Joe Biden is about to change the tax policy of the United States. The United Kingdom should expect the Chancellor to feel the need to imitate him
The differences could not be more striking. Promises to “rebuild better” from Covid-19 were made on both sides of the Atlantic. But as blockade measures are increasingly relaxed, President Joe Biden shows far more ambition than Boris Johnson’s government when it comes to shaping post-pandemic recovery.
This week, Washington will set out plans for more comprehensive reforms of American tax policy in half a century, alongside trillions of dollars in investment finance to tackle deeply-rooted inequalities.
In a move that is expected to reverse years of tax cuts that have benefited society’s richest, taxes on investment gains will almost double, from 20% to 39.6%, for Americans with earnings of $ 1 million or more. A 3.8% tax on investment income used to finance Obamacare will also be withheld, bringing the US maximum rate to 43.4%.
Biden is also preparing to raise the marginal income tax rate from 37% to 39.6%, as a way to bring about a parity between the taxation of wealth and labor income.
There are two important issues to consider. First, whether the most ambitious version of Biden’s plan will go through a divided Congress. The president will demand unanimous Democratic support, given the expected opposition from Republicans. Second, there are concerns about inflation as the stimulus plan fuels US growth.
However, the risks of lasting damage to society’s poorest, as well as the need to tackle inequalities in the US long before Covid, mean that a broad package of structural fiscal stimulus and reform measures is the only way to “rebuild better ”Promise will mean anything more than a catchphrase.
In contrast, the measures outlined by Chancellor Rishi Sunak in last month’s budget are positively timid. Instead of rekindling the spirit of economic reform that followed the Second World War, as in the United States, Britain obtains freeports and a license extension until the fall.
The government toyed with ideas similar to Biden’s, but it didn’t even come close to following them. Last year, the Office for Tax Simplification recommended increasing the capital gains tax to align it with the income tax, after a review commissioned by Sunak. It was a welcome finding by progressives, who for years had been asking the government to take such measures to combat inequality.
The IPPR research institute estimates that this measure could raise £ 90 billion in additional revenue in five years – after taking into account the behavioral changes that many wealthy individuals will make to avoid the full impact of the tax increase. Given the urgent need to tackle inequality and the government borrowing £ 303 billion last year – more than in any year since 1946 – it is an attractive idea.
The share of national income paid in wages, salaries and benefits has been steadily declining for decades, both in the United States and the United Kingdom, while returns on capital – returns on investment – have steadily increased.
With the capital gains tax set at a lower rate than the income tax, this disparity was only exacerbated by the tax system. Reforms aimed at rebalancing the system would go a long way towards addressing this inequity. However, the chancellor has taken no action in this regard in the budget.
There are hopes among progressives that Biden’s tax audacity could help Britain take other steps – not least because it would pressure the government to follow the example of the world’s largest economic superpower.
There was a first glimpse of how this would work. In the budget, Sunak raised the corporate tax, arguing that he was able to maintain a competitive rate because the Biden government was also raising taxes on the company’s profits.
The shift to a more radical economic policy in Washington makes room for the London government to take similar measures. To fulfill his promises to rebuild better, Johnson just needs to look across the Atlantic for inspiration.
The force is still strong with Netflix
“It’s a little wobbly now,” Netflix founder Reed Hastings said last week, underestimating the sale of shares caused by a dramatic drop in the number of new subscribers that took $ 20 billion from the market value of the largest subscription service. streaming in the world.
Netflix added just under 4 million new subscribers in the first three months, a quarter of those it signed in the same period last year and 2 million less than it had predicted. The pandemic home entertainment boom fueled the company’s best year ever, but with a forecast of just one million new subscribers this quarter – the lowest level in more than a decade – has the world surpassed the “Netflix peak”?
The pioneering advantage has made Netflix a steamroller of 200 million subscribers. But big money rivals have emerged, including Disney +, which reached more than 100 million subscribers in just 16 months, and Amazon Prime, with more than 150 million users. Many of these new players have provided Netflix’s most popular content, from Friends to Marvel movies, and now channel them into their own services.
Netflix is now looking for new sources of revenue, such as cracking down on password sharing. Analysts estimate that more than 30 million households “borrow” login details, losing the company $ 6 billion a year.
Hastings hopes that consumer products related to its successful content – Disney makes billions from the sale of Frozen and Star Wars merchandise – will contribute to a “gigantic and defensible profit pool”.
But Netflix has never been in a more solid financial position. It can finance its content spending without resorting to debt markets, operating margins are on the rise and investors are seeing their first share buyback in more than 15 years. The first two quarters will be disappointing for growth, but Netflix is ready for battle in the next era of global streaming wars.
JP Morgan needs to reflect on Super League gaffes
‘We misjudged how this business would be seen by the football community in general and how it could impact them in the future. Let’s learn from that, ”said JP Morgan on Friday, finally acknowledging his spectacular goal in his role as the alleged financier of the 48-hour European Super League fiasco.
If what Chief Executive Jamie Dimon is looking for is lessons, here it is: stop bragging that JP Morgan is on a mission to improve the fate of “communities” – he used the word tirelessly in this month’s annual letter to shareholders . It will be at least half a decade before Europeans are ready to hear another round of self-congratulatory bullshit.
That the Super League would infuriate football fans across Europe should be obvious from the day the project was conceived. The idea of a closed competition of elite clubs goes against more than 100 years of the sport’s history. The only motivating force was the clubs’ desperation to escape their debts by increasing their transmission revenues.
We don’t know how closely JP Morgan’s “public accountability committee” – the body charged with dealing with issues that could damage the company’s reputation – has examined the Super League proposal. But someone older should be aware that granting a € 3.25 billion (£ 2.8 billion) loan was the only thing that gave credence to the chaotic undertaking. Even so, JP Morgan moved on. If it took political polls, it did not draw the right conclusion – that the adventure would not fly. No European bank, it is suspected, would have come close to the Super League proposal.
The oligarch and billionaire football club owners are ultimately to blame, of course, but JP Morgan comes across as clumsy at best, or simply living in a bubble. A long period of silence from Dimon on the subject of serving communities is now in order.