Happy Wednesday! The presidential election rematch is a big step closer to reality as both President Joe Biden and former president Donald Trump each clinched enough delegates yesterday to win their party’s nomination. Today, the House easily passed a bill that would force Chinese technology firm ByteDance to sell its TikTok app or face a nationwide ban. The overwhelming and bipartisan 352-65 vote sends the bill to the Senate, where its future is less clear.
Here's what else is happening.
Major Companies Pay Top Execs More Than They Pay in Taxes: Report
In the years following the passage of the Tax Cuts and Jobs Act in 2017, dozens of large corporations paid their top executives more than they paid in federal taxes, according to a new report from the progressive groups Institute for Policy Studies and Americans for Tax Fairness.
Investigating the connection between executive pay and the business tax cuts provided by the 2017 legislation, analysts reviewed the compensation of top corporate officers and federal tax payments at major firms in the five years following the passage of the law, starting in 2018. They found 64 companies that paid their top five executives more than they paid in taxes in at least two of the five years. At 35 of the companies — a group that includes such well-known firms as Tesla, Ford and Netflix — executive compensation exceeded tax payments every year.
Total executive compensation at those 35 companies came to $9.5 billion over the five-year period. Taxes paid, on the other hand, totaled less than zero, as the companies claimed about $1.8 billion in refunds from the federal government.
The analysts also found that the federal income tax rate for those companies that did pay taxes was quite low. Total pre-tax profits at the 64 companies included in the study came to $657 billion between 2018 and 2022. The average tax rate on those profits was just 2.8%, well below the 21% top rate defined by the 2017 tax law. Meanwhile, top executives at those firms were paid more than $15 billion.
The report provides some notable examples, with numbers drawn from the five-year period:
* Tesla: $2.5 billion in executive pay, $4.4 billion in profits, -$1 million in federal income taxes;
* T-Mobile: $675 million in executive pay, $17.9 billion in profits, -$80 million in federal income taxes;
* Netflix: $652 million in executive pay, $15.1 billion in profits, $236 million in federal income taxes;
* American International Group: $406 million in executive pay, $17.1 billion in profits, $385 million in federal income taxes;
* Ford Motor: $355 million in executive pay, $7.8 billion in profits, $121 million in federal income taxes.
The report argues that soaring executive pay levels and plunging tax revenues are driven by changes in the tax laws over the last few decades. “For decades, corporate profits as a share of the economy have been generally rising and CEO pay has been skyrocketing,” the analysts wrote. “However, the average effective corporate-tax rate — what firms actually pay as a percentage of their earnings — has been steadily trending downwards.”
David Kass, executive director of Americans for Tax Fairness, said the report highlights the need for tax reform that produces more revenue from corporations and limits excesses in executive pay. “Both kinds of corporate misbehavior — underpaying taxes and overpaying executives — ultimately make working families the victim through smaller paychecks and diminished public services,” he told The Hill.
Shutdown Threat Rises Again as GOP Demands Border Changes
The package of spending bills that needs to be passed by March 22 was always going to be more contentious than the first batch of bills approved by Congress last week. The upcoming tranche includes funding for the departments of Defense, Labor, Health and Human Services, State and Homeland Security, with potential obstacles to an agreement scattered throughout. Already, The Hill’s Alexander Bolton reports, some senators in both parties are expressing concerns about the Homeland Security bill in particular due to divisions over President Joe Biden’s immigration policy.
Senate Appropriations Chair Patty Murray, a Democrat from Washington, Sen. Chris Murphy, a Connecticut Democrat, and Sen. Lisa Murkowski, an Alaska Republican, all told The Hill that DHS funding would be the toughest to finalize. “We’re all talking about Homeland and how challenging that’s going to be,” Murkowski said, though she also noted that all of the appropriations bills have been getting bogged down in skirmishes over House conservatives’ desired policy riders. She also suggested that the Homeland Security funding could be separated out from the rest of the package.
House Republicans are reportedly pushing for hardline border security measures, including barrier construction and the “Remain in Mexico” policy for migrants seeking asylum. Among other demands, they reportedly continue to try to zero out the salary of Homeland Security Secretary Alejandro Mayorkas, whom they impeached last month.
One unnamed Senate Democratic source also tells The Hill that House Republicans are balking at delivering billions of dollars in new border funding to the Biden administration for political reasons: “because it might make things better, and they don’t want to make things better.”
What’s next: As negotiations continue, lawmakers reportedly hope to release the legislative text of the next package by Sunday evening ahead of the deadline the following Friday. The Homeland Security bill could be separated out, or congressional leaders could decide that a broader stopgap funding extension is needed to push back the March 22 deadline. Both chambers are scheduled to be in recess from March 23 until the second week of April.
Another twist: The full-year appropriations process has to be completed by April 30 to avoid automatic spending cuts that would kick in under last year’s Fiscal Responsibility Act. But the Congressional Budget Office said today that, under the complicated caps established by that law and the spending bills passed so far, the defense budget would be subject to a 1% cut at the April 30 deadline, but funding for non-defense programs would not face automatic cuts, even if Congress doesn’t pass the next batch of spending bills in time.
“Ultimately, the authority to decide whether sequestration is required and to calculate the percentage reductions, if any, rests with the Office of Management and Budget (OMB),” the budget office said.
Quote of the Day
“I have every expectation that the single largest contributor to inflation is going to be moving down over this year.”
– Treasury Secretary Janet Yellen, telling Fox Business in an interview Wednesday that she expects recent trends in housing costs to help cool inflation this year. Shelter costs make up roughly a third of the consumer price index measure of inflation, but it takes a while for new lease agreements, which have reportedly shown more tepid cost increases or even decreases this year, to show up in the CPI report. “Inflation is down two-thirds from the high it reached in 2022,” Yellen said. “I wouldn’t expect this to be a smooth path month-to-month, but the trend is clearly favorable.”
Fiscal News Roundup
- Lawmakers Begin Efforts to Move Around Johnson, Force Vote on Ukraine Aid – Washington Post
- Immigration Fight Could Trigger Shutdown at End of Next Week – The Hill
- CBO Predicts Nondefense Spending Bills Won’t Face Automatic Cuts Post-April 30 – The Hill
- Yellen Says She Regrets Saying Inflation Was ‘Transitory’ – The Hill
- ACA Is Here to Stay, McConnell Declares – The Hill
- Here Comes $20B in Climate Finance – Politico
- The Freedom Caucus Has Been Wreaking Havoc On Washington. Now It’s Exporting the Chaos to the States. – Politico
- Cancer Clinics Face Cash Crunch After Hack Rocks US Health Care – Bloomberg
- HHS Opens Probe Into UnitedHealth’s Cybersecurity as Hack Fallout Continues – Washington Post
- Rich Nations Are Leaving Poor Behind in Risk to Global Stability, UN Says – Bloomberg
- Rollout of Financial Aid Revamp Leaves Students in the Lurch – Bloomberg
- Mississippi Has the Nation’s Worst Infant Mortality. It Will Allow Earlier Medicaid to Help Babies – Associated Press
- A Massachusetts Town Spent $600k on Shore Protection. A Winter Storm Washed It Away Days Later – Associated Press
- ‘It'll Be Fine’: Katie Britt Says Mike Johnson Reassured Her Ahead of SOTU Rebuttal – Politico
Views and Analysis
- What Biden’s 2025 Budget Means for Medicare, Family Leave, and Medicaid Home Care – Howard Gleckman, Forbes
- Free Tuition Is No Panacea for Medical Schools – Erin Lowry, Bloomberg
- The Fed Will Slow QT. What Matters Is Where It Stops – Bill Dudley, Bloomberg
- What History and Economics Suggest About Biden-Trump, Round 2 – Jeff Sommer, New York Times
- Conservative Pundit Says Retirement 'Is a Stupid Idea.' I Agree. Let Us Work Until We Die – Rex Huppke, USA Today