Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig pressed lawmakers Wednesday to give the Internal Revenue Service more information about taxpayers’ bank accounts, as the Biden administration tries to salvage its tax-compliance proposal.
In letters to lawmakers, the administration officials again asked Congress to require banks to report annual inflows and outflows from bank accounts with at least $600 or at least $600 worth of transactions, a proposal aimed at letting the IRS target its audits more effectively. It would generate about $460 billion over a decade to cover the costs of Democrats’ planned expansion of the social safety net and climate-change policies, according to the administration.
But after a flurry of opposition from banks and credit unions, House Democrats omitted the proposal from their list of tax-policy changes this week. That was a sign that it lacked the support in the party to advance, though a scaled-back version raising about half as much money could still emerge from ongoing talks between administration officials and Congress.
An agreement by wealthy countries to impose minimum taxes on multinational companies faces a rocky path to implementation, with many governments likely to wait to see what others, especially a divided U.S. Congress, will do.
Treasury Secretary Janet Yellen hailed the deal, reached by finance ministers of the Group of Seven leading rich nations over the weekend in London, calling it a return to multilateralism and a sign countries can tighten the tax net on profitable firms to fund their governments.
In countries with parliamentary systems, governments can quickly deliver on pledges, turning them into local laws and regulations. In the U.S., however, a slim Democratic majority in the House, an evenly split Senate, antitax Republicans and procedural hurdles complicate passage.
Buy-in will also have to come from a broader group of 135 countries in what is known as the Inclusive Framework. Some countries with very low tax rates — such as Ireland, with a 12.5% charge on profit — are reluctant to sign up. The U.S. has proposed tax changes that would penalize companies from countries that don’t impose the minimum taxes.
Author(s): Richard Rubin, Paul Hannon, Sam Schechner
Illinois? borrowing through the Federal Reserve?s Municipal Liquidity Facility provided a lifeline for critical services during the COVID-19 pandemic, so the state should be allowed to use its incoming federal coronavirus relief money to pay it off, Comptroller Susana Mendoza tells the federal government.
The state?s $3.8 billion of short-term borrowing, including $3.2 billion through the Federal Reserve?s Municipal Liquidity Facility ?was essential for the continued performance of government services during the most fiscally challenging times for the state?s cash flow during the pandemic, all directly related to the COVID-19 crisis,? Mendoza wrote in a letter to Treasury Secretary Janet Yellen.
?We want to promptly repay federal taxpayers for the crucial help they provided us during the pandemic,? wrote Mendoza, the elected constitutional officer who manages state debt, pension, and bill payments. The state?s updated American Relief Plan share is $8.1 billion.
Mendoza fired off the letter Wednesday, two days after the release of a 151-page guidance on how states, local governments, and tribes can spend their shares of the $350 billion Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund that?s built into the American Rescue Plan.
The guidance imposes a sweeping ban on using funds to cover principal and interest repayment, even when the borrowing was directly related to the COVID-19 crisis.
If you’re a U.S. firm that does business abroad, the TCJA essentially gives you an easy — but perverse — choice: You can move your foreign profits and operations to America, where the corporate tax rate is 21%, or you can keep them anywhere else in the world, where the U.S. will charge you around half that. It’s not a hard call, especially because the minimum tax is calculated based on a firm’s total global profits rather than looking at what the company earns in each different country. With no one looking at individual jurisdictions, corporations can shift and book profits wherever they can get the lowest tax bill. The TCJA also makes the first 10% of returns earned by foreign assets tax exempt, a powerful incentive for companies to offshore factories and jobs. It isn’t an overstatement to say that today most firms would prefer to earn income anywhere but America.
The U.S. isn’t the only loser in this race to the bottom. So are our corporations. The global competition for low rates allows American firms to pay less taxes — or none at all — but they still pay a significant cost. Over the next 10 years, more than $2 trillion of the U.S. corporate tax base will flow out of the country because of the broken system I’ve described. Our tax revenues are already at their lowest level in generations, and as they continue to drop, the country will have less money to invest in airports, roads, bridges, broadband, job training, and research and development.
It’s an idea that has been debated widely across global capitals: impose the same minimum corporate tax rate all over the world to prevent companies from shopping around for the country that can offer the smallest tax bill.
Now, it has a powerful new adherent. Treasury Secretary Janet Yellen on Monday expressed support for a minimum tax rate, providing the vital backing of the U.S. government.
Yellen, in a speech, said a minimum global tax rate would stop what she described as a “30-year race to the bottom” that has allowed big corporations to avoid contributing fully to vital national needs.
The government deducts tax and other revenues from net cost (with some adjustments) to derive its FY 2020 “bottom line” net operating cost of $3.8 trillion. o From Chart 4, total government tax and other revenues decreased slightly by $49.4 billion (1.4 percent) to about $3.6 trillion for FY 2020. This net decrease was due primarily to a $51.6 billion decrease in individual tax revenue, compared with an offsetting decrease and increase in corporate and other tax revenue, respectively. o Together, individual income tax and tax withholdings, and corporate taxes accounted for about 88.8 percent of total tax and other revenues in FY 2020. Other revenues include Federal Reserve earnings, excise taxes, and customs duties.
Warren is spending this week talking up her “Ultra-Millionaire Tax Act.” It’s essentially a refreshed version of the same idea she proposed during her failed bid for the Democratic presidential nomination. The current measure, like the old one, would tax the net worth of American households with more than $50 million in assets to the tune of 2 percent annually, with an additional 1 percent tax for households worth more than $1 billion. Warren favored the wealth tax in 2019 when the economy was generally doing pretty well. But now, she says, it’s needed “because of the changes in this country under the pandemic.”
Fewer workers are employed in manufacturing, but the average worker is earning far more per hour. This is a problem? Meanwhile, American manufacturing output is significantly higher today than it was when the WTO was established. In fact, even at the lowest point of last year’s COVID-19 recession, manufacturing output was still higher than it had been in any year before 1997.
Long-held strategies such as evaluating company fundamentals have gone out the window in favor of momentum. War has broken out between professionals losing billions and the individual investors jeering at them on social media. Meanwhile, the frenzy of activity is stirring regulatory and legal concerns, as well as the attention of the Biden administration. The White House press secretary said on Wednesday that its economic team, including Treasury Secretary Janet Yellen, is monitoring the situation.
The newbie investors are gathering on platforms such as Reddit, Discord, Facebook and Twitter . They are encouraging each other to pile into stocks, bragging about their gains and, at times, intentionally banding together to intensify losses among professional traders, who protest that social-media hordes are conspiring to move stock prices.
Author(s): Gunjan Banerji, Juliet Chung and Caitlin McCabe
The US is running up debt like never before, and one of the reasons Washington can get away with it is because interest rates are hovering around their lowest levels ever. This raises the question—should the Treasury lock in these rates for 50 years? How about a century?
Government borrowing is under renewed scrutiny as politicians consider their third mega-spending package to support the US economy, adding to more than $3 trillion already earmarked since the onset of the Covid-19 pandemic. Federal debt owned by the public is expected to ramp up from 81% of GDP this year to nearly 100% in 2030, the highest ratio since 1946, according to Congressional Budget Office (CBO) projections in December. That ratio could hit 180% by 2050, by far the highest debt burden the US has ever had.
Debt levels are high, but the government’s borrowing cost is low. In March, 10-year Treasury bond yields fell below 1% for the first time and they’ve only ticked up modestly since, rising to about 1.1%. That helps explain why the US has amassed so much debt and, yet, is spending less on interest expense than it did in the 1980s and 1990s. The worry is that the unprecedented mountain of debt could have to be refinanced at higher yields down the road.
Treasury Secretary Janet Yellen convened a meeting with the nation’s top regulators Thursday, who are continuing to review whether recent volatility in popular, so-called meme stocks, and brokers’ responses to it, “are consistent with investor protection and fair and efficient markets,” according to a Treasury Department statement.
Yellen met with the heads of the Securities and Exchange Commission, Federal Reserve Board, Federal Reserve Bank of New York and Commodity Futures Trading Commission to discuss the functioning of financial markets and practices of both investors and brokers in recent weeks.
“The regulators believe the core infrastructure was resilient during high volatility and heavy trading volume, and agree on the importance of the SEC releasing a timely study of the events,” according to the statement. “Secretary Yellen believes it is imperative to uphold the integrity of these markets and ensure investor protection.”
While the COVID-19 pandemic and its economic impact present the most pressing challenges, Democratic control of Congress and the White House could also spur action on issues ranging from climate change to scrutiny of private equity practices.
Mr. Neal’s first bill introduced in the new 117th Congress addresses the multiemployer pension crisis that he said “has only worsened” in the COVID-19 economic downturn. A similar proposal was introduced by members of the House Education and Labor Committee, whose chairman, Robert C. “Bobby” Scott, D-Va., said the pandemic could cause as many as 180 more multiemployer plans to become insolvent, adding up to 300 plans facing failure. Both leaders are urging that the proposed Emergency Pension Plan Relief Act of 2021 be attached to a COVID-19 relief measure now before Congress.
Potential legislation is expected to build on the panel’s climate action plan calling for clean energy tax credits and jobs initiatives, investments in water infrastructure and research into land and ocean climate solutions, among other ideas.