Who'd Pay for the Stimulus? Biden Tax Initiatives
The excitement over a new $1.9 trillion stimulus package for the United States is not going to subside in financial markets. Keeping in mind 2020 and prices' reaction to economic stimulus, everything looks quite logical and reasonable.
But for some reason no one thinks of whose expense the holiday is at and who will pay for it. After all, if everything is so simple: they adopted a stimulus package and outstripped China in terms of economic growth, then why has the United States not done anything like this for 40 years?
The most obvious version is that everything is far from simple and you have to pay for everything. How? Well, for example, by increasing the revenue side of the budget. How? For example, by raising taxes. It will be very interesting to observe the behavior of the same US stock market when Biden fulfills his election promise and raises the corporate tax up to 28%.
So, the hour of reckoning is just around the corner. President Joe Biden plans the first major federal tax hike since 1993. Proposed steps include raising the corporate tax rate up to 28%, raising the tax for people with high incomes, and a possible increase in the capital gains tax.
In our opinion, it is a great reason to think about the consequences today, before tomorrow comes. One of the examples of the future events logic is as follows. Increase in corporate tax will result in profits of corporations sharply sinking with all the consequences for their reporting and investment metrics. And, of course, the share buyback programs pumped up by an influx of money out of nowhere is due to the corporate tax cut by Trump. Thus, one can remember that companies will sell previously bought shares to fill holes in corporate budgets.
But for some reason no one thinks of whose expense the holiday is at and who will pay for it. After all, if everything is so simple: they adopted a stimulus package and outstripped China in terms of economic growth, then why has the United States not done anything like this for 40 years?
The most obvious version is that everything is far from simple and you have to pay for everything. How? Well, for example, by increasing the revenue side of the budget. How? For example, by raising taxes. It will be very interesting to observe the behavior of the same US stock market when Biden fulfills his election promise and raises the corporate tax up to 28%.
So, the hour of reckoning is just around the corner. President Joe Biden plans the first major federal tax hike since 1993. Proposed steps include raising the corporate tax rate up to 28%, raising the tax for people with high incomes, and a possible increase in the capital gains tax.
In our opinion, it is a great reason to think about the consequences today, before tomorrow comes. One of the examples of the future events logic is as follows. Increase in corporate tax will result in profits of corporations sharply sinking with all the consequences for their reporting and investment metrics. And, of course, the share buyback programs pumped up by an influx of money out of nowhere is due to the corporate tax cut by Trump. Thus, one can remember that companies will sell previously bought shares to fill holes in corporate budgets.
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