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Trump Wants Payroll Tax Cut, What That Means For You

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Trump Wants Payroll Tax Cut, What That Means For You

The next stimulus bill proposal is expected to be released as early as this week. With this, one of the major battleground items in the bill will be a payroll tax cut.

As we mentioned on Friday, National Economic Council chief Larry Kudlow wants a payroll tax cut included to help spur economic growth. Kudlow views the tax cut as a wage subsidy the government would give to employers. These employers would, in turn, pass it on to their employees.

Treasury Secretary Steve Mnuchin would rather send another stimulus check. He believes that the Democrat-led House would never approve a payroll tax.

Yesterday, President Trump raised the stakes by saying that he would consider not signing the next stimulus bill if it doesn’t include a payroll tax cut.

“I want to see it,” Trump said during an interview with Fox News. “I’ll have to see but, yeah, I would consider not signing it if we don’t have a payroll tax cut, yes.”

So what is a payroll tax cut, and how would it benefit the average American?

What Is A Payroll Tax Cut

For working Americans, 7.65% of your earnings are subtracted from each paycheck to help pay for Social Security and Medicare (6.2% goes to Social Security; 1.45% goes to Medicare). Your employer also pays an equal amount of taxes.

The Social Security tax is only collected on the first $137,700 of earnings; however, if you earn more than $200,000 per year, an additional 0.9% Medicare tax is collected on wages over $200,000.

What hasn’t been determined yet is if President Trump is insisting on a 100% tax cut or a smaller percentage. Let’s assume it’s a 100% payroll tax cut. For someone making $25 per hour and working a standard 40 hour work week, the savings would be $76.50 per week. This goes for a little more than $300 per month.

It’s also unclear how long the tax cut would last. In previous comments, President Trump mentioned extending the tax cut through November or possibly the remainder of the year.

The goal of the tax cut would be to allow workers to keep more of their wages in each paycheck. This would give them more money to spend and help boost the economy. Critics say that the money wouldn’t get into the economy quickly enough with a tax cut. Instead, like Treasury Secretary Mnuchin, they prefer to send out stimulus checks that are available for immediate spending.

Reservations

The other knock against a payroll tax cut is that it does nothing for those who aren’t collecting a paycheck, i.e. the tens of millions of unemployed Americans.

There is also concern about diverting money – at least temporarily – away from the chronically under-funded Social Security and Medicare programs. While the thought is to simply close the funding hole at a later date, there’s no framework in place to ensure that will occur.

We should know additional details of the plan this week when the proposal is released and we hear more from President Trump.

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DOJ Files Suit Against Google Over Anti-Competitive Behavior

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DOJ Files Suit Against Google Over Anti-Competitive Behavior

After a nearly 16-month investigation, the Justice Department filed an antitrust lawsuit against Google, part of Alphabet. This is the first of likely a handful of lawsuits against one of the FAANG stocks.

The suit alleges that Google has engaged in anticompetitive conduct to preserve monopolies in search and search advertising. It is the most notable lawsuit on the grounds of anticompetitive behavior in nearly 20 years. The last one was when Microsoft had been sued by the government in 1998 accusing the software giant of unlawful monopolization.

The lawsuit alleges that Google is acting as a gatekeeper to the internet. It acts as such by creating exclusionary and interlocking business agreements that prevent competition. For example, the government says Google uses the billions of dollars it collects from advertisers to pay cell phone manufacturers to install Google as their preset, default search engine.

The DOJ lawsuit specifically points out that Google’s search application is preloaded on mobile phones running its popular Android operating system. It also points out the fact that this app can’t be deleted. The lawsuit adds that Google unlawfully prohibits competitors’ search applications from being preloaded on phones under revenue-sharing arrangements.

Keeping an Eye on Tech Companies

Large tech companies, like Alphabet’s Google, along with Facebook, Apple and Amazon, are in the crosshairs of legislators in Washington, D.C., who think that the government should have more control over how the companies operate.

In the U.S., nearly all state attorneys general are separately investigating Google. Eleven state attorneys general, all Republicans, joined the Justice Department’s case.

It’s not just Republicans who have a problem with Google’s actions. Democrats on a House antitrust subcommittee released a report this month saying all four tech giants wield monopoly power and recommending congressional action.

The company’s problems aren’t limited to US regulators, either. European Union regulators have also hit Google with three antitrust complaints and fined it about $9 billion. However, the lawsuits and fines have apparently done little to slow the company down.

Lawsuit Too Broad?

Amazingly, as news broke of the DOJ lawsuit, Google’s share price actually rose.

Fox Business’ Charlie Gasparino says it’s because investors think the lawsuit is too broad and will take years to litigate.

“When the news hit, when they read the complaint, let’s just say “underwhelmed” was the word of the day. Investors we are talking to are downplaying the impact of this suit on Google. They believe the suit, if you look at it, there’s a lot of heated language, but in terms of comparing to other anti-trust suits on tech, such as Microsoft that had really specific issues that Microsoft did to hurt a competitor… this lacks that type of specificity.”

He then added that even a worst-case scenario could be good for Google investors.

“They believe it’s too broad, they believe it’s going to take years to litigate, they believe Google has the financial resources to fight, and here’s the other interesting thing. They actually think that Google, even if you broke it up, and that’s the worst-case scenario, you could get a lot of value out of the sum of its parts,” said Gasparino.

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Rickards: Get Ready For Deflation, And Here’s Where Gold Prices Are Headed

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Rickards: Get Ready For Deflation, And Here’s Where Gold Prices Are Headed

Yesterday we brought you the first part of an interview by James Rickards. In it, he gave his outlook on the stock market. He also shared his viewpoints on why the Federal Reserve can’t create inflation despite printing trillions of dollars.

Today we bring you the second part of the interview, where Rickards discusses why he thinks we are headed towards deflation and not inflation, why gold falls when the stock market falls, and where he sees gold prices headed.

Moving Toward Deflation?

He says we are headed toward deflation despite trillions of dollars in money printing. Rickards thinks it’s because we aren’t spending any of that money.

“The greatest danger in the macro-economy today is deflation, because declining labor force participation, declining productivity, most of all velocity. Velocity is the turnover of money. It doesn’t matter what the money supply is. If there’s not turnover, if there’s not lending and spending, if the people aren’t chasing the goods, you’re not going to get inflation. But velocity is a psychological phenomenon. How do you feel? Do you feel prosperous, do you feel confident, do you want to go out and buy dinner or drinks, or do you feel cautious, do you feel concerned, you saw your neighbor lose her job, you’re worried about losing your job, so you save more,” said Rickards.

He said the savings rate is still at levels well above anything we’ve seen historically here in the US.

“The evidence is people are saving more. We’re in a liquidity trap. Saving was sort of working its way up from 5% to 8%, in April it was 33%. In May it was still 25%, in June it was 17%. So savings can be a good thing in the long run, but in the short run savings comes out of consumption. If I make money I’m either going to spend it or save it. Well if I save more I spend less. So all the signs are pointed to deflation. They can say they want inflation and they can print all the money they want, it doesn’t mean they’re going to get it.”

Gold Buyers

There are two types of gold buyers according to Rickards. The “strong hands” will be around when gold runs to $15,00 per ounce.

“There are two kinds of buyers of gold or investors in gold generally. The strong hands and the weak hands. The strong hands don’t use a lot of leverage, they use cash or capital, they’re in it for the long haul, they’re not day traders, I mean I watch the tape because I’m an analyst, I do a lot of interviews about it and I write about it, but I’m not a day trader. I don’t get too euphoric if gold goes up, I don’t get depressed if it goes down. I know where it’s going in the long run, it’s going in the neighborhood of $15,000 an ounce.”

Not Out of the Ordinary

He doesn’t offer a timeframe for the massive run-up in gold prices. However, he says it isn’t uncommon for gold to sell off along the way.

“That doesn’t have to happen next year or the year after. That’s the trend. I like to remind people, if it’s going to $15,000 an ounce, which it is, it’s got to go to $3,000 – $4,000 – $5000 – $6,000 along the way. So that’s the long term trend, so I don’t worry about the wiggles. As far as the stock market is concerned, this happened in 2008, I remember the worst part of it in 2008 in September, October and November when the stock market was absolutely crashing, gold was going down. And I was getting all these calls, ‘Gold is a safe haven, how come it’s going down?'” he said.

“What happens is in a liquidity crisis, everybody sells everything, especially the weak hands. If you’re leveraged and you’re in the gold futures market and you’re long and the market is collapsing, you’ve got to sell and get out, you’ve got to cut your losses.”

“Strong Hands” Stepping In

When this happens and prices drop, Rickards says the “strong hands” step in and start buying.

“If you’re a leveraged player, you’ve got to either come up with cash for the margin, or you have to sell your position which makes it worse. So what people do is sell gold to get cash to meet the margin call on the stock losses. Or they’re on the wrong side of the gold market and they’re leveraged and they just sell to cut their losses. So it does go down, it’s highly predictable. But the strong hands are waiting. It’s like a lynx or a mountain lion hunt. They don’t stalk their prey, they just sit there and wait and then pounce. Strong hands are watching, they don’t jump in on day one, they wait until it goes down enough and then they come in and buy and it goes right back up again.”

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DOJ Files Antitrust Suit Against Google

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Google Headquarters with bikes on foreground-Antitrust Suit Against Google-ss-featured

Yesterday, the US Department of Justice (DOJ) filed an antitrust suit against Google. The Justice Department alleged that Google maintained a monopoly on internet searches. Its dominance allowed it to cut off rivals from critical distribution channels.

RELATED: Legislative Changes on Tech Companies

Eleven Republican state attorneys general joined the lawsuit as plaintiffs. These are Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas.

DOJ Cites Sherman Act of 1890

Under the Sherman Act, DOJ lawyers alleged that Google illegally maintained monopolies. This covered markets for “general search services, search advertising, and general search text advertising.” US Deputy Attorney General Jeffrey Rosen led the filing of charges. He said that “Google is the gateway to the internet and a search advertising behemoth. It maintained its monopoly power through exclusionary practices that are harmful to competition.”

The lawsuit comes after a House Judiciary report that says some tech act as monopolies. Apart from Google, Amazon, Apple, and Facebook also got mentioned. The report recommended Congress to update antitrust laws. These changes can help with breaking up businesses.

Within a month, the Justice Department issued a lawsuit against Google. It is a result of a 16-month investigation into company business practices. Google got involved in a 2013 antitrust suit but did not get charged.

Monopoly Power In Online Search

Google allegedly tied up distribution channels for online search and related markets. The suit said Google “foreclosed competition for internet search” through exclusionary agreements. This prevented rivals from achieving the scale to fight Google’s dominance. The DOJ said Google holds 88% of the U.S. search market and 94% of mobile searches. Google allegedly harmed consumers by providing lower quality search and reducing choices.

The DOJ also claimed Google owns more than 70% of the search ads market. It said that the company’s monopoly power lets them charge more. While they charged more, Google provided lower-quality services in the absence of competition.

Exclusionary contracts

Google used exclusionary tactics with distributors of its Android mobile OS. As such, Google also suppressed innovation in the search market. Google allegedly requires phone manufacturers who use Android to agree to certain limits. Android-powered devices that aren’t compliant with Google standards face selling restrictions. The company then provides the same manufacturers access to its “vital proprietary apps.” They do so in exchange for agreeing to carry other Google apps. Under the agreement, the devices should prevent users from deleting certain Google apps.

Apart from exclusivity, Google’s revenue-sharing model for distributors helped expand its dominance. A senior executive described the model as bittersweet.  He said it was“a bitter pill for carriers, and a generous revenue share is a sugar that makes it go down smoother.”

Apple’s partnership

Google’s partnership with Apple is the centerpiece of the DOJ’s allegations. Google allegedly misused its power in an anticompetitive manner. At stake is a major revenue stream for both tech giants.

It’s no secret that Google relies on search traffic from Apple’s iPhones. The search engine is the default service on Apple’s Safari phone browser. This means that consumers get Google search results—and related advertising – automatically. The agency claimed Google “locked up” distribution by entering exclusionary agreements with Apple.

Google responds to the suit

Google Chief Legal Officer Kent Walker responded immediately to the suit via a blog post. He laid out the company’s rebuttal to the DOJ’s claims.

He wrote: “Today’s lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives. This lawsuit would do nothing to help consumers. On the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use.”

Walker refuted claims that Google’s arrangement with Apple is exclusive. Rivals also pay to appear in Apple’s Safari. He said Apple chose Google search because they found it as “the best.” He linked a 2018 article where Apple CEO Tim Cook complimented the search engine.

Missed the Main Point

Walker also said that the suit missed the “bigger point.” He argued that consumers choose to use Google’s services because they want to. In case they didn’t, switching default search engines is an easy task to do. Walker pointed to specialized search engines like Expedia, OpenTable, and even Twitter. These companies help people seek specialized information and are available. While Google pays for digital shelf space competitors “are readily available too.” As for agreements, he said that Google’s contracts are industry standard. They offer nothing unusual. 

Watch this as FoxNews reports that the US Department of Justice has filed an antitrust lawsuit against search engine giant Google: 

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Do you think that the antitrust suit has merit and that Google might be too big a company? Do you use, or even know, any other search engine other than Google? If not, is that enough proof of the company’s monopolistic behavior? Let us know what you think by sharing your comments below.

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