Goldman has a crack:
- The Treasury has released a new more detailed description of its corporate tax proposals. They are in line with the outline from the White House last week, but include a few new details related to the treatment of foreign income and the minimum tax on book income.
- Overall, Treasury estimates the proposal would raise around $2 trillion over 10 years. Compared to the CBO’s projection of total corporate profits, this would represent an increase in the effective corporate tax rate of 7pp.
- The net increase by company would vary substantially from this for two reasons. First, the White House is also proposing substantial tax incentives for specific activities—manufacturing, R&D, infrastructure, housing, and clean energy to name a few—many of which would go to corporations.
- Second, around 60% of the gross tax increase the Treasury proposes relates to more heavily taxing the foreign profits of multinationals at rates similar to the current 21% domestic tax rate. The proposals would also tax the US profits of foreign multinationals more heavily.
- These details are very likely to change. Senate Democrats have already released their own proposal, though it follows the same general outline. More importantly, some centrist Democrats have already suggested they prefer as maller corporate rate increase.
- The Treasury’s report is silent on the timing of tax increases, but we think a retroactive tax hike is very unlikely. Budget rules require long-term offsets to new spending, but not in the near-term, and we expect that retroactive tax increases would reduce political support for the next fiscal package.
Great stuff to my mind and much of it will get through the budget reconciliation process as well. All of those fake left dills obsessing over race and gender need a long cold shower of Biden class warfare.
While we’re at it, here’s the Goldman take on Fed minutes:
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BOTTOM LINE: The Fed staff upgraded its economic forecast “considerably,” reflecting a faster-than-expected pace of reopening and larger fiscal response. Both participants and the staff expected inflation to temporarily rise above 2% in the near term, and the staff expected inflation to then run a bit below 2% in 2022 and reach 2% in 2023. The FOMC minutes provided little new information about the policy outlook deletion. Participants discussed the concern that continued expansion of the Fed’s balance sheet and a drawdown of the Treasury General Account will put downward pressure on money market rates. The minutes also noted that the Chair said that if “undue downward pressure on overnight rates” emerges, it might be appropriate to adjust administered rates. However, the effective fed funds rate has held roughly steady since the meeting, and the bulk of the near-term bill pay downs is likely behind us, so we do not anticipate adjustments for at least the next meeting or two.
Onwards and upwards for profits, yields, inflation and DXY.