Biden's Plan to Make Amazon Pay Taxes

Biden's Plan to Make Amazon Pay Taxes

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Plus, new Trump food stamp rule will cut 700,000 from program
Wednesday, December 4, 2019

Biden Unveils $3.2 Trillion Tax Plan Targeting Corporations Like Amazon

Joe Biden rolled out a plan Wednesday to raise $3.2 trillion in additional taxes over 10 years, with the wealthy and corporations paying more to cover the cost of spending proposals on health care, climate, infrastructure and education.

Biden’s plan would require companies with U.S. net income of more than $100 million to pay a minimum tax rate of 15%. That measure, called a “minimum book tax,” would raise about $400 billion over a decade. It would hit about 300 companies, including Amazon, Netflix and others that have been criticized for paying no federal income tax in recent years. Another proposal would double the minimum tax rate on foreign income of U.S.-based companies to 21%, raising $340 billion.

His plan also calls for $200 billion in sanctions on countries such as Ireland, the Cayman Islands and Bermuda that “facilitate illegal corporate tax avoidance.”

Biden has previously called for raising the corporate tax rate from 21% to 28%, below the 35% rate that had been in place prior to the 2017 Republican tax law and the same level President Obama had proposed. He has also said he would restore the top individual income tax rate of 39.6%, up from the current 37%. And he would raise $800 billion from new capital gains taxes and proposes to eliminate tax breaks and loopholes, including what’s known as “stepped-up basis,” a provision that currently allows individuals to pass on property that has appreciated in value without the gains facing taxation.

Positioning himself as a fiscal moderate

Biden is looking “to cast himself as the fiscal moderate in the Democratic presidential primary amid pressure from his liberal rivals,” writes The Washington Post’s Jeff Stein. His plan stands in sharp contrast to proposals from Sens. Elizabeth Warren and Bernie Sanders, both of whom have called for returning the corporate tax rate to 35% and new taxes totaling more than $20 trillion over 10 years, according to Stein.

Biden has rejected the idea of a wealth tax, which both Warren and Sanders support, and he opted against calling for a financial transaction tax, which some of his campaign advisers had reportedly considered.

“Biden has proposed a $1.7 trillion climate and infrastructure plan, a $750 billion health care plan and a $750 billion higher education plan,” Jennifer Epstein writes at Bloomberg News. “That $3.2 trillion in spending over 10 years is far less than other Democrats have proposed spending on health care alone. Warren’s campaign estimates that her health care plan would cost $20.5 trillion over a decade, her climate plan would cost $3 trillion and other proposals trillions more.”

Biden’s proposal also contrasts with President Trump’s deficit-raising tax cuts and promises to pursue additional cuts in a second term.

“The vice president does think it’s very important to be clear with the American people regarding how you’re going to pay for things in order to demonstrate they can actually get it done,” Biden policy director Stef Feldman told Bloomberg’s Epstein, who first reported the plan.

That approach may win Biden flak from both the right and the left. Brian Riedl, a tax expert at the libertarian-leaning Manhattan Institute think tank, told The Washington Post that the former vice president’s plan, while more acceptable to Republicans than those from Warren and Sanders, would still make corporate taxes in the U.S. the highest among countries in the OECD after state and local taxes are factored in.

On the other hand, Robert C. Hockett, a professor at Cornell University who has reportedly advised Warren, Sanders and Rep. Alexandria Ocasio-Cortez, described Biden’s proposal as exceedingly modest compared to those of his rivals. “Biden continues to plan the least ambitious federal program of the top-tier candidates,” Hockett told the Post. “It’s kind of a drop in the bucket given the long-term problems in the economy. It’s small potatoes for a federal plan.”

New Trump Food Stamp Rule Will Cut 700,000 from Program

The White House said Wednesday that it has finalized a rule that will tighten work requirements for participants in the Supplemental Nutrition Assistance Program, or SNAP. The new rule could result in about 700,000 people becoming ineligible for the program when it takes effect on April 1, 2020, while reducing government expenditures by $5.5 billion over five years.

Currently, individual states are allowed to waive food stamp work requirements for childless, able-bodied adults who live in economically distressed areas, which are defined as places where unemployment levels are 20% higher than the national average. Starting in April, economically distressed areas will be defined more narrowly as places where the unemployment level is above 6%. The national unemployment rate in October was 3.6%.

Why now? The administration says that a strong economy and historically low unemployment rates warrant the change. “This rule lays the groundwork for the expectation that able-bodied Americans reenter the workforce where there are currently more job openings than people to fill them,” said Department of Agriculture Secretary Sonny Perdue. A press release from the USDA said the new rule “restores the system to what Congress intended: assistance through difficult times, not a way of life.”

Critics push back: Those who oppose the rule change say it will needlessly harm some of the poorest people in the country. “Cutting off basic assistance doesn’t appear to help individuals get jobs,” said Robert Greenstein of the Center for Budget and Policy Priorities. “The rule will hit hardest those with the greatest difficulties in the labor market. That includes adults with no more than a high school education, whose unemployment rate is much higher than the overall unemployment rate; people living in rural areas where jobs are often harder to find; and people who are between jobs or whose employers have cut their hours to less than 20 hours a week, which is common in the very-low-wage labor market even when the economy is strong.”

A comprehensive effort: The work requirement adjustment is one of three changes the Trump administration intends to make with SNAP, which provides nutritional assistance to about 36.4 million people. The other two involve restrictions on automatic qualification for food stamps linked to other kinds of aid and an adjustment to the rules defining incomes for potential beneficiaries. Altogether, the new rules governing SNAP would result in 3.7 million people and 2.1 million households losing access to the program, according to a recent analysis from the Urban Institute.

Hospitals Sue to Protect Secret Prices

As expected, groups representing hospitals sued the Trump administration Wednesday to stop a new regulation would require them to make public the prices for services they negotiate with insurers. Claiming the rule “is unlawful, several times over,” the industry groups, which include the American Hospital Association, say the rule violates their First Amendment rights, among other issues.

"The burden of compliance with the rule is enormous, and way out of line with any projected benefits associated with the rule," the suit says. In response, a spokesperson for the Department of Health and Human Services said that hospitals “should be ashamed that they aren’t willing to provide American patients the cost of a service before they purchase it.”

See the lawsuit here, or read more at The New York Times.

Chart of the Day

The Kaiser Family Foundation, a nonpartisan nonprofit focused on health care, points out that premiums for Affordable Care Act marketplace plans are lower on average for 2020 than they were for 2019 — but according to the foundation’s November tracking poll, just 6% of Americans think that’s the case, compared to 44% who think premiums are higher than last year. A new Gallup poll finds that 50% of Americans approve of Obamacare while 48% disapprove.

Is Trump's $28B Bailout Paying Farmers Too Much?

The Trump administration is spending $28 billion to bail out farmers hurt by the president’s trade war with China — a huge sum that some experts say overestimates the economic losses inflicted by the conflict.

Joseph Glauber, a former chief economist at the Department of Agriculture, told Bloomberg News that according to his analysis of multiple research papers on the subject, soybean farmers are being overcompensated by the bailout program. “It’s clear that the payment rates overstated the damage suffered by soybean growers,” Glauber said. “Based on what the studies show, the damages were about half that.”

Soybeans are far and away the largest single crop affected by the trade conflict, but other crops have been hurt as well. Glauber said that most farm products have taken less of a hit than estimated by the USDA, though there are probably a few that may be worse off.

The bailout is certainly having an effect on farm income. The USDA forecast last week that net farm income will total $92.5 billion in 2019, a 10% increase over the year before. Nearly 40% of that income will come the bailout payments, disaster assistance, federal subsidies and insurance payments.

The White House Slams Pelosi’s Drug Plan. Experts Call Its Claims ‘Nonsense’

The White House Council of Economic Advisers issued a report Tuesday warning that House Speaker Nancy Pelosi’s bill to lower prescription drug prices would have devastating health and economic costs. But health policy experts cautioned that the report itself is a flawed product of questionable methodology and assumptions.

The CEA report warns that Pelosi’s bill “could lead to as many as 100 fewer drugs entering the United States market over the next decade, or about one-third of the total number of drugs expected to enter the market during that time.”

The report also claims that, by limiting access to lifesaving drugs, Pelosi’s bill would reduce American’s average life expectancy by about four months. And, it says, having fewer new drugs on the market would result in worse public health, with an economic toll that could reach as high as $1 trillion a year over the next decade, far greater than the cost savings generated by the legislation. (The Congressional Budget Office estimated in a preliminary analysis in October that parts of Pelosi’s bill, H.R. 3, would save Medicare $345 billion over seven years while resulting in about eight to 15 fewer drugs coming to market over 10 years.)

Health policy experts weren’t buying the new report’s numbers, or its assumption that the drugs that could be lost would be lifesavers.

"This is nonsense," tweeted Stacie Dusetzina, an associate professor in health policy and cancer research at Vanderbilt University Medical Center. "I am not one to throw shade on simple analysis. There are just so many problems here beyond the calculation."

Peter Bach, director of the Drug Pricing Lab at Memorial Sloan Kettering Cancer Center in New York, called the White House report “internally contradictory,” given that that Trump administration has also proposed ideas that would lower drugs prices and manufacturers’ revenues — and, applying the logic used in the report, would therefore also reduce pharmaceutical innovation.

“Either decreased prices = decreased revenues = decreased innovation, or not,” he tweeted. “How that endpoint is achieved (Potus vs HR3) should not matter and yet here apparently one approach scuttles innovation and the other doesn’t. SMH.”

The bottom line: Pelosi’s drug bill isn’t going anywhere in the Republican-led Senate, but if you hear critics attack it as wiping out 100 new drugs, costing $10 trillion or reducing American’s life expectancy, take those charges with a healthy dose of skepticism.

Read more at S&P Global or CNBC.


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