Displaying items by tag: taxes

Talks were making progress on the state and local tax reductions but they hit a wall this week. Democrats are splitting on the SALT deduction, specifically Senator Bernie Sanders has withdrawn from the previously agreed to plan. Democrats have been in agreement for a 10-year revenue neutral deduction, but Sanders wants to use the SALT deduction to be a revenue generator and use the multiple hundred billion dollars in revenue to pay for vision and dental in a Medicare expansion. The biggest disagreement is what incomes would be eligible for the unlimited benefit; Sanders wants to set the market at $400k while most democrats feel the limit should be $550k. Overall the current SALT write offs in the Build Back Better bill give up to $80k in write offs and this is too much for Senator Sanders.

FINSUM: Holding up the BBB for a SALT deduction is a small grievance. These deductions were revenue neutral which should be a bi-partisan victory.

The $2 trillion Build Back Bill pushed through a contested House of Representatives last week and the climate and social-focused stimulus bill have a complicated tax code in order to garner support. BBB features a dynamic tax system with moving parts that evolves as years develop. Most significant of which is a tax break of about 5.4% relative to current legislation for those earning more than $1 million a year. This tax breaks scales down in income down to $75k, but spikes below that. However, this tax break is very temporary as the lion’s share of the legislation will be paid by higher income individuals. There are other benefits for the rich such as SALT relief, but by and large, starting in 2023 higher corporate taxes and a bump in personal income taxes of 5% will begin to take effect.

FINSUM: Biden’s BBB could be a bad storm of events for the economy where stimulus boosts inflation and higher taxes keep markets and real growth from keeping up.

Morgan Stanley acquired custom indexing provider Parametric Portfolio associates in March and are benefiting greatly from the acquisition. Parametric has developed their existing client base by allowing them to pitch a new set of custom-built portfolios and increased AUM by 50% year over year. These custom indexing tools allow investors at Morgan Stanley to build tailored portfolios to meet ESG or tax objectives. On top of this, it furthers client relationships by allowing a more connected investment strategy and personal experience. Parametric is leading the industry in direct indexing by asset size.

FINSUM: Direct indexing will be an incredibly important tool in order to mitigate all of the tax changes in the new administration.

Another post pandemic super bill is flowing through the economy this time with a Biden name tag, and the president claims the $1.2 trillion dollar stimulus will lower inflation. The idea is the new bill will lubricate the American supply chains and have goods flowing easier and thus lowering costs. It's difficult to say if this bill will un-kink the supply chains or just boost demand and prices even more. Americans are already worried about $4.50 gass and surging food prices. Inflation hit a 31 year record this month, and inflation expectations aren’t slowing according to the Michigan survey of consumer expectations. The median projection is 4.6% over the next year, up nearly 2% from a year ago. Additionally the Biden administration is planning on pushing the $1.75 trillion dollar Build Back Better in the upcoming weeks.

FINSUM: A stimulus bill would have to be hyper targeted at supply chains to have the effect Biden is aiming at, and in combination with the BBB these bills will only further the U.S.’s inflation problem.

Over a hundred and thirty nations have already consented to the global minimum corporate tax, and that number just got a little larger as all G20 came forward to endorse a 15% global minimum tax rate. This was a huge win for the Biden administration and secretary Yellen who have been strong advocates, but they still face hurdles with the domestic tax code in the Build Back Better bill. The administration said that the other G20 understand the minimum could take time with Republican opposition and Democratic infighting dominating congress, and the official timeline for the G20 will roll out at the end of the week. The other topic that is driving the G20 are the world's energy shortage which is on the forefront of everyone's minds, and how the world can come together to spur production.

FINSUM:The current form of the Build Back Better legislation aligns the U.S. with the global minimum and extends tax credits for millions of low-income Americans, but we’ll see if that makes it through the Congress at the end of the week.