Bloomberg

(Bloomberg) -- President Joe Biden is planning the first major federal tax hike since 1993 to help pay for the long-term economic program designed as a follow-up to his pandemic-relief bill, according to people familiar with the matter.Unlike the $1.9 trillion Covid-19 stimulus act, the next initiative, which is expected to be even bigger, wont rely just on government debt as a funding source. While its been increasingly clear that tax hikes will be a component -- Treasury Secretary Janet Yellen has said at least part of the next bill will have to be paid for, and pointed to higher rates -- key advisers are now making preparations for a package of measures that could include an increase in both the corporate tax rate and the individual rate for high earners.With each tax break and credit having its own lobbying constituency to back it, tinkering with rates is fraught with political risk. That helps explain why the tax hikes in Bill Clintons signature 1993 overhaul stand out from the modest modifications done since.For the Biden administration, the planned changes are an opportunity not just to fund key initiatives like infrastructure, climate and expanded help for poorer Americans, but also to address what Democrats argue are inequities in the tax system itself. The plan will test both Bidens capacity to woo Republicans and Democrats ability to remain unified.His whole outlook has always been that Americans believe tax policy needs to be fair, and he has viewed all of his policy options through that lens, said Sarah Bianchi, head of U.S. public policy at Evercore ISI and a former economic aide to Biden. That is why the focus is on addressing the unequal treatment between work and wealth.While the White House has rejected an outright wealth tax, as proposed by progressive Democratic Senator Elizabeth Warren, the administrations current thinking does target the wealthy.The White House is expected to propose a suite of tax increases, mostly mirroring Bidens 2020 campaign proposals, according to four people familiar with the discussions.The tax hikes included in any broader infrastructure and jobs package are likely to include repealing portions of President Donald Trumps 2017 tax law that benefit corporations and wealthy individuals, as well as making other changes to make the tax code more progressive, said the people familiar with the plan.The following are among proposals currently planned or under consideration, according to the people, who asked not to be named as the discussions are private:Raising the corporate tax rate to 28% from 21%Paring back tax preferences for so-called pass-through businesses, such as limited-liability companies or partnershipsRaising the income tax rate on individuals earning more than $400,000Expanding the estate taxs reachA higher capital-gains tax rate for individuals earning at least $1 million annually. (Biden on the campaign trail proposed applying income-tax rates, which would be higher)White House economist Heather Boushey underlined that Biden doesnt intend to boost taxes on people earning less than $400,000 a year. But for folks at the top whove been able to benefit from this economy and havent been this hard hit, theres a lot of room there to think about what kinds of revenue we can raise, she said in a Bloomberg TV interview Monday.An independent analysis of the Biden campaign tax plan done by the Tax Policy Center estimated it would raise $2.1 trillion over a decade, though the administrations plan is likely to be smaller. Bianchi earlier this month wrote that congressional Democrats might agree to $500 billion.The overall program has yet to be unveiled, with analysts penciling in $2 trillion to $4 trillion. No date has yet been set for an announcement, though the White House said the plan would follow the signing of the Covid-19 relief bill.An outstanding question for Democrats is which parts of the package need to be funded, amid debate over whether infrastructure ultimately pays for itself -- especially given current borrowing costs, which remain historically low. Efforts to make the expanded child tax credit in the pandemic-aid bill permanent -- something with a price tag estimated at more than $1 trillion over a decade -- could be harder to sell if pitched as entirely debt-financed.What Bloombergs Economists Say...The next major legislative initiative, infrastructure investment, could provide the sort of durable economic gains that not only support higher pay, but promote diffusion of those gains across demographic lines and political persuasions.--Andrew Husby and Eliza Winger, U.S. economistsFor the full report, click hereDemocrats would need at least 10 Republicans to back the bill to move it under regular Senate rules. But GOP members are signaling they are prepared to fight.Well have a big robust discussion about the appropriateness of a big tax increase, Senate Minority Leader Mitch McConnell said last month, predicting Democrats would pursue a reconciliation bill that forgoes the GOP and would aim for a corporate tax even higher than 28%.Kevin Brady, the top Republican on the House Ways & Means Committee, said, There seems to a be a real drive to tax investment of capital gains at marginal income rates, and called that a terrible economic mistake.While about 18% of the George W. Bush administrations tax cuts were allowed to expire in a 2013 deal, and other legislation has seen some increases in levies, 1993 marks the last comprehensive set of increases, experts say. That bill passed on a two-vote margin in the House and required the vice president to break a tie in the Senate.I dont think it is an understatement to say the current partisan environment is more severe than 1993 said Ken Kies, managing director of the Federal Policy Group, a former chief of staff of the congressional Joint Committee on Taxation. So you can draw your own conclusions about prospects for a deal this year, he said.Still, there could be some tax initiatives Republicans could get behind. One is a shift from a gasoline tax to a vehicle-miles-traveled fee to help fund highway projects.Read More: By-the-Mile Vehicle Tax to Help Fund Infrastructure Gains SteamAnother is more money for Internal Revenue Service enforcement -- a way to boost revenue without raising rates. Estimates have found that for every additional $1 spent on IRS audits, the agency brings in an additional $3 to $5.Democrats are also looking to revise tax laws that they say dont do enough to stop U.S. companies from shifting jobs and profits offshore as another way to raise revenue, one aide said. Republicans could potentially support incentives, though its unclear whether theyd back penalties.White House officials including deputy director of the National Economic Council, David Kamin -- who wrote a 2019 paper on Taxing the Rich -- are in the process of fleshing out the Biden tax plans.As for timing, if passed, tax measures would likely take effect in 2022 -- though some lawmakers and Biden supporters outside the administration have argued for holding off while unemployment remains high due to the pandemic.Lawmakers have their own ideas for tax reforms. Senate Finance Committee Chairman Ron Wyden wants to consolidate energy tax breaks and require investors to pay taxes regularly on their investments including stocks and bonds that have unrealized gains.A nurse pays taxes with every single paycheck. A billionaire in an affluent suburb on the other hand can defer paying taxes month after month to the point where their paying taxes is pretty much optional, Wyden told Bloomberg in an interview. I dont think thats right.Warren has pitched a wealth tax, while House Financial Services Committee Chair Maxine Waters has said she would like to consider a financial-transaction tax.Democratic strategists see the next package as effectively the last chance to reshape the U.S. economy on a grand scale before lawmakers turn to the 2022 mid-term campaign.Normally, the party in power gets one or two shots to do major legislative packages, said Chuck Marr, senior director of Federal Tax Policy at the left-leaning Center on Budget and Policy Priorities. This is the next shot.(Updates with White House economist comments in first paragraph after bullet-pointed section.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.2021 Bloomberg L.P.

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Bitcoin Spikes to New Record High Over $61K - Yahoo Finance

Contradictory statements and media leaks are making it impossible to get a handle on Indias soon-to-be-unveiled cryptocurrency policy. The uncertainty is throwing young blockchain firms and programmers into a paroxysm of anxiety: Should they leave or stay? If they hang back, should they do something else with their lives?

On Sunday, the global crypto industry heaved a sigh of relief when Finance Minister Nirmala Sitharaman categorically ruled out a much-feared blanket ban, promising to allow a window for people to do certain experiments using distributed ledger technologies, Bitcoin and other virtual currencies, she said at an India Today conclave.

But before the ink could dry on the congratulatory press releases from entrepreneurs, Reuters cited an official with direct knowledge of the plan as saying that the new law will criminalize possession, issuance, mining, trading and transferring crypto-assets.

That will be nothing short of a second existential crisis in three years. Indias crypto evangelists fought a brave legal fight a couple of them even went behind bars for a short while against the monetary authoritys 2018 diktat to banks, telling them not to allow anyone dealing in digital assets to operate an account. Last year, the nascent blockchain industry won when the countrys highest court set aside the Reserve Bank of Indias order.

Optimism started to rebuild, and surging Bitcoin prices began to lure millennials. When it comes to transferring Bitcoin and other digital assets, India is of late providing more volume than China on popular peer-to-peer platforms.

The risk that India would hit back with a new law to make criminals out of crypto professionals and investors was always present. So practitioners tried to educate policymakers, appealing for sensible regulation starting with definitions for what is a utility token, which digital asset is to be viewed as a security, and which is to be treated as a currency.

Such a dichotomy will be messy in practice. Take international money transfers, where costs pile up because of payment messages that have to laboriously jump national borders by using correspondent banks. To provide value, the service provider will need to employ virtual payment tokens, something that the Philippines and Bangladesh are already allowing. India, the worlds largest recipient of overseas remittances, wont want to miss out.

To see where India might be going with its policy flip-flops, consider something else Sitharaman said at the conclave. A lot of the experiments that fintech firms are doing in blockchain, she said, will be taken up in a big way in the offshore financial center in Gift City in Gujarat, Prime Minister Narendra Modis home state. A startup meet is planned there, she said.

Now, it may be an excellent idea to fill up a ghost town with 20-something programmers since 40-something Mumbai bankers wont go there. Perhaps even the code writers dont have to leave behind the city lights of Bangalore and Hyderabad and head for the boondocks. As long as resident Indian investors are allowed to freely park in Gift City some of the $250,000 theyre permitted to take overseas annually, the offshore center could in theory channel some dollar liquidity to the crypto industry. The domestic banking system will steer clear of crypto. The central banks sway over the rupee would remain intact.

Such a compromise solution will leave the blockchain industry cold. Yes, therell be a sandbox for local fintech to play and learn. But there will be no pathway for enterprises to grow into mature businesses. Thats because when they want to graduate from segregated dollar accounts and enter the mainstream of the domestic economy, theyll bump up against the crypto ban if theres one in place.

Its unclear how exactly authorities will catch people in possession of virtual currencies. The two obvious chokepoints are banks and the telecom network. If someone is using a VPN service to access the internet, and not buying or selling Bitcoin using an Indian bank account (but earning and spending it peer to peer), the prohibition wont be enforceable.

Today, the popular person-to-person payment choice is Bitcoin, which isnt surprising given its $60,000 price tag. After Beijing rolls out its digital yuan in 2022, even the e-CNY could gain international acceptance as a means of payment and store of value. Rather than complain then about Chinese incursions in Indias monetary sovereignty, New Delhi should enact a practical crypto law now.

A regulatory sandbox in Mumbai, where most of Indias financial industry resides, would give the authorities ideas for designing a smart official paperless currency. If they adopt a draconian law out of a fear of money laundering or loss of control on the capital account, transactions will simply go underground. Nobody is asking New Delhi to make Bitcoin legal tender or accept tax payments in it. Just a little tolerance of cryptocurrencies will be enough.

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View: Whats Indias beef with Bitcoin, really? - Economic Times

As Bitcoin rallies to record highs, many are looking to make sense of the sudden price boom. PwCs Global Crypto Leader Henri Arslanian has some answers.

Bitcoin last made the headlines in 2017, when its price jumped from around 900 to nearly $20,000 in a single year, followed by a 30% drop in value shortly after. 2020 saw a similar boom. By 16th December, the cryptocurrency had broken through $20,000, before doubling in three weeks to cross $40,000 by 8th January 2021. Thats a 300% jump in 2020 alone. At the time of writing, the Bitcoin is worth over $56,000.

With the whole world grappling for answers, Henri Arslanian spoke Global Crypto Leader atPwC to CNBC to shed some light on this record-breaking trend.When you look at this Bitcoin rally that weve been seeing over the last couple of weeks and months, really theres two elements driving it.

One is the continuous entry of institutional players. Arslanian cited Paul Tudor Jones as the prime example here a billionaire hedge fund manager who first revealed his Bitcoin investments in May 2020. He has since been vocally bullish about Bitcoin, positioning it as a hedge against inflation.

Already in October, Tudor Jones told CNBC that Bitcoins rally was only in its first inning a prediction that has come through with conviction. In November, Wall Street investment fund Guggenheim Partners revealed plans to invest more than half a billion dollars in Bitcoin, which gave the price rally a remarkable boost.

According to Arslanian, more institutional players will keep joining the party. We expect this to continue over the next couple of months for various reasons. A lot of traditional insturments allow institutional investors to explore Bitcoin. Theres also a lot of regulated players as well, which was not the case a couple of years ago.

The gradual institutionalisation is giving an air of legitimacy to the cryptocurrency a deficit from which it has historically suffered. Many are now comfortable conducting large transactions via Bitcoin, putting its foot in the door of the payments market. Even PwC Hong Kong, where Arslanian sits,has previously accepted advisory fees via Bitcoin.

With bullish institutional investors leading the charge, Arslanian suggests that a fear of missing out among retail investors is the second factor fueling the latest rally. If you compare it to five years ago, where there were only five million people with an account at a crypto exchange: according to the latest data that we have, theres over 100 million people with accounts at a crypto exchange.

And the financial services world is coming around as well. Its probably never been easier to buy Bitcoin and other cryptocurriencies, especially when you consider the entry of large technology firms like a Paypal or a Square, which have made it even easier.

With the world of FinTech advancing at a rate of knots, the niche for Bitcoin is only expected to get larger even if its volatile price fluctuations continue to perplex.

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PwC's Henri Arslanian on why Bitcoin is breaking records - Consultancy.asia

Kweichow Moutai is the most famous Chinese liquor brand, regarded as the national liquor in China.

Zhang Peng | LightRocket | Getty Images

BEIJING The biggest stock in the mainland Chinese "A share" market is a liquor company that analysts are betting on for the long term, despite its plunge in the last month.

Kweichow Moutai sells "baijiu" which has an alcohol content of about 43% to 53% and can cost about a few hundred U.S. dollars per bottle. Baijiu literally "white spirits" is a staple at Chinese business and government dinners for forging relationships and deals.

The stock was down about 1% year-to-date as of Monday morning, holding 2020's gains of roughly 70%.

Earlier this year, the stock's rapid surge in price drew internet memes comparing it to the GDP of Chinese cities and bitcoin's high-flying price. Cryptocurrency bitcoin has surged more than 80% this year to above $60,000.

Moutai's share price had climbed 30% from Dec. 31 to a record high just before the Lunar New Year in mid-February, when it achieved a market value of $500 billion. That's been shaved by over $100 billion in the weeks since, as shares fell more than 20% amid a broad sell-off in Chinese stocks.

But Kweichow Moutai still has a bigger valuation than any other mainland A share stock, including the giant ICBC bank, according to Wind Information.

Moutai is the strongest brand in the high-end baijiu market and will grow its share even as China's drinking culture subsides, said Luo Hao, equity analyst with Global Capital Investment at China Asset Management.

He pointed to the company's steady growth and returns for investors as reasons why he favors the stock.

Moutai expects it made about 97.7 billion yuan ($15.1 billion) in operating income last year, for growth of 10% amid the coronavirus pandemic. The company is set to release final 2020 results at the end of this month, according to Bernstein analysts.

Wind data showed that as of March 11, the liquor stock had the largest number of non-mainland institutions investing in it among A share stocks, with 101 firms holding 7.7% of the total market share. That's up from only a handful of firms earlier this year, the database showed.

Moutai and another baijiu manufacturer, Wuliangye, are the top two members of MSCI's China A index, which is tracked by many foreign funds wanting to invest in China.

"We have a positive long-term view on the China Ultra Premium Baijiu. We expect superior industry value growth to be driven by increasing incomes which will continue driving affordability led up-trading," Bernstein analysts said in a note this month.

While they prefer Wuliangye to Moutai due to supply chain and governance concerns, the Bernstein analysts still have a "buy" rating on Moutai and a price target of 2,500 yuan a share. That's up more than 20% from Moutai's Friday closing price of 2,026 yuan per share.

CNBC's Michael Bloom contributed to this report.

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Chinese liquor stock that drew comparisons to bitcoin is clinging to 2020 gains - CNBC