The US Treasury said a proposal to beef up the IRS includes reporting any transfers of at least $10,000 in cryptocurrencies for tax purposes.
“As with cash transactions, businesses that receive crypto assets with a fair-market value of more than $10,000 would also be reported on,” The Treasury Department said.
Bitcoin sold off by as much as 6% on Thursday following the announcement.
The Treasury Department detailed plans to have any cryptocurrency transfers of at least $10,000 to be reported to the Internal Revenue Service in a report on Thursday.
Bitcoin pared its gains and fell by as much as 6% in afternoon trading following the release of the report, adding to the cryptocurrency’s volatile week of trading in which it fell more than 30% in a day.
“As with cash transactions, businesses that receive cryptoassets with a fair-market value of more than $10,000 would also be reported on,” the Treasury Department said in the report. The report is part of the Biden administration’s plans to beef up the IRS in hopes of collecting more tax revenue that otherwise goes unreported.
The IRS first began asking individuals if they ever bought or sold virtual currencies in 2020, and now requires individuals to report capital gains realized from any cryptocurrency transactions.
The Treasury Department said that reporting the crypto transactions is necessary “to minimize the incentives and opportunity to shift income out of the new information reporting regime,” according to the report.
“Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion,” the Treasury added in its report.
Treasury Secretary Janet Yellen reiterated her support for President Joe Biden’s spending plans on Sunday, pitching the measures as strong investments in the country’s future.
The president on Wednesday rolled out a $1.8 trillion spending proposal that includes funding for paid family and medical leave, universal pre-K, and childcare. The measure follows the March passage of Biden’s $1.9 trillion stimulus package and joins the president’s $2.3 trillion infrastructure plan as his latest step in big-government economic policy.
Republicans and some moderate Democrats have balked at the follow-up plans cost, saying the measures would dangerously inflate the government’s debt pile. Yellen countered on NBC’s “Meet The Press,” saying it’s a better time than ever to spend on such projects.
“We’re in a good fiscal position. Interest rates are historically low… and it’s likely they’ll stay that way into the future,” the Treasury Secretary said. “I believe that we should pay for these historic investments. There will be a big return.”
The economy is poised to rebound from the coronavirus pandemic throughout 2021 and, in turn, bring in greater tax revenues. That stronger growth justifies some spending, but the safest and most sustainable way to spend on infrastructure and care involves equitable tax increases, Yellen said.
Stricter tax compliance would also play a critical role. The country is currently estimated to lose $7 trillion through tax underpayment over the next decade. Stepping up compliance efforts and adequately funding the IRS can also boost tax collection, Yellen added.
The Treasury Secretary also rebuffed concerns of the massive spending fueling a sharp rise in inflation.
Administration officials and the Federal Reserve already anticipates the latest stimulus and economic reopening to drive a sharp but temporary bout of stronger inflation. While Biden’s latest proposals are far larger than the March stimulus, plans to spend them over eight to 10 years cuts down on the risk of rampant inflation, Yellen said.
“I don’t believe that inflation will be an issue, but if it becomes an issue, we have tools to address it,” she added. “These are historic investments that we need to make our economy productive and fair.”
President Joe Biden is creating a task force to help promote and strengthen union membership through an executive order today.
According to the White House, the task force – which will be chaired by Vice President Kamala Harris, with Labor Secretary Marty Walsh serving as vice chair – will focus on helping to bolster union membership and worker organizing and bargaining.
“Since 1935, when the National Labor Relations Act was enacted, the policy of the federal government has been to encourage worker organizing and collective bargaining, not to merely allow or tolerate them,” the White House release said. “In the 86 years since the Act was passed, the federal government has never fully implemented this policy.”
The main focuses of the task force include setting up the federal government as a “model employer,” helping to bolster worker organizing – especially by increasing power for marginalized workers, and those in industries where organizing is difficult – as well as generally upping the number of workers in unions.
Union membership has fallen
A report from the Economic Policy Institute (EPI), a left-leaning think tank, found that the number of workers who are represented by a union declined by 444,000 from 2019 to 2020.
However, the rate of unionization – the share of workers represented by one – actually increased in 2020, to 12.1% from 11.6%. The report attributes that to the power that unions give their workers, potentially resulting in those unionized workers having more of a say in how their workplaces functioned during the pandemic and its economic impact. And industries that are less unionized – the report cites leisure and hospitality – also saw the most job losses.
On the whole, according to EPI, the unionization rate is highest for Black workers, coming in at 13.9%. Throughout the pandemic, both that rate and the number of Black workers represented by a union increased.
Data from the Bureau of Labor Statistics also found that “Nonunion workers had median weekly earnings that were 84 percent of earnings for workers who were union members ($958 versus $1,144).”
However, in a historical context, unionization rates are still very low. EPI said 2020’s rate is still below half of what it was 40 years ago. Amazon workers had a recent high-profile union loss, as workers in a Bessemer, Alabama warehouse voted against forming a union. That unit would’ve been the first union for the company.
“Amazon didn’t win – our employees made the choice to vote against joining a union,” the company said in a statement after the vote, over which the Retail, Wholesale and Department Store Union (RWDSU) has filed official objections.
But with Biden’s task force, union membership could see a boost. The president has also backed a labor-rights bill called the PRO Act.
“As America works to recover from the devastating challenges of deadly pandemic, an economic crisis, and reckoning on race that reveals deep disparities, we need to summon a new wave of worker power to create an economy that works for everyone,” Biden said in a March statement on the bill.
The Biden administration spent much of its first days in office testing how further stimulus might drive inflation higher. No modeled scenario saw price growth surge out of control, The New York Times reported on Wednesday.
Still, the report said repeatedly that White House and Treasury officials are “worried” about the issue.
The inflation debate has loomed large over the White House since before President Joe Biden was even inaugurated. The president unveiled a $1.9 trillion relief proposal in January, pitching the plan as an additional boost for the US economic recovery. Largely Democrat-affiliated economists have fiercely debated the inflation risks of such large deficit-financed spending, led by former Obama- and Clinton-administration official Larry Summers.
Democrats largely backed the measure, saying the risks of retracting government support were greater than the risks of spending too much. But Republicans – and even some moderate Democrats – balked at the hefty price tag and cited fears that another set of stimulus checks could spark a dangerous surge in inflation.
“This is the least responsible fiscal macroeconomic policy we’ve had for the last 40 years,” Summers said in a March interview with Bloomberg TV, adding the measures are a product of “intransigence” among Democrats and “irresponsible behavior” among Republicans.
Democrats went ahead without any Republican votes, passing the bill via reconciliation, and Biden signed it into law on March 11. Still, the stimulus push wasn’t without some trepidation. A handful of officials in the Treasury Department spent several months modeling how Americans would deploy new fiscal support, and whether any outcome could lead to stifling inflation, according to The Times. Treasury Secretary and former Federal Reserve Chair Janet Yellen even helped create the models.
Their observations were encouraging and lend new support to Biden’s latest spending proposal. The team tested a range of potentialities for how quickly Americans would spend stimulus, where they would deploy cash, and how the labor market’s recovery would affect inflation. Yet no outcome saw inflation charge out of the Fed’s control and risk a new recession, the Times reported.
The findings have been hinted at in statements from the White House and the Treasury in recent weeks. Long-term scarring in the labor market poses a greater risk than inflation, Yellen told ABC’s “This Week” in March. Economic reopening is expected to drive a jump in prices, but the effects will likely be temporary and fail to drive sustained inflation, she added.
The administration’s Council of Economic Advisors mirrored Yellen in a Monday blog post. A temporary rise in inflation is consistent with trends seen after other major events like wars or past labor-market rebounds, economists Ernie Tedeschi and Jared Bernstein said. The White House will continue to monitor consumer prices, but it expects inflation to fade as actual price growth “runs more in line with longer-run expectations,” they added.
Fed Chair Jerome Powell has repeatedly backed up such an outlook. The central bank chief said last month that the Fed will “be patient” in monitoring inflation and eventually lifting interest rates. The most likely scenario during the recovery is that prices move higher but fail to stay elevated as the country enters a new sense of normalcy, Powell said in early March.
Although the Fed operates independently from the executive branch and doesn’t play a role in fiscal spending, officials testing inflation scenarios told the Times that the Biden administration trusts the Fed to intervene and stave off price growth should it accelerate faster than expected.
The latest data signals the country is far from any sort of inflation scare. The Consumer Price Index – a popular gauge of overall inflation – rose 0.6% in March as stimulus, reopening, and vaccination fueled stronger economic activity. Economists expected a 0.5% gain.
Consumer prices rose 2.6% year-over-year, also exceeding estimates. The measure is skewed somewhat by year-ago data, since prices initially dropped when the pandemic first slammed the US economy. Those readings present a lower bar for year-over-year inflation. Though the data points to stronger inflation, price growth still has a ways to go before it trends at the Fed’s above-2% level and warrants serious concern.
That opening paves the way for additional spending. Biden unveiled a $2.3 trillion infrastructure proposal late last month that includes funds for nationwide broadband, improved roads and bridges, and affordable housing. The package is expected to be spent over eight years, compared to the weeks-long rollout seen with much of Biden’s stimulus plan. Such long-term deployment would present little inflationary risk, and Biden has portrayed the plan as an investment in American industry, jobs, and research as opposed to an emergency relief measure.
The March uptick in inflation, however, does signal that price growth is trending higher. Future CPI readings are set to be closely watched releases as the administration balances its spending goals with a red-hot economy. Economists and officials are anticipating stronger inflation. How price growth trends from there will determine whether the Biden administration was successful or created new risks.
President Joe Biden said on Tuesday he would safeguard the independence of the Federal Reserve, breaking with his predecessor, Donald Trump, who often tried pressuring the central bank to lower the cost of borrowing.
“Starting off my presidency, I want to be real clear that I’m not going to do the kinds of things that have been done in the last administration – either talking to the attorney general about who he’s going to prosecute or not prosecute … or for the Fed, telling them what they should and shouldn’t do,” he said at a White House news conference.
“I think the Federal Reserve is an independent operation,” he said, adding he does speak with Treasury Secretary Janet Yellen. The Treasury did not immediately respond to a request for comment.
The remarks reflect another way that the president is distancing himself from his predecessor by preserving the Fed’s traditional independence from the White House. Trump heaped criticism onto Powell throughout his term, assailing him as “an enemy of the state” and a “terrible communicator” from his now-suspended Twitter account.
Trump furiously tried pressuring Powell from raising interest rates while the economy was in the middle of its longest expansion in history in the years leading up to the pandemic. At one point, he suggested Powell may be a “bigger enemy” of the US than China.
Powell played a critical role designing the Fed’s stimulus programs as vast swaths of the economy shut down last year. He also encouraged Congress to continue approving more federal aid for struggling individuals, small businesses, and state and local governments.
“Given the low level of interest rates, there’s no issue about the United States being able to service its debt at this time or in the foreseeable future,” he told NPR recently. Powell, a Trump nominee, has also downplayed the inflation risks stemming from the $1.9 trillion stimulus package.
Powell’s term as Fed chair expires in 2022, and Biden must decide whether to keep him onboard.
Treasury Secretary Janet Yellen has been clear since her confirmation hearing and subsequent press appearances that the Biden administration needs to raise new tax revenues. At the same time, she’s warned of the difficulties of implementing a wealth tax, which is favored by the progressive wing of the Democratic Party.
Part of the solution is reforming the corporate tax rate – not just in the US but far beyond its borders.
The US was long an outlier, with a corporate tax rate of 35% versus the international average of 24%, until former President Donald Trump’s 2017 tax cut slashed the corporate rate to 21%. But even that hasn’t stopped other countries from lowering their rates to attract multinationals. The Post noted that nine countries lowered their corporate tax rate just last year.
Nobel Prize-winning economist Joseph Stiglitz, a mentor of Yellen’s, told the Post that if she is successful in these talks, it would be “a little like the Paris climate accord of taxes.” Yellen is holding talks with more than 140 international counterparts via the Organization for Economic Cooperation and Development (OECD), where countries are looking at global tax issues, with a particular focus on tech.
The goal for now is a nonbinding consensus on a minimum tax rate within the OECD, with the thinking that the US could move off the Trump-era 21% without fear of multinationals leaving to pay taxes at a lower rate somewhere else.
In the background of Yellen’s push for a global minimum is the Biden administration’s current push to find more tax revenue. President Joe Biden is reportedly planning the first major federal tax increase in nearly three decades, according to Bloomberg. One of the proposals on the table is a raise to the corporate tax, something that Biden campaigned on. He’s proposed raising the corporate tax rate to 28%.
The right-leaning Tax Foundation found that, since 1980, the “worldwide average statutory corporate tax rate has consistently decreased,” with the biggest drops coming in the early 2000s. According to the Tax Foundation, “the worldwide average statutory corporate income tax rate” is 23.85%.
Biden also just said this week that Americans earning over $400,000 could see an increase in their taxes, a measure he acknowledged may not win any Republican support.
There could be a complicated path forward for Yellen’s corporate minimum, per the Post. Congress may need to be involved in approving new tax rules, and it could take the countries involved years to enact the tax, if they even choose to adopt it.
As the Post reports, if the complex measure is successful, it would be a huge accomplishment for both Yellen and Biden’s presidency – and maybe the world. It could also help pay for a $2 trillion infrastructure package.
One year after the S&P 500 tumbled nearly 8% on COVID-19 fears, experts on Wall Street see the US bearing down on the finish line of the pandemic.
Declining case counts, vaccine rollouts, and expectations for new stimulus have lifted spirits in recent weeks. Economists have upgraded growth forecasts and investors continue to shift cash from defensive investments to riskier assets more likely to outperform during a rebound. Major banks’ strategists are taking it one step further.
The rapidly improving backdrop and “spectacular” profit growth in the fourth quarter signal “the recession is effectively over,” Michael Wilson, chief investment officer at Morgan Stanley, said Sunday.
“At the current pace of vaccinations and with spring weather right around the corner, several health experts are talking about herd immunity by April,” he said in a note. “It’s hard not to imagine an economy that’s on fire later this year.”
JPMorgan made a similarly bullish claim late last month, telling clients it doesn’t expect new COVID-19 strains to dent its positive outlook. The spread of new variants is still overshadowed by the broader decline in cases, the team led by Marko Kolanovic, chief global markets strategist at JPMorgan, said.
The rate of vaccination implies the pandemic will “effectively end” in the next 40 to 70 days, they added.
To be sure, there’s plenty of progress to make before the pandemic is no longer a public health threat. The US reported 98,513 new COVID-19 cases on Monday, lifting the seven-day moving average to 64,722, according to The New York Times.
And while the country is averaging 2.17 million vaccine administrations per day, reaching herd immunity at the current rate would still take roughly six months, according to Bloomberg data, which gauges how quickly the US can vaccinate 75% of its population.
Herd immunity is widely considered the most effective way to defeat COVID-19. Yet Wall Street’s more bullish forecasts suggest a mix of vaccinations and continued precautions could crush the virus in a matter of weeks.
Officials have warned that, while accelerated growth is on the horizon, there’s work to be done before the US stages a complete recovery. Reopening and new stimulus may fuel a sharp increase in inflation, but such a jump will likely be short-lived and fail to meet the Federal Reserve’s target, Fed chair Jerome Powell said Thursday.
The labor market also has “a lot of ground to cover” before reaching the central bank’s goal of maximum employment, Powell added. The chair indicated that, along with a lower unemployment rate, the Fed would need to see improved wage growth and labor-force participation before tightening ultra-easy monetary conditions.
Others are more optimistic. Treasury Secretary Janet Yellen said Monday that the $1.9 stimulus package nearing a final House vote can “fuel a very strong economic recovery.”
“I’m anticipating, if all goes well, that our economy will be back to full employment – where we were before the pandemic – next year,” Yellen said in an interview with MSNBC.
One of the slowest-recovering sections of the US economy can return to pre-pandemic health as early as next year, Treasury Secretary Janet Yellen said Monday.
That would be the labor market.
While business output and retail sales have all trended higher in recent weeks, job growth continues to lag behind the overall recovery. Friday’s jobs report, while stronger than expected, still shows roughly 10 million Americans out of work. Weekly jobless claims remain at elevated levels. And the “real” unemployment rate, which measures people who have stopped looking for work, stands at around 9% after Friday.
Yellen sees the stimulus changing that, telling MSNBC that the $1.9 trillion stimulus plan moving through Congress will play a critical role in boosting demand and reinvigorating job creation.
“We expect the resources [in the bill] to really fuel a very strong economic recovery,” Yellen said. “I’m anticipating, if all goes well, that our economy will be back to full employment – where we were before the pandemic – next year.”
Senate Democrats approved the new relief package on Saturday, and the House is expected to vote on the last version before President Joe Biden signs it on Tuesday. Biden is overwhelmingly likely to be able to sign it into law before expanded unemployment benefits expire on March 14.
To be sure, “full employment” is different from the “maximum employment” target sought by the Federal Reserve. The central bank has indicated it won’t rein in its ultra-easy monetary policy until wage growth improves and the unemployment rates for minorities and low-income groups fall.
Yellen also dispelled concerns that inflation would run rampant as new stimulus hits households. Direct payments and the unemployment-insurance supplement included in the measure are likely to lift consumer spending and, in turn, lead businesses to raise prices. Republicans have argued the relief plan will lead the economy to overheat, but the Treasury Secretary isn’t concerned.
“I really don’t think that is going to happen,” Yellen said.”We had a 3.5% unemployment rate before the pandemic and there was no sign of inflation increasing.”
The comments come as Treasury yields hover at their highest levels since February 2020. Expectations for strong growth and higher inflation have led investors to dump government bonds and shift cash to sectors best positioned to thrive through the economic recovery.
The rapid leap in Treasury yields jostled markets and caught the Fed’s attention. Central bank officials have so far only made soft comments regarding the sell-off, but some on Wall Street are preparing for the Fed to further clarify its inflation expectations when policymakers meet on March 17.
To help the people who have struggled the most during COVID-19, the US Treasury Department announced a $9 billion investment on Thursday in programs to support low-income and minority communities.
The Treasury Department opened applications for the Emergency Capital Investment Program, which, according to a press release, is designed to help communities traditionally excluded from the financial system gain access to COVID-19 relief. To do so, the Program will invest $9 billion in Community Development Financial Institutions (CDFI) and minority depository institutions (MDI) to support the provision of grants and loans in low-income and minority areas.
“America has always had financial services deserts, places where it’s very difficult for people to get their hands on capital so they can, for example, start a business. But the pandemic has made these deserts even more inhospitable,” Treasury Secretary Janet Yellen said in a statement. “The Emergency Capital Investment Program will help these places that the financial sector hasn’t typically served well. It will allow people to access capital, especially in communities of color and rural areas.”
According to the press release, the ECIP will set aside $2 billion for those with less than $500 million in assets, and an additional $2 billion for those with less than $2 billion in assets.
The Program also includes:
Incentivized lending with no dividends or interest payable or accruing during the first 24 months;
Maximized Program effectiveness by ensuring stock investments under the ECIP qualify for beneficial capital treatment;
And tools to strengthen CDFIs and MDIs for the long-term.
The $900 billion stimulus package which Congress passed in December included $12 billion for CDFIs and MDIs, and the $9 billion allocated on Thursday is part of that funding.
Along with the ECIP, the press release said two other complementary programs are being implemented: the CDFI Rapid Response Program, which allocated $1.25 billion for CDFIs to respond to the pandemic’s economic impact, and the Emergency Support and Minority Lending Program, which allocated $1.75 billion to expand lending in low-income, minority communities.
The CDFI Rapid Response Program opened on February 25.
This new funding is part of President Joe Biden’s efforts to ensure equity in aid distribution during COVID-19. On February 22, he announced changes to the Paycheck Protection Program to ensure those who had previously been left out of it could receive aid, and the president’s American Rescue Plan includes funding for underserved communities in the forms of small business aid, housing aid, and more.
“Taken together, these three programs, created under the Consolidated Appropriations Act, 2021, enable Treasury to take aggressive action to address the impacts of the ongoing COVID-19 pandemic, and to promote an equitable economic recovery,” the press release said. “These historic investments are intended to provide catalytic growth for institutions and communities that have traditionally been underserved by the financial sector.”
Yellen also said during a virtual conference held by the Times that “a wealth tax has been discussed,” but it’s not favored by President Biden.
One major plank of Sen. Warren’s presidential run – and, later, Sen. Bernie Sanders’ run – was a wealth tax. Warren called for an “Ultra-Millionaire Tax” that would levy an annual 2% tax on households with net worths between $50 million and $1 billion. Households that have a net worth over $1 billion would have seen a 3% annual tax. Warren has renewed her calls for a wealth tax amidst the pandemic, as inequality grows along with the K-shaped recovery.
Stephen Henley, senior managing director and national tax practice leader at CBIZ MHM, told Insider that wealth taxes like Warren’s and Sanders’s would require wealthy individuals to value their net assets every year, similarly to how assets are valued for an estate tax when someone dies. With a wealth tax, that valuing would be annual – “not just when you die.”
“So somebody that might have $50 million or $100 million of wealth, you can imagine having to go out and get values of all those assets every year would be an administrative nightmare,” Henley said.
Many of those individuals may hold private assets in addition to public ones, another “administrative nightmare” for valuing assets.
“You can also see where that would be ripe for tax avoidance, and even tax evasion,” Henley said.
For instance, if the legislation didn’t require someone to get an appraisal, they’d have to come up with some way to devalue it. Or people could hire appraisers that know the appraisal is for a wealth tax, and “use certain methodologies that will benefit the client.”
Henley also added that the IRS “doesn’t have the manpower or the bandwidth” to increase their auditors, who would audit all of those forms.
So if not a wealth tax, then what? Yellen has indicated that she’s open to some other ways to raise tax revenues.
There may be some other potential changes on the horizon
The Times reports that Yellen is looking into ending one tax rule that could have a significant impact: the “stepped-up basis” on capital gains.
For this kind of tax, Henley gives the example of a piece of land that someone bought for hundreds of thousands of dollars years ago, but now it’s worth $5 million. The owner of that land then passes away, and the land is left to an heir. So even though the land has appreciated in value, it’s passed along to the heir at that current value of $5 million.
Under the current regime, there would be no capital gains tax on how much the land appreciated, even though in fact it would have gained millions of dollars in value. Instead, capital gains taxes would be measured “only on the change in the asset’s value relative to the stepped-up basis,” according to the Congressional Budget Office – aka, gains beyond that $5 million value at the time of inheritance.
“So in other words, if they were to immediately sell the land for $5 million after the will was probated, and they got the land, then they would pay no income tax on that,” Henley said. “No capital gains tax.”
The Times reports that Yellen “plans to explore stopping” that rule.
“It would probably generate more revenue immediately,” Henley said, “because you’d have everybody that is subject to that threshold over $1 million, either a capital gain over $1 million or income over $1 million – they’d be taxing.”
Per Bloomberg, Yellen also said the Biden administration is looking to raise the corporate tax to 28%. As Insider’s Allana Akhtar previously reported, that increase to 28% from 21% has long been a part of Biden’s tax plan.
