Thought of the Week:
One of the most famous quotations falsely attributed to Winston Churchill is, “If you’re not a liberal at 25, you have no heart. If you’re not a conservative at 35, you have no brain.” Whether the saying is actually Edmund Burke, John Adams, or some other statesman may never be known, but in my mind I’ve always at least partially linked the quip to the taxes extracted from my paycheck every month. With Democrats trying to move both an infrastructure bill and reconciliation package by October 1, taxes will certainly be front and center once Congress fully returns from recess in September. In fact, the portions of the $3.5 trillion reconciliation package that will be the most difficult to pass will be the tax provisions. Which “pay-fors,” whether corporate, individual, or some combination of both, ultimately garner enough votes will determine how much new revenue can be raised and how large the final reconciliation bill will be. More recent quotations, definitely linked to taxes and easily traced to President Biden, Speaker Pelosi, and Majority Leader Schumer all begin, “If the rich [or large corporations] would just pay their fair share…” Although what constitutes “fair share” is never clearly defined, the task of selling this concept may have just gotten more difficult with the release of a new report from the Tax Policy Center. The report found that 61% of Americans, more than 100 million households, paid no federal income taxes in 2020. While the pandemic and related stimulus and tax credit programs surely caused that figure to spike, the truth is that the share of Americans who pay no federal income taxes has hovered around 44% for most of the last decade. 57% are expected to pay zero income taxes this year, and the number is projected to stay above 42% through 2025. The extremely high number of non-taxpayers will fuel the debate in Congress over ever-higher taxes on the wealthy. While Democrats will hold to the “pay their fair share’ mantra, Republicans will counter that the tax structure is already progressive and relies heavily on revenue from a small group of high earners and companies at the top—the top 20% of taxpayers paid 78% of federal income taxes in 2020 and the top 1% of taxpayers paid 28% of taxes in 2020, up from 25% in 2019. The Washington office has been following the infrastructure and reconciliation bills closely and can provide additional details on their contents as well as the likely prospect of passage.
Thought Leadership—from our Associations, Think Tanks, and Consultants:
John Zogby Strategies: Americans Form Supermajority on “Radical” Issues: Although division and extreme polarization characterize the current political landscape, recent polls indicate that an opportunity exists to build unity along extreme reforms—term limits for Congress, Senate, and federal bureaucrats (83% in favor) and support for removing all corporate PAC money from campaigns and elections (87% in favor). In fact, the mistrust towards government is so high that 78% of Americans would support a law that goes as far as requiring high-level federal bureaucrats to wear body cameras while at work. While Zogby Strategies believes the results show that Democrats, Republicans, and Independents can come together to form a supermajority, the question becomes whether the leadership of the two major parties acts to address this mistrust or whether a 3rd party candidate will emerge to exploit it.
National Association of Manufacturers (NAM): The Fed May Dial Back Stimulus: The Federal Reserve may soon take action to scale back its monthly bond purchases. In fact, minutes show there is a growing consensus inside the Fed to do just that, with an announcement expected at one of the central bank’s three remaining meetings in 2021. Although a level of disagreement remains as to when it would be appropriate to dial back, some analysts feel that action will occur in the next few months so that the Fed would be able to raise rates if the economy continues to grow next year, while others hold that the Fed may wait until early next year to ensure the job market has fully recovered. Last month’s meeting provided little guidance—the Fed said that this year’s rise in inflation would prove transitory, but also noted that the risks of higher-than-expected inflation exceed the risks of lower-than-expected inflation. The next two meetings of the Federal Reserve will be held on September 21–22 and then November 2–3.
Trade Analyst Laura Chasen: Former Chicago Mayor Emanuel Nominated Ambassador to Japan: President Biden announced that he has nominated long-time Democratic adviser Rahm Emanuel to be U.S. Ambassador to Japan. Emanuel is known as a moderate Democrat who was President Obama’s Chief of Staff when Biden was Vice President. Before joining the Obama White House, Emanuel was a three-term Congressman. While Emanuel is likely to be confirmed by the Senate, it is unknown when he might come up for a vote as the Senate has a backlog of nominations and a full legislative calendar. Although Emanuel has no specific Asia or Japan experience, this may be outweighed, in terms of his effectiveness in Tokyo, by the fact that he is a friend of the President and trusted by him for his role in the presidential campaign as well as in the Obama administration. The appointment suggests that the President wants a trusted adviser in Japan, and someone who can easily reach the White House, rather than a career diplomat or political donor. Since entering politics, Emanuel he has been a partisan Democrat, but having staked out centrist ground, he is not close to the party’s progressive wing.
In Other Words (Quote):
“The federal government is not a family. And it’s not a small business. And it’s not a local government. And it’s not a state government. We can spend whatever we need to spend in the interest of serving the American people,”
— House Budget Committee Chairman Yarmuth (D-KY), addressing criticism of major, multi-trillion spending proposals in the Democrats’ budget.
Did You Know:
The Presidential Succession Act of 1947 established the presidential order of succession; the order is as follows: Vice President, Speaker of the House, Senate President pro tempore, Secretary of State, Secretary of Treasury, Secretary of Defense, Attorney General, Secretary of Interior, Secretary of Agriculture, Secretary of Commerce, Secretary of Labor, Secretary of Health and Human Services, Secretary of Housing and Urban Development, Secretary of Transportation, Secretary of Energy, Secretary of Education, Secretary of Veterans Affairs, and Secretary of Homeland Security.
Image of the Week: