Policy/Legislation
Biden’s Proposed Taxes Test Democrats’ Unity: Bloomberg reports that moderate and progressive Democrats are on a collision course over how to pay for President Joe Biden’s economic agenda, a disagreement that has the potential to stall the legislation or sink it entirely. Biden has proposed an ambitious set of tax increases on households and corporations to pay for trillions of dollars in new spending. Congressional Democrats have set in motion a $3.5 trillion legislative vehicle to vastly expand the government’s role in health care, climate change, childcare and education. Moderates want a smaller overall package of tax increases and are hesitating on some of Biden’s plans. Progressives view a total rewrite of the tax code as a moral imperative to fund social programs and climate measures as well as address a widening wealth gap.
Bloomberg also reports that most Democrats on the U.S. House Committee on Ways and Means support Biden’s plan to raise the capital gains rate to 39.6% from 20% on those earning above $1 million. About a third of Democrats on the panel, however, are advocating for a lower rate on investments, potentially around 28%. Some Democrats on the panel are also balking at Biden’s plan to end a tax treatment, known as “step-up-in-basis.” House passage will require near Democratic unity because of their narrow House majority.
House Ways and Means and Senate Finance Committees Shape Tax Package: Roll Call reports that Ways and Means Chairman Richard E. Neal (D-MA) is working with the Senate on how to pay for the massive $3.5 trillion reconciliation package. Neal said he intends to pay for all of the package and that he’s in regular communication with Senate Finance Chair Ron Wyden (D-OR) as they put together a wide array of potential revenue-raisers. “We made an agreement not to surprise each other,” Neal said. Neal's panel has jurisdiction over large parts of the anticipated reconciliation bill, including tax credits for childcare, lower-income workers and health insurance premiums; clean energy tax incentives; Medicare expansion and virtually all of the bill's tax offsets. The article states that Ways and Means is expected to spend several days starting Sept. 9 marking up their piece of the package, with a break for the intervening weekend. Senate committees have been given their own Sept. 15 deadline to produce their reconciliation recommendations. Given that chamber's 50-50 split, there's an expectation that Senate panels likely won't mark up their own versions, but rather will work with their House counterparts on the package that eventually comes out of the House.
ADISA is working hard to ensure the House and Senate committees don’t add President Biden’s plan to limit Section 1031 like-kind exchanges as part of reconciliation. Read our policy statement, here.
Regulation
SEC Launches Review of Online Strategies Used by Brokers, Advisers: The Wall Street Journal reports that the U.S. Securities and Exchange Commission launched a wide-ranging review Friday of the online strategies that brokers and investment advisers use to interact with customers, aiming to determine whether tools like smartphone notifications are in the best interests of investors. The SEC solicited public comments Friday on “digital engagement practices” in the financial industry. These include social-networking tools, investing games and contests with prizes, digital badges, and leaderboards, notifications, celebrations for trading and chatbots. A 30-day public comment period is expected after the action is printed in the Federal Register.
SEC Cracks Down on Cybersecurity Lapses: InvestmentNews reports that the SEC ordered eight financial firms to pay a total of $750,000 in fines for deficient cybersecurity protections that led to the exposure of client and customer information at various times over the last four years. The SEC charged the firms with violating the Safeguards Rule, which requires investment advisory firms and brokerages to adopt written policies and procedures that are designed to protect customer records and information against cybersecurity attacks or other unauthorized access that could cause substantial investor harm or inconvenience.
SEC Eyes Increase in Disclosure for 'Green' Fund Managers: The Hill reports that the SEC is eyeing an increase in disclosure for “green” fund managers. SEC Chair Gary Gensler made the announcement during a meeting with the European Parliament’s Committee on Economic and Monetary Affairs. Gensler said he’s asked his staff to come up with recommendations on investment funds that brand themselves as “green,” “sustainable,” and “low-carbon.” Gensler anticipates putting a policy up for public comment later this year or early next year. “I’ve also asked staff to review current practices and consider recommendations about whether a fund manager should disclose criteria underlying when they call themselves ‘green’ and ‘sustainable’ and the like,” Gensler said.
More Big Players Move into the Non-Traded REIT Market: Wealth Management reports that high-profile firms are moving into the non-traded real estate investment trust market as non-traded REITs will raise about $30 billion this year, roughly triple the volume of capital raised in the sector in 2020. Although capital is always a powerful motivator, asset managers also like some of the differences that non-traded REITs offer compared to their publicly-traded counterparts. Many REITs were hit hard by stock market volatility last year before bouncing back in 2021.
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