Because of that complexity, the corporate minimum tax has faced substantial skepticism. It is less efficient than simply eliminating deductions or raising the corporate tax rate and could open the door for companies to find new ways to make their income appear lower to reduce their tax bills.
Similar versions of the idea have been floated by Mr. Biden during his presidential campaign and by Senator Elizabeth Warren, Democrat of Massachusetts. They have been promoted as a way to restore fairness to a tax system that has allowed major corporations to dramatically lower their tax bills through deductions and other accounting measures.
According to an early estimate from the nonpartisan Joint Committee on Taxation, the tax would most likely apply to about 150 companies annually, and the bulk of them would be manufacturers. That spurred an outcry from manufacturing companies and Republicans, who have been opposed to any policies that scale back the tax cuts that they enacted five years ago.
Although many Democrats acknowledge that the corporate minimum tax was not their first choice of tax hikes, they have embraced it as a political winner. Senator Ron Wyden of Oregon, the chairman of the Senate Finance Committee, shared Joint Committee on Taxation data on Thursday indicating that in 2019, about 100 to 125 corporations reported financial statement income greater than $1 billion, yet their effective tax rates were lower than 5 percent. The average income reported on financial statements to shareholders was nearly $9 billion, but they paid an average effective tax rate of just 1.1 percent.
“Companies are paying rock-bottom rates while reporting record profits to their shareholders,” Mr. Wyden said.
told the Senate Finance Committee last year. “This behavioral response poses serious risks for financial accounting and the capital markets.”
Other opponents of the new tax have expressed concerns that it would give more control over the U.S. tax base to the Financial Accounting Standards Board, an independent organization that sets accounting rules.
“The potential politicization of the F.A.S.B. will likely lead to lower-quality financial accounting standards and lower-quality financial accounting earnings,” Ms. Hanlon and Jeffrey L. Hoopes, a University of North Carolina professor, wrote in a letter to members of Congress last year that was signed by more than 260 accounting academics.
the chief economist of the manufacturing association. “Arizona’s manufacturing voters are clearly saying that this tax will hurt our economy.”
Ms. Sinema has expressed opposition to increasing tax rates and had reservations about a proposal to scale back the special tax treatment that hedge fund managers and private equity executives receive for “carried interest.” Democrats scrapped the proposal at her urging.
When an earlier version of a corporate minimum tax was proposed last October, Ms. Sinema issued an approving statement.
“This proposal represents a common sense step toward ensuring that highly profitable corporations — which sometimes can avoid the current corporate tax rate — pay a reasonable minimum corporate tax on their profits, just as everyday Arizonans and Arizona small businesses do,” she said. In announcing that she would back an amended version of the climate and tax bill on Thursday, Ms. Sinema noted that it would “protect advanced manufacturing.”
That won plaudits from business groups on Friday.
“Taxing capital expenditures — investments in new buildings, factories, equipment, etc. — is one of the most economically destructive ways you can raise taxes,” Neil Bradley, chief policy officer of the U.S. Chamber of Commerce, said in a statement. He added, “While we look forward to reviewing the new proposed bill, Senator Sinema deserves credit for recognizing this and fighting for changes.”
Emily Cochrane contributed reporting.
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DEVENS, Mass. — The machines stand 20 feet high, weigh 60,000 pounds and represent the technological frontier of 3-D printing.
Each machine deploys 150 laser beams, projected from a gantry and moving quickly back and forth, making high-tech parts for corporate customers in fields including aerospace, semiconductors, defense and medical implants.
The parts of titanium and other materials are created layer by layer, each about as thin as a human hair, up to 20,000 layers, depending on a part’s design. The machines are hermetically sealed. Inside, the atmosphere is mainly argon, the least reactive of gases, reducing the chance of impurities that cause defects in a part.
“The Mainstreaming of Additive Manufacturing.”
a report by Hubs, a marketplace for manufacturing services.
The Biden administration is looking to 3-D printing to help lead a resurgence of American manufacturing. Additive technology will be one of “the foundations of modern manufacturing in the 21st century,” along with robotics and artificial intelligence, said Elisabeth Reynolds, special assistant to the president for manufacturing and economic development.
Additive Manufacturing Forward, an initiative coordinated by the White House in collaboration with major manufacturers. The five initial corporate members — GE Aviation, Honeywell, Siemens Energy, Raytheon and Lockheed Martin — are increasing their use of additive manufacturing and pledged to help their small and medium-size American suppliers adopt the technology.
VulcanForms was founded in 2015 by Dr. Hart and one of his graduate students, Martin Feldmann. They pursued a fresh approach for 3-D printing that uses an array of many more laser beams than existing systems. It would require innovations in laser optics, sensors and software to choreograph the intricate dance of laser beams.
By 2017, they had made enough progress to think they could build a machine, but would need money to do it. The pair, joined by Anupam Ghildyal, a serial start-up veteran who had become part of the VulcanForms team, went to Silicon Valley. They secured a seed round of $2 million from Eclipse Ventures.
The VulcanForms technology, recalled Greg Reichow, a partner at Eclipse, was trying to address the three shortcomings of 3-D printing: too slow, too expensive and too ridden with defects.
Arwood Machine this year.
Arwood is a modern machine shop that mostly does work for the Pentagon, making parts for fighter jets, underwater drones and missiles. Under VulcanForms, the plan over the next few years is for Arwood to triple its investment and work force, currently 90 people.
VulcanForms, a private company, does not disclose its revenue. But it said sales were climbing rapidly, while orders were rising tenfold quarter by quarter.
Cerebras, which makes specialized semiconductor systems for artificial intelligence applications. Cerebras sought out VulcanForms last year for help making a complex part for water-cooling its powerful computer processors.
The semiconductor company sent VulcanForms a computer-design drawing of the concept, an intricate web of tiny titanium tubes. Within 48 hours VulcanForms had come back with a part, recalled Andrew Feldman, chief executive of Cerebras. Engineers for both companies worked on further refinements, and the cooling system is now in use.
Accelerating the pace of experimentation and innovation is one promise of additive manufacturing. But modern 3-D printing, Mr. Feldman said, also allows engineers to make new, complex designs that improve performance. “We couldn’t have made that water-cooling part any other way,” Mr. Feldman said.
“Additive manufacturing lets us rethink how we build things,” he said. “That’s where we are now, and that’s a big change.”
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Inflation is high and has been for months. It’s weighing on consumer confidence, making policymakers nervous and threatening to eat away at household paychecks well into 2022.
This is the first time many adults have experienced meaningful inflation: Price gains had been largely quiescent since the late 1980s. When the Consumer Price Index climbed 7 percent in the year through December, it was the fastest pace since 1982.
Naturally, people have questions about what this will mean for their pocketbooks, their finances and their economic futures.
Closely intertwined with price worries are concerns about interest rates: The Federal Reserve is poised to raise borrowing costs to try to slow down demand and keep the situation under control.
furniture and camping gear.
That rapid consumption is running up against constrained supply. Factories shut down early in the pandemic, and in parts of Asia, they continue to do so as Omicron cases surge. There aren’t enough containers to ship all of the goods people want to buy, and ports have become clogged trying to process so many imports.
expanding their profits.
In theory, competition should eat away at extra earnings over time. New firms should jump into the market to sell that same products for less and steal away the customer. Existing competitors should ramp up production to meet demand.
But this may be a unappealing time for new firms to enter the market. Established companies may be hesitant to expand production if doing so involved a lot of investment, because it is not clear how long today’s strong demand will last.
“It is a very uncertain environment,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. “A new firm stepping in is a lot of investment, with a lot of financial risk.”
Until companies can produce and transport enough of a given product to go around — as long as shortages remain — companies will be able to raise prices without running much risk of losing customers to a competitor.
In past periods of inflation, do employers typically increase wages or award higher-than-average yearly increases to help employees offset inflation? If so, in what industries is this practice most common? — Annmarie Kutz, Erie, Pa.
There is no standard historical experience with wages and inflation, Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said during an interview with The New York Times on Twitter Spaces last week.
lower-wage service industries have been competing mightily for workers in recent months, and pay is climbing faster there.
“The history isn’t so clear that cost of living translates into higher wages, but that’s largely because inflation has been low and stable for a very long time,” Ms. Daly said.
in December projected that price gains will drop back below 3 percent by the end of the year, and will level off to normal levels over the longer term.
are adjusted for inflation, so those should keep pace with price gains. Bonds that pay back fixed rates do less well during periods of inflation, while stock investments — though riskier — tend to rise more quickly than consumer prices. Ms. Benz recommends holding assets across an array of securities, potentially including inflation-protected securities such as some exchange-traded funds or Treasury Inflation Protected Securities, commonly called TIPS.
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What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation costs and toys.
“It argues against having too much in cash,” Ms. Benz said. “That’s too much dead money.”
Readers wonder how government policymakers will react.
We currently have low unemployment, strong wage growth (largely through attrition / voluntary retirements), easy monetary policy and now rising inflation. What are other periods of time when the United States had these conditions? How did things work out then? — Harshal Patel, Moorestown, N.J.
Jared Bernstein, a member of the White House Council of Economic Advisers, pointed to the post-World War II period as a reference point for the present moment.
“Demand was strong, and supply was constrained,” he said in an interview. “That’s a very instructive path for us.”
The good news about that example is that supply eventually caught up, and prices came down without spurring any greater crisis.
Other, more worried commentators have drawn parallels between now and the 1970s, when the Fed was slow to raise rates as unemployment fell and prices rose — and inflation jumped out of control. But many economists have argued that important differences separate that period from this one: Workers were more heavily unionized and may have had more bargaining power to push for higher wages back then, and the Fed was slow to react for years on end. This time, it’s already gearing up to respond.
about price controls in a recent article, and vocal minority think the 1970s experience unfairly tarnished the idea and that it might be worthwhile to reopen the debate.
“This is a great suppressed topic,” said James K. Galbraith, an economist at the University of Texas. “It was absolutely mainstream from the start of World War II until the Reagan administration.”
If inflation is being caused by supply chain problems, how will raising interest rates help? — Larry Harris, Ventura, Calif.
Kristin J. Forbes, an economist at the Massachusetts Institute of Technology, said that a big part of today’s inflation ties to roiled supply chains, which monetary policy can’t do much to fix.
But trade is actually happening at elevated levels even amid the disruptions. Factories are producing, ships are shipping, and consumers are buying at a rapid clip. It is just that supply is not keeping up with that booming demand. Higher interest rates can relieve pressure on demand, making it more expensive to buy a boat or a car, cooling off the housing market and slowing business investment.
“A good part of the supply chain problems, you can’t do anything about,” Ms. Forbes said. “But you can affect demand. And it is the combination of the two which determines inflation.”
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Rocketing inflation has become a headache for U.S. consumers, and President Biden has a go-to prescription. He says a key way to help relieve increasing prices is to pass a $1.85 trillion collection of spending programs and tax cuts that is currently languishing in the Senate.
A wide range of economists agree with the president — but only in part. They generally accept his argument that in the long run, the bill and his infrastructure plan could make businesses and their workers more productive, which would help to ease inflation as more goods and services are produced across the economy.
But many researchers, including a forecasting firm that Mr. Biden often cites to support the economic benefits of his proposals, say the bill is structured in a way that could add to inflation next year, before prices have had time to cool off.
Some economists and lawmakers worry about the timing, arguing that the risk of fueling more inflation when it has reached record highs outweighs the potential benefits of passing a big spending bill that could help to keep prices in check while addressing other social goals. Prices have picked up by 6.2 percent over the past year, the fastest pace in 31 years and far above the Federal Reserve’s inflation target.
Joe Manchin III of West Virginia, has questioned whether high and rising prices should persuade lawmakers to tone down their ambitions.
“West Virginians are concerned about rising inflation,” he said on Twitter last week. “We cannot throw caution to the wind & continue to pile on debt that our country can’t afford.”
Democrats preparing to push it to a House vote as early as next week. But timing is uncertain in the Senate, where a vote is likely to be changed or delayed in response to Mr. Manchin’s concerns.
The extent to which Mr. Biden’s $1.85 trillion bill exacerbates inflation largely depends on how much it stimulates the economy and whether Americans increase their spending as a result of the legislation — and when all of that occurs.
Many economists say it could create a short-term stimulus because the plan is structured to raise money gradually by taxing wealthier Americans, who are less likely to spend each additional dollar they have, and redistribute it quickly to people who earn less and are more likely to spend newfound cash.
Because of the difference in timing between when the government spends money and when it starts to bring in more revenue, the bill is expected to pump money into the economy in its early years. Moody’s Analytics — the firm that the White House typically cites when arguing in favor of its legislation — estimates that the government will spend $163 billion more on the package than it takes in next year. And the redistribution could make the money more potent as economic stimulus.
“The spending is designed to go to the people who are more likely to spend it than to save it,” said Ben Ritz, the director of the Progressive Policy Institute’s Center for Funding America’s Future. But more than any specific program, “the bigger inflationary issue is the math.”
White House economists have countered those arguments. If the bill passes, they say, it would do relatively little to spur increased consumer spending next year and not nearly enough to fully offset the loss of government stimulus to the economy as pandemic aid expires. That the program spends more heavily next year is a feature, they say, because it will partly blunt the economic drag as fiscal help fades. They note that the bill is intended to be offset completely by tax increases and other revenue savings.
And they argue that by increasing the economy’s capacity to churn out goods and services, the president’s infrastructure plan and his broader program could both help to moderate costs over time.
Mr. Summers has argued.
There is less economic or political debate about Mr. Biden’s $1 trillion infrastructure plan, which cleared Congress last week and which the president will sign on Monday. Economists — including conservative ones — largely agree that it is likely to eventually expand the capacity of the economy, and that it is small and spread out enough that it will not meaningfully fuel faster inflation in the near term.
Among Democrats, there is widespread support for the economic ambitions contained in the administration’s broader spending bill, which aims to create more equity for low- and middle-class earners and a bigger safety net for working parents. But the measure is drawing more complicated reviews when it comes to its immediate effect on inflation.
Economists at Moody’s found in a recent analysis that the administration’s full agenda would slightly increase inflation in 2022, though they did not expect the program to ultimately raise it because of benefits that would later ease supply constraints. It estimates that with the infrastructure bill alone, inflation will be running at a 2.1 percent annual rate by the final quarter of next year. If the larger spending bill also passes, that grows to 2.5 percent.
Understand the Supply Chain Crisis
But Moody’s baseline assumption that inflation will moderate by the end of next year is relatively optimistic. Bank of America’s economics team said that core consumer prices would still rise at a 3.2 percent rate at the end of next year, incorporating the assumption that Mr. Biden’s plan passes.
companies scramble for workers, prices rise and supply chains struggle to keep pace with booming demand, this is the wrong moment to hit the economy with any added juice.
“We don’t have a lot of spare capacity,” said Kristin J. Forbes, an economist at the Massachusetts Institute of Technology. “We certainly don’t have a lot of spare workers today.”
Inflation looms more significantly in the near term because it is currently high, and if it remains that way for an extended period, consumers could change their behaviors and expectations, locking in faster gains. People who worry about the proposals say that 2022 is the wrong time to hand households more money.
Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said she was unsure whether the package would fuel inflation. But given the current pace of price increases, “you have to be more careful than you would be otherwise.”
The White House says the provisions of the bill that put money in families’ pockets, such as child care help, are not simple stimulus. They will allow caregivers into the labor market, they argue, an investment in the economy’s future that will allow it to produce more with time.
That makes the new program different from the spending passed earlier this year. The Biden administration increasingly acknowledges that sending households checks and offering expanded unemployment insurance supplemented savings, and that as households had more wherewithal to spend it helped to drive up prices.
Mr. Biden said in Baltimore on Wednesday. But the White House contends that this program is not the same as the previous package, and that it will make the price situation better, not worse.
“According to the economic experts, this bill is going to ease inflationary pressures,” the president said on Wednesday.
Still, the 17 Nobel Prize-winning economists that the White House regularly cites have specified that capacity improvements will ease inflation over time rather than imminently.
“Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy,” they wrote, “it will ease longer-term inflationary pressures.”
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The Biden administration is moving in a new direction. It is trying to help low-income Americans by pushing for direct cash assistance in addition to expanding health insurance.
Each is a laudable goal. But doing both at once may not be feasible, as lawmakers raise concerns about the total price tag of Biden’s plans.
If the administration has to make hard choices, it can do more to help the poor by prioritizing cash transfers over expanded health insurance. That’s because cash helps recipients directly, while health insurance would pay mainly for care that many uninsured people were already receiving at low or no cost.
For over a decade, health insurance expansions have dominated the budget and politics of legislation directed toward the poor. In 2019, the government spent more than $600 billion on Medicaid — the major health insurance program for low-income Americans. This was more than 10 times the amount spent on the largest cash transfer program, the earned-income tax credit.
legislation enacted in March brought a welcome shift in focus toward cash benefits. Among its temporary provisions were about $100 billion in increased payments to low-income families with children and $15 billion in stepped-up wage subsidies for low-income workers, overshadowing the approximately $35 billion in new spending for health insurance.
The evidence indicates that for the low-income recipients of these programs, cash transfers will provide a greater bang for the government’s buck. Two separate studies that my collaborators and I conducted found that, on average, low-income adults would benefit more from a dollar in cash than a dollar of government spending on health insurance.
These kinds of comparisons are inherently difficult. One approach we took to measuring the value of health insurance to recipients was to see how much they were willing to pay for it. Another was to estimate the effects of such insurance on their lives, like improved health and increased economic security. Neither approach is airtight.
But they gave very similar answers: The benefit of Medicaid coverage received by a newly insured adult is less than half what that coverage costs taxpayers, which is about $5,500 a year.
The reason is simple: The uninsured already receive a substantial amount of health care, but pay for only a very small portion of it, especially when their medical bills are high.
estimated that 60 percent of government spending to expand Medicaid to new recipients ends up paying for care that the nominally uninsured already receive, courtesy of taxpayer dollars and hospital resources. In other words, from the recipient’s perspective the alternatives are $5,500 in cash or only about 40 percent of that — $2,200 — in health insurance benefits, on top of the care they were already receiving.
The United States has a longstanding tradition of providing free medical services to the indigent. Hospitals emerged in the 18th century largely to care for those with no other sources of help. In modern times, federal and state governments have enacted a grab bag of policies to help defray some of the costs incurred by hospitals and clinics in providing humanitarian care.
The result is today’s health care safety net for the uninsured. It is grossly inadequate and inefficient. It needs a radical overhaul.
But in the meantime, the direct benefits from expanding insurance to the low-income uninsured are, paradoxically, limited by the imperfect patches currently in place. Hospitals are major beneficiaries of health insurance expansions, which reduce their financial burdens and increase their profit margins.
Health insurance has always been an important financial tool for hospitals. During the Great Depression, they pioneered the first widespread health insurance in the United States to help ensure payment for provided care.
More recently, in 2006, when Senator Mitt Romney was the Republican governor of Massachusetts, he embraced the state’s health insurance expansion — which became the blueprint for Obamacare — as a way to reduce the costs that uninsured patients imposed on hospitals and taxpayers. Hospitals later used similar logic in lobbying for Medicaid expansions under Obamacare and against their repeal.
Of course, the newly insured have also benefited greatly from health insurance expansions. On this point, the evidence from Obamacare is in, and the research results are clear: Medicaid coverage is better than the safety-net care available to the uninsured.
saved lives. They also increased access to medical care and reduced medical debt, which can impose substantial financial and emotional pain on patients and their families, even though most of it is never repaid. Covering some of the remaining 30 million Americans who are still uninsured would most likely produce similar benefits.
But people in need also benefit greatly from cash. And there is evidence that cash transfers can also save lives.
In addition, a large body of work shows that wage subsidies to low-income workers with children help lift their families out of poverty, increase economic self-sufficiency, and improve their health and well-being. A recent experiment found that wage subsidies very similar to the ones that were temporarily expanded in March also increase employment and earnings for low-income adults without dependent children. Likewise, direct cash transfers provide important benefits to families and their children, whose academic achievement and physical and mental health can improve as a result.
In an ideal world, everyone would have health insurance and sufficient income. But in the real world, budgetary and political constraints often force wrenching trade-offs.
There are powerful moral imperatives for making sure that everyone has adequate medical care, as well as sufficient income for their nonmedical needs. It’s hard for economists to weigh competing moral imperatives.
But we can, at least, stack dollars on scales. And the good done by cash transfers tips the scale in their favor.
The Biden administration is now trying to make permanent its temporary expansions of both cash subsidies and health insurance. If forced to prioritize how best to help those who are struggling economically — either because of the coronavirus pandemic or from longer-term, structural obstacles — it’s time to recognize that cash is more effective than insurance.
Amy Finkelstein is the John and Jennie S. MacDonald professor of economics at the Massachusetts Institute of Technology.
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The question is whether the new technology is going to make the yuan an attractive alternative to other currencies. Chinese central bankers say it is not an effort to supplant the dollar, and Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, said digitization won’t fix issues that make the yuan unattractive as a reserve currency in the first place — like capital controls, which mean you can’t exchange it easily at all times.
Is Bitcoin coming for the dollar?
Others worry that private-sector innovations like Bitcoin or “stablecoins,” which are backed by a bundle of assets or currencies, could become an attractive alternative to government-created cash if central banks don’t keep up.
Mr. Powell has argued that Bitcoin is more like gold than the dollar. It has value because it’s rare and people want to hold it, so it can even at times be traded for other goods and services, but it is not government-guaranteed money.
But global regulators did slow down Facebook’s stablecoin project, originally known as Libra and now called Diem, because they worried about the potential for money laundering and financial system disruption.
Mr. Powell said in testimony last year that Libra was “a bit of wake up call that this is coming fast and could come in a way that is quite widespread and systemically important fairly quickly,” highlighting the “importance of making quick progress.”
If tech companies come to dominate the payment system, that could create privacy and stability issues. In fact, China’s digital yuan was pursued partly in reaction to the rise and dominance of private-sector digital payment platforms like Alipay and WeChat Pay.
A faster or instant payments system, like the FedNow instant payment technology that America’s central bank is now developing, could keep the Fed up-to-date without changing the system as much as a digital currency would. But digital dollar fans say the point is to prepare for the future — and the future might be central bank digital currency.
“Digital cash, if built in the right way, could be really groundbreaking,” said Neha Narula, who is the director of the Digital Currency Initiative at the Massachusetts Institute of Technology and is working with the Boston Fed on its project.