan would be the Internal Revenue Service, which has seen its budget starved in recent years. The Biden administration’s proposal would beef up the tax collection agency’s budget so that it can step up enforcement and tax collection efforts.
The annual letter to shareholders by JPMorgan Chase’s chief Jamie Dimon was just published. The widely read letter is not just an overview of the bank’s business but also covers Mr. Dimon’s thoughts on everything from leadership lessons to public policy prescriptions.
“The U.S. economy will likely boom.” A combination of excess savings, deficit spending, a potential infrastructure bill, vaccinations and “euphoria around the end of the pandemic,” Mr. Dimon wrote, may create a boom that “could easily run into 2023.” That could justify high equity valuations, but not the price of U.S. debt, given the “huge supply” soon to hit the market. There is a chance that a rise in inflation would be “more than temporary,” he wrote, forcing the Fed to raise interest rates aggressively. “Rapidly raising rates to offset an overheating economy is a typical cause of a recession,” he wrote, but he hopes for “the Goldilocks scenario” of fast growth, gently increasing inflation and a measured rise in interest rates.
“Banks are playing an increasingly smaller role in the financial system.” Mr. Dimon cited competition from an already large shadow banking system and fintech companies, as well as “Amazon, Apple, Facebook, Google and now Walmart.” He argued those nonbank competitors should be more strictly regulated; their growth has “partially been made possible” by avoiding banking rules, he wrote. And when it comes to tougher regulation of big banks, he wrote, “the cost to the economy of having fail-safe banks may not be worth it.”
“China’s leaders believe that America is in decline.” While the U.S. has faced tough times before, today “the Chinese see an America that is losing ground in technology, infrastructure and education — a nation torn and crippled by politics, as well as racial and income inequality — and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals,” he wrote. “Unfortunately, recently, there is a lot of truth to this.”
a leveraged buyout offer from the private equity firm CVC Capital, sending its shares to a four-year high. Toshiba has had a series of scandals, and faces pressure from activist investors.
raising the corporate rate to help pay for President Biden’s infrastructure plans — though he didn’t mention the White House’s proposed rate, 28 percent. Other corporate chiefs are privately criticizing the potential tax rise.
The company behind the Johnson & Johnson vaccine mix-up has a history of errors. Emergent BioSolutions, which the U.S. relied on to produce doses by J.&J. and AstraZeneca, had a made manufacturing errors before. Experts worry this may leave some Americans more wary of getting vaccinated, even as Mr. Biden has moved up the eligibility deadline for U.S. inoculations.
An electric aircraft maker sues a rival for intellectual property theft. Wisk, which is backed by Boeing and the Google founder Larry Page, said that former employees downloaded confidential information before joining Archer, a competitor. Archer, which is going public by merging with a SPAC run by Moelis & Company and which counts United Airlines as an investor, denied wrongdoing and said it was cooperating with a government investigation.
A blistering start for venture capital in 2021. Start-ups set a fund-raising quarterly record in the first three months of the year, raising more than $62 billion, according to the MoneyTree report from PwC and CB Insights. That’s more than twice the total a year earlier and represents nearly half of what start-ups raised in all of 2020.
Why is the Amazon union vote taking so long?
Voting in the union election at an Amazon warehouse in Bessemer, Ala., ended on March 29, and counting began the next day, but the outcome is still unknown. What’s going on? It’s less about the number of ballots than how they’re counted.
The stakes are high, for both Amazon and the labor movement. Progressive leaders like Bernie Sanders have argued a victory for the union, the first at an Amazon facility in the U.S., could inspire workers elsewhere to unionize. And Amazon is facing increased scrutiny for its market power and labor practices.
a painstaking process:
Once Amazon and the union have gone back and forth over disputed voters, the N.L.R.B. counts the uncontested ballots anonymously and by hand, on a video conference open to reporters. This could start today.
“Economic fortunes within countries and across countries are diverging dangerously.”
— Kristalina Georgieva, the managing director of the I.M.F., on how the uneven rollout of vaccines poses a threat to the global economic recovery.
Credit Suisse’s expensive mistakes
After the 2008 financial crisis, Credit Suisse emerged battered by high-risk bets and promised to do better. A series of recent scandals suggests it hasn’t, The Times’s Jack Ewing writes.
A recap of the Swiss bank’s troubles over the past year or so:
A spying scandal that led to the ouster of Tidjane Thiam as C.E.O.
Ties to Greensill Capital, the SoftBank-backed lender that has filed for insolvency and will lead to losses at the Swiss bank.
Its involvement with Archegos, whose hugely leveraged stock bets went south, saddling the bank with a big hit.
30-day comment period on to-be-drafted regulations that would make it harder to obscure who controls a company. Among the details to be worked out are what entities should report and when; how to collect, protect and update information for a database; and the criteria for sharing with law enforcement.
“We could not be more excited,” Kenneth Blanco, the director of the Treasury’s Financial Criminal Enforcement Network (FinCEN), told bankers recently. The U.S. has been under pressure to address its vulnerability to money laundering and financial crimes:
In 2016, the international Financial Action Task Force gave the country a failing grade on transparency of company ownership.
In 2018, banks and financial institutions began having to collect that information from clients to help law enforcement identify individuals.
In January, Congress passed the Corporate Transparency Act, which requires businesses to report ownership to the government.
New rules could make forming small businesses, special purpose vehicles and other closely held entities “significantly” more burdensome, said Steve Ganis of Mintz, an expert in anti-money laundering regulation. “FinCEN’s new regime will make things much more complicated for start-ups, where control and ownership are highly fluid,” he said. Public companies and many larger businesses would be exempt because they already face stricter scrutiny.
THE SPEED READ
Flipkart, the Indian e-commerce company owned by Walmart, is reportedly planning to go public through an I.P.O. this year. (Bloomberg)
Grab, the Singaporean tech giant, is near a deal to merge with a SPAC backed by Altimeter Capital at a $35 billion valuation. It would be the biggest-ever blank check deal. (FT)
Fox sued the owner of FanDuel over the price of its option to buy a stake in the sports betting service. (CNBC)
Politics and policy
Coinbase, whose direct listing is set for next week, said it collected more revenue in the first quarter this year than in all of 2020. (CNBC)
The audio chat start-up Clubhouse is said to be raising funds at a $4 billion valuation. (Bloomberg)
The S.E.C. accused an actor of running a $690 million Ponzi scheme built around false claims of deals with Netflix and HBO. (Bloomberg)
Best of the rest
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Treasury Secretary Janet L. Yellen made the case on Monday for a global minimum tax, kicking off the Biden administration’s effort to help raise revenue in the United States and prevent companies from shifting profits overseas to evade taxes.
Ms. Yellen, in a speech to the Chicago Council on Global Affairs, called for global coordination on an international tax rate that would apply to multinational corporations regardless of where they locate their headquarters. Such a global tax could help prevent the type of “race to the bottom” that has been underway, Ms. Yellen said, referring to countries trying to outdo one another by lowering tax rates in order to attract business.
Her remarks came as the White House and Democrats in Congress begin looking for ways to pay for President Biden’s sweeping infrastructure plan to rebuild America’s roads, bridges, water systems and electric grid.
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Ms. Yellen said. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government.”
will release a new plan on Monday to overhaul the way the United States taxes multinational corporations. In addition to raising revenue, the proposal, which is co-authored by Senator Sherrod Brown of Ohio and Senator Mark Warner of Virginia, seeks to discourage companies from shifting profits and jobs to low-tax countries to avoid paying taxes in America. It also creates new incentives through the tax code for companies to invest in research and manufacturing in the United States.
The speech represented Ms. Yellen’s most extensive comments since taking over as Treasury secretary, and she underscored the scope of the challenge ahead.
“Over the last four years, we have seen firsthand what happens when America steps back from the global stage,” Ms. Yellen said. “America first must never mean America alone.”
Ms. Yellen also highlighted her priorities of combating climate change and reducing global poverty and underscored the importance of the United States helping to lead the world out of the crisis caused by the pandemic. Ms. Yellen called on countries not to pull back on fiscal support too soon and warned of growing global imbalances if some countries do withdraw before the crisis is over.
The slow pace of the deployment of vaccines around the world is also a concern for Ms. Yellen, who lamented that many developing and middle-income countries have been unable to invest in robust rollouts of inoculations, which could hurt the global economy.
“The result will likely be a deeper and longer-lasting crisis, with mounting problems of indebtedness, more entrenched poverty, and growing inequality,” Ms. Yellen said, estimating that as many as 150 million people could be pushed into extreme poverty this year. “This would be a profound economic tragedy for those countries, one we should care about.”
In a sharp break with the administration of former President Donald J. Trump, Ms. Yellen emphasized the importance of the United States working closely with its allies, noting that the fortunes of countries around the world are intertwined.
Overhauling the international tax system is a big part of that. Corporate tax rates have been falling around the world in recent years. Under the Trump administration, the rate in the United States was cut from 35 percent to 21 percent. Mr. Biden wants to raise that rate to 28 percent and increase the international minimum tax rate that American companies pay on their foreign profits to 21 percent.
The Organization for Economic Cooperation and Development, in coordination with the United States, has been working to develop a new international tax architecture that would include a global minimum tax rate for multinational corporations as part of its effort to curtail profit shifting and tax base erosion.
Ms. Yellen said she is working with her counterparts in the Group of 20 advanced nations on changes to the global tax system that will help prevent businesses from shifting profits to low-tax jurisdictions.
“President Biden’s proposals announced last week call for bold domestic action, including to raise the U.S. minimum tax rate, and renewed international engagement, recognizing that it is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” Ms. Yellen said. “We are working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom.”