Policy/Legislation
White House Issues New Tax and Spend Outline, Still Not Final: The Wall Street Journal reports that The White House released a $1.85 trillion social-policy and climate framework, putting out a still-developing product that top House Democrats hoped would be enough to persuade progressives to drop their objections to a parallel, roughly $1 trillion infrastructure bill. President Biden met with House Democrats in the morning to pitch lawmakers on the new framework, a far slimmer piece of legislation than the $3.5 trillion the party originally had outlined. It is not clear the scaled down package would have enough Democratic support to pass the narrowly divided House and Senate,
House Progressives Stop Infrastructure Vote Again: Roll Call reports that House Democrats fell short in securing enough progressive votes to pass a $1 trillion bipartisan infrastructure bill that represents a cornerstone of President Joe Biden’s domestic agenda. Progressives have tied their support for that bipartisan bill to a massive $1.85 trillion tax and spend package of Biden’s other domestic priorities, including child care and climate change. Progressives remained unconvinced that Senate Democratic holdouts Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona would endorse the bill. House Democratic leadership had felt urgency to pass the bipartisan infrastructure bill, which the Senate passed Aug. 10, in order to give Biden a win before his appearance this weekend at a meeting of the Group of 20 industrial and emerging nations.
Senate Democrats Outline 15% Corporate Alternative Minimum Tax: The Wall Street Journal reports that Senate Democrats detailed a 15% alternative minimum tax on large companies’ income on Tuesday. The 15% corporate minimum tax proposed on Tuesday is different from the 15% global minimum tax the U.S. has been pushing in international negotiations. That latter plan, which is also likely to be included in the Democrats’ tax-and-spending bill, is focused on U.S. companies’ foreign income and would require them to pay at least 15% in each foreign country where they operate. Some companies could be affected by both taxes.
Democrats’ Plan to Tax Unrealized Gains Would Face Constitutional Challenge: The Wall Street Journal reports that the Democrats’ plan to tax billionaires’ unsold assets each year as they gain in value would almost certainly face a Constitutional legal challenge if enacted. Taxing capital gains that haven’t been realized yet falls outside the income taxes allowed by the 16th Amendment that don’t have to be apportioned based on state population. Under current law, individuals pay capital-gains taxes only when the gain is realized, typically when they sell an asset. The Democrats’ plan would impose a one-time tax on unrealized gains to date, and then create an annual tax on each gain in net worth. The proposal would apply to Americans worth more than $1 billion or with incomes above $100 million for three consecutive years.
No from Joe: The Hill reports that Democratic hopes of including a new tax on the wealthy to help pay for their social spending package faded on Wednesday as centrist Sen. Joe Manchin (D-WV) said he was uncomfortable with the idea. The plan was not included in the Democrats’ new outline released Thursday, The Hill also reports that Manchin criticized a proposal to increase the amount of information the IRS receives about bank accounts, saying he thinks it is unlikely to be included in Democrats' social spending package. Democrats are considering the IRS bank-reporting proposal as a way to raise revenue to finance their social spending measure. It would require banks to report to the IRS the total amount of money that came in and out of an account during a year.
House Democrats Propose Social Security Tax Increases: CNBC reports that a Social Security reform bill popular with House Democrats has been reintroduced in Congress. The bill, the Social Security 2100 Act, was introduced by Rep. John Larson (D-CT), chairman of the House Ways and Means Social Security Subcommittee. The Social Security Administration estimates that the Social Security trust funds will be depleted by 2034, when only 78% of promised benefits will be payable. The bill proposes extending that date to 2038 but would boost benefits for lower income recipients. To offset those benefits, the bill would increase Social Security taxes paid by higher wage earners. In 2021, those taxes are capped at $142,800 in wages, and in 2022 that will rise to $147,000. The bill reimposes taxes on wages at $400,000 and up.
Regulation
SEC Blasts Broker-Dealers over Reg BI Deficiencies: Financial Advisor Magazine reports that a wide array of broker-dealers have received Regulation Best Interest exam deficiency letters from the U.S. Securities and Exchange Commission regarding conflicts of interest and alternative investment obligations, a leading attorney for the securities industry told the publication. The “widespread” deficiency letters are citing firms for failing to meet the requirements of Reg BI—the SEC’s 16-month old rule governing retail investment advice, Issa Hanna, a partner with Eversheds Sutherland, who represents broker-dealers and registered investment advisors said. Hanna said the SEC letters are citing firms for deficiencies in two prominent areas: a failure by firms and their reps to consider reasonably available alternative investments and deficiencies around processes and procedures to identify and root out conflicts of interests.
DOL Extends Fiduciary Rule Compliance Date: ThinkAdvisor reports that the U.S. Department of Labor extended the non-enforcement policy on its fiduciary rule to Jan. 31, bowing to financial industry pressure. Also, the DOL “further extended the requirement for providing the ‘specific reasons’ that justify a rollover recommendation” until June 30, said Fred Reish, partner at Faegre Drinker’s Los Angeles office. Financial institutions have expressed concern that they would incur significant additional distribution costs if the Dec. 20 compliance date wasn't extended.
FINRA Mulls Complex-Product Rules Update: ThinkAdvisor reports that the Financial Industry Regulatory Authority is mulling an update to its rules around complex products, according to Robert Cook, FINRA’s president and CEO. The broker-dealer self-regulator is “looking closely at the offering of complex products by our member firms,” Cook said during a recent New York Law School event. “We’re close to issuing a Regulatory Notice to solicit views about whether these rules need to be updated,” Cook said. Complex products include junk bonds, structured notes and leveraged and inverse exchange-traded funds, according to FINRA. Complex products may use futures and options or other potentially complicated trading strategies. FINRA wants to assess whether the rules it has in place “provide the appropriate safeguards for investors,” Cook said.
Non-Traded REIT Sales Still on a Roll: The DI Wire reports that sales of non-traded real estate investment trusts exceeded $3 billion for the fourth month in a row with $3.29 billion raised in September, according to Robert A. Stanger and Co. “Non-traded REIT fundraising through September has reached $24.6 billion dollars, which surpasses the prior full year record of $19.6 billion set back in 2013,” said Randy Sweetman, executive managing director of Stanger. Kevin Gannon, chairman and chief executive officer, said that Stanger reconfirms its 2021 fundraising projection of $35 billion for non-traded REITs and $70 billion for the alternative investments it covers.
