Today, the Council of Economic Advisers released a report on the relationship between the corporate tax rate and wage growth. Please see below for the executive summary and read the full report here.
Wage growth in America has stagnated. Over the past eight years, the real median wage in the U.S. rose by an average of six-tenths of a percent per year. But even as Americans’ real wages stagnated, real corporate profits soared, increasing by an average of 11 percent per year. The relationship between corporate profits and worker compensation broke down in the late 1980s. Prior to 1990, worker wages rose by more than 1 percent for every 1 percent increase in corporate profits. From 1990-2016, the pass-through to workers was only 0.6 percent, and looking most recently, from 2008-2016, only 0.3 percent. The profits of U.S. multinationals are still American profits, but, increasingly, the benefits of those profits do not accrue to U.S. workers.
The deteriorating relationship between wages of American workers and U.S. corporate profits reflects the state of international tax competition. The problem is not unique to America; countries around the world have responded to the international flow of capital by cutting their corporate tax rates to attract capital back from other countries. They have doubled down on such policies as they have seen business-friendly policies benefit workers.
This analysis from the Council of Economic Advisers reviews the evidence that has driven other developed countries to pursue the path of lower corporate tax rates and estimates how business tax reform in the Unified Framework for Fixing Our Broken Tax Code (hereafter, the “Unified Framework”) is expected to affect wages for American workers.
Reducing the statutory federal corporate tax rate from 35 to 20 percent would, the analysis below suggests, increase average household income in the United States by, very conservatively, $4,000 annually. The increases recur each year, and the estimated total value of corporate tax reform for the average U.S. household is therefore substantially higher than $4,000. Moreover, the broad range of results in the literature suggest that over a decade, this effect could be much larger.
These conclusions are driven by empirical patterns that are highly visible in the data, in addition to an extensive peer-reviewed research. While much of the academic literature predates the latest data, the covariation between the trajectory of inflation-adjusted wages and statutory corporate tax rates (Federal and sub-Federal) between the most-taxed and least-taxed developed countries (OECD) over recent years, visible in Figure 1, is indicative of these papers’ findings. Between 2012 and 2016, the 10 lowest corporate tax countries of the OECD had corporate tax rates 13.9 percentage points lower than the 10 highest corporate tax countries, about the same scale as the reduction currently under consideration in the U.S. The average wage growth in the low tax countries has been dramatically higher, as would have been predicted by a consumer of the academic literature, which looks at much longer time periods and explores the relationship with modern econometric techniques.
This sizable empirical literature measures the relationship between wages and corporate taxes, controlling for other variables that may affect wage growth across countries and over time. The literature suggests the relationship between corporate taxes and wages is more than observational and is econometrically robust. The remainder of this report explains the theory and the empirical regularities that relate lower business tax rates – such as those in the Unified Framework – to higher wages and uses these estimates to measure the likely wage effects of the business tax reforms of the Unified Framework.
https://www.whitehouse.gov/the-press-office/2017/10/16/cea-report-corporate-tax-reform-and-wages-%E2%80%93-theory-and-evidence
MONDAY'S BUSINESS & FINANCE REPORT
US CHAMBER OF COMMERCE: Stopping Cyberattacks Requires a United FrontBy, Thomas J. Donohue, President and CEO, U.S. Chamber of Commerce
https://www.uschamber.com/above-the-fold/stopping-cyberattacks-requires-united-front
Blog post from the US Chamber of Commerce 10/ 16/ 17
Businesses face an endless list of potential cyber enemies, ranging from financially motivated thieves to consumer data robbers to malicious state actors. Massive data breaches have underscored the ongoing threat to businesses, consumers, and national security alike. Protecting sensitive, personally identifiable information from theft or illegal uses must be a top priority for all stakeholders, which is why the U.S. Chamber of Commerce has long been an advocate for a strong cyber defense partnership between government and industry.
The Chamber was encouraged when President Trump signed an executive order earlier this year emphasizing the importance of further strengthening public-private partnerships. While more remains to be done, the business community continues to work closely with the administration to promote real-time information sharing and streamline the bureaucratic hurdles that impede private sector security efforts.
Currently, companies face a cumbersome patchwork of federal and state regulations regarding cyber defenses and notification policies in the event of a breach. We need a truly uniform federal standard for breach notification that is consistent with the best approaches in state law. To be workable and effective, any such legislation must recognize that both consumers and businesses are victims of crimes that give rise to a data breach.
Any business of any size can be a victim. The most recent Small Business Index released by the Chamber and MetLife found that almost 60% of small business owners are concerned about cybersecurity threats. And for good reason: Data show that 44% of small businesses have been hit by a cyberattack, with an average cost of around $9,000 per incident. Further, nearly 59% of companies do not have a contingency plan on how to deal with a data breach.
Awareness, education, and public-private partnerships can help all businesses improve their security. October is National Cybersecurity Awareness Month, and on October 4 the Chamber hosted its Sixth Annual Cybersecurity Summit. The summit brought together leaders from the public and private sectors to discuss challenges and strategies for presenting a united defense. And the Chamber’s ongoing Cybersecurity Education and Awareness campaign educates companies about cyber threats.
Government leaders must prioritize thoughtful and supportive solutions, and all businesses should work with law enforcement agencies and adopt basic cybersecurity fundamentals to reduce network weaknesses. This is a matter of enormous importance for consumers and the overall health of our economy. Protection of businesses’ digital assets ensures the free flow of commerce and information, which is critical to driving economic growth
US CHAMBER OF COMMERCE: Offshoring American Jobs? The Risk Posed by Tighter Rules of Origin in NAFTA
Article posted 10/ 13/ 17
https://www.uschamber.com/above-the-fold/offshoring-american-jobs-the-risk-posed-tighter-rules-origin-nafta
Concern is mounting as negotiations to update the North American Free Trade Agreement (NAFTA) enter their fourth round this week. While the American business and agriculture community broadly supports measures to modernize the pact, the Trump administration is pushing a series of proposals that break its pledge to “do no harm” in the negotiations.
One of these proposals is particularly risky: the administration’s plan to tighten dramatically the agreement’s already stringent “rules of origin.” In fact, it would have the opposite effect of the one intended: It would lead to lower U.S. content in our manufactured goods.
As negotiated, the NAFTA already imposes strict rules of origin. For example, in the automotive sector, 62.5% of a car or light truck must be produced within North America to qualify for duty-free treatment.
The NAFTA’s rule of origin for autos is already the highest in any trade agreement in the world, but the administration reportedly would like to raise it to 85%. However, higher requirements for North American content would actually incentivize manufacturers to cease trading under the agreement and instead simply pay the low U.S. most-favored nation tariff (just 2.5%).
Why? Doing so would allow automakers to avoid the administrative costs associated with rules of origin, which include paperwork and the burden of “tracing” the origin of content. It would also incentivize the auto sector to source more inputs from Asia, not fewer, and would thus lead to lost American jobs.
In addition to tightening the NAFTA’s existing North American content rules, the administration is reportedly proposing to add a “U.S. content” requirement of 50%. The concerns named above apply in this area as well, but a domestic content rule in a trade agreement was previously ruled to be a violation of World Trade Organization (WTO) rules in a dispute settled nearly two decades ago. As such, the governments of Canada and Mexico have already indicated there is no way they could accept such a proposal. (see link source for more)
US DEPT. of LABOR: U.S. SECRETARY OF LABOR ACOSTA ANNOUNCES MEMBERSHIP OF TASK FORCE ON APPRENTICESHIP EXPANSION
Press release issued 10/ 16/ 17
https://www.dol.gov/newsroom/releases/osec/osec20171016
WASHINGTON, DC – Following President Donald J. Trump’s Executive Order Expanding Apprenticeships in America, U.S. Secretary of Labor Alexander Acosta today announced members of the President's Task Force on Apprenticeship Expansion. The Task Force—representing companies, trade and industry groups, educational institutions, and labor unions—brings to the table substantial workforce development experience in addressing the nation’s skills gap.
“Expanding apprenticeships will help Americans learn the skills they need to fill jobs that are open right now and in the future. I am pleased to see business leaders, unions, educational institutions, and industry groups come together to help the American worker,” said Secretary Acosta. “The members of the Task Force on Apprenticeship Expansion will provide varied perspectives that will help guide the Administration’s strategy on growing apprenticeship programs nationwide. I am grateful for their participation in this important effort.”
To help more Americans obtain relevant skills and family-sustaining jobs, President Trump issued an Executive Order Expanding Apprenticeships in America. Apprenticeships provide paid, relevant workplace experiences and opportunities to develop skills that job creators demand. Hundreds of companies—big and small, across industries—have shown an interest in apprenticeships since President Trump signed his Executive Order.
The President’s Executive Order called for the Secretary of Labor to establish a Task Force on Apprenticeship Expansion. The mission of the Task Force is to identify strategies and proposals to promote apprenticeships, especially in sectors where apprenticeship programs are insufficient.
THE FED: U.S. Faster Payments Governance Framework Formation Team announced
Press release issued 10/ 13/ 17
https://www.federalreserve.gov/newsevents/pressreleases/other20171013a.htm
The Federal Reserve, on behalf of the Governance Framework Formation Team, announced the 27 members of the collaborative industry short-term work group that will focus on developing a governance framework for faster payments in the United States. The work group, originally called the interim collaboration work group, was established by the Faster Payments Task Force and described in a recommendation in its July 21 final report titled, "The U.S. Path to Faster Payments."
In response to the Faster Payments Task Force's request that the Federal Reserve facilitate the work of the Governance Framework Formation Team, Sean Rodriguez, faster payments strategy leader at the Federal Reserve and chair of the task force, will serve as chair of the group.
"The work of the Faster Payments Task Force was successful because 300-plus payment stakeholders came to the table with a common goal of an improved payment system for the U.S.," said Rodriguez. "I've seen this same enthusiasm with the Governance Framework Formation Team. They are committed to working together in order to achieve the task force vision of ubiquitous faster payments capabilities in the U.S. by 2020."
The Governance Framework Formation Team objectives include:
Developing an initial faster payments governance framework that incorporates public commentary; and
Establishing the framework and membership.
The formation team will initially focus on the structure, decision-making and processes of a governance framework, and is committed to keeping industry stakeholders abreast of progress by seeking comment on its recommendations in the spring of next year, with the goal of concluding its work in the second half of 2018.
Prior to its dissolution, the Faster Payments Task Force elected the initial membership of the Governance Framework Formation Team to ensure representation of all stakeholder perspectives in the effort, in addition to providing the team latitude to appoint additional members to secure needed expertise and perspectives. With the task force elections and subsequent appointments, the Governance Framework Formation Team believes the final roster achieves this broad representation( see source link for more)
IRS: Online Seminars from the 2017 IRS Nationwide Tax Forums Now Available
PRESS RELEASE ISSUED 10/ 16/ 17
https://www.irs.gov/newsroom/online-seminars-from-the-2017-irs-nationwide-tax-forums-now-available
WASHINGTON — The Internal Revenue Service today reminded tax professionals that they can earn continuing education credits online through seminars filmed at the 2017 IRS Nationwide Tax Forums.
The 17 self-study seminars are now available on the IRS Nationwide Tax Forums Online (NTFO). Self-study seminars provide information to participants using interactive videos, PowerPoint slides and transcripts.
The 2017 online forum seminars cover many topics of interest to tax professionals including business use of the home (for such things as the shared economy), advanced rental real estate issues, Office of Professional Responsibility discipline, and Individual Tax Identification Number program changes.
The online forums are registered with the IRS Return Preparer Office and the National Association of State Boards of Accountancy (NASBA) as a qualified sponsor of continuing education. For a fee, CPAs, Enrolled Agents and Annual Filing Season Program participants taking NTFO seminars can earn continuing education credits. To earn credit, users must create an account, answer review questions throughout the seminar, and pass short tests at the end of the seminars.
The online forum seminars can also be audited for free. Individuals who choose to audit seminars will not have access to the review questions or final examination and will not receive credit for the seminar.
In addition to the recently-added seminars, NTFO also offers many seminars from prior-year IRS Nationwide Tax Forums. For more information, please visit www.irstaxforumsonline.com.
Reminder: Oct. 24 is Deadline for Foreign Financial Institutions Participating in FATCA to Check Their Renewal Requirement
IR-2017-174, Oct. 13, 2017
WASHINGTON — Internal Revenue Service officials today urged foreign financial institutions to quickly renew their Foreign Financial Institution (FFI) agreements if required. If an FFI is required to renew its agreement and fails to do so by Oct. 24, 2017, the group will be removed from the November FFI list and will be subject to a 30 percent withholding tax on certain U.S. source payments.
An FFI must determine whether it is required to renew its FFI agreement. The table below is provided to assist FFIs with the determination. If an FFI has determined that it is required to renew, the FFI should log into the FATCA FFI Registration system and click on the link to “Renew FFI Agreement.” The FFI will need to verify, update (if needed), and submit their registration to renew their FFI agreement.
https://www.irs.gov/newsroom/reminder-oct-24-is-deadline-for-foreign-financial-institutions-participating-in-fatca-to-check-their-renewal-requirement
WORLD AND NATIONAL HEADLINES FROM REUTERS
Iraqi forces seize Kirkuk from Kurds in bold advanceBAGHDAD/KIRKUK, Iraq (Reuters) - Iraqi government forces captured the Kurdish-held city of Kirkuk on Monday, responding to a Kurdish vote on independence with a bold lightning strike that transforms the balance of power in the country.
China offers to buy 5 percent of Saudi Aramco directly - sources
DUBAI/LONDON (Reuters) - China is offering to buy up to 5 percent of Saudi Aramco directly, sources said, a move that could give Saudi Arabia the flexibility to consider various options for its plan to float the world’s biggest oil producer on the stock market.
Search goes on for worker missing after Louisiana oil platform explosion
HOUSTON (Reuters) - The search continued for a worker missing from an oil production platform in Louisiana’s Lake Pontchartrain that exploded and caught fire late Sunday, sending six others to hospital with injuries, the U.S. Coast Guard said.
U.S. jury finds New Jersey man guilty in 2016 Manhattan bombing
(Reuters) - A New Jersey man was found guilty by a federal jury in New York on Monday of planting two bombs in Manhattan’s Chelsea neighborhood in September 2016, one of which exploded and wounded 30 people.
Daily Bible Verse: Let the words of my mouth and the meditation of my heart Be acceptable in Your sight, O Lord, my strength and my Redeemer.
Psalm 19:14 NKJV
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