The US government on Monday said it may slap punitive duties of up to 100 percent on $2.4 billion in imports from France of Champagne, handbags, cheese and other products, after concluding that France’s new digital services tax would harm US tech companies.
The US Trade Representative’s office said its “Section 301” investigation found that the French tax was “inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies,” including Alphabet Inc’s Google, Facebook, Apple and Amazon.com.
US Trade Representative Robert Lighthizer said the government was exploring whether to open similar investigations into the digital services taxes of Austria, Italy and Turkey.
“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies,” Lighthizer said. His statement made no mention of proposed digital taxes in Canada or Britain.
The US trade agency said it would collect public comments through Jan. 14 on its proposed tariff list as well as the option of imposing fees or restrictions on French services, with a public hearing scheduled for January 7.
It did not specify an effective date for the proposed 100% duties.
CHAMPAGNE, ROUGE AND GRUYERE
The list targets some products that were spared from 25 percent tariffs imposed by the United States over disputed European Union aircraft subsidies, including sparkling wines, handbags and make-up preparations – products that would hit French luxury goods giant and cosmetics maker L’Oreal hard.
Gruyere cheese, also spared from the USTR aircraft tariffs levied in October, featured prominently in the list of French products targeted for 100 percent duties, along with numerous other cheeses.
The findings won favor from US lawmakers and US tech industry groups, who have long argued that the tax unfairly targets US firms.
“The French digital services tax is unreasonable, protectionist and discriminatory,” Senators Charles Grassley and Ron Wyden, the top Republican and Democrat, respectively, on the Senate Finance Committee, said in a joint statement.
Spokespeople for the French embassy and the European Union delegation in Washington could not immediately be reached for comment.
But prior to the release of the USTR’s report, a French official said that France would dispute the trade agency’s findings, repeating Paris’ contention that the digital tax is not aimed specifically at US technology companies.
“We will not give up on taxation” of digital firms, the official said.
France’s 3 percent levy applies to revenue from digital services earned by firms with more than €25 million ($27.86 million) in French revenue and €750 million (£644 million) worldwide.
The USTR’s report and proposed tariff list follow months of negotiations between French Finance Minister Bruno Le Maire and US Treasury Secretary Steven Mnuchin over a global overhaul of digital tax rules.
The two struck a compromise in August at a G7 summit in France that would refund US firms the difference between the French tax and a new mechanism being drawn up through the Organization for Economic Cooperation and Development.
But Trump never formally endorsed that deal and declined to say whether his French tariff threat was off the table.
US Housing Sales Boom Will Last Until 2021
Redfin CEO Glenn Kelman told CNBC on Thursday that he sees the US housing sales boom will last until 2021. Total US Home sales increased 9.4% in September, surpassing estimates. Meanwhile, median prices went up 15% year over year. This is according to data provided by the National Association of Realtors.
Shares of Redfin, a real estate brokerage firm, were higher by 1% Thursday to $45.60. The stock more than doubled during this year. It now has a market cap of $4.5 billion.
Why do people buy houses during a recession?
During this time when the economy is reeling and jobs are tight, people buy homes. Why? There are a couple of reasons.
The bigger acceptance for remote work freed many people from living in the city. The opportunity to leave cramped apartments and expensive city living. The pandemic gave enough reason for workers to pack up and head for greener pastures. Next, interest rates are going down hard. From 3.7%, 30-year mortgage rates are now 2.9%, the lowest rates ever. Despite higher prices, people know this is the best time to buy on the cheap.
The intent is there. The pandemic allowed you to work anywhere. And interest rates allow you to pay the lowest interest rates. People are taking the plunge and buying. So what’s the problem? We’re running out of houses to buy.
Demand coming from the rich
Rich professionals who can work from home are the reason for the uptick in housing demand. Kelman said that many remote workers moved from major cities to distant suburbs. Kelman said these workers began “taking a permanent vacation where they’re working from those homes.”
People are taking advantage of low-interest rates to snap up homes. Kelman noted that “part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free.” The opportunity to buy homes for cheap may be too much to resist. “Of course, they’re going to use that money to buy homes,” he added.
Meanwhile, there’s another group of people who would like to buy but can’t. Kleman said: “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.”
Kelman foresees demand to continue until 2021 at least. Many undecided buyers will buckle down next year and take the plunge. He said: “There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least.” Why 2021? “There are so many people now who have decided they’re not going to be able to buy a home by year-end,” he said. Kelman expects them to buy next year, “as their kids shift school districts. I do think we’re going to see this for some time.”
Shrinking inventory of houses for sale
With homes fast disappearing from the market, higher purchase prices are coming back. Based on data from the National Association of Realtors data, only 2.7 months’ supply of houses is available last month. This represents the lowest level since 1982 when the NAR began tracking data.
Kleman expects supply to increase after the elections. Uncertainty will decrease after voters elect a new president. Listing and selling a home can take months to process. That’s why sellers have a lower risk tolerance than buyers. “Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term in the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”
Demand won’t last forever
The Wall Street Journal’s Justin Lahart thinks not everybody can live outside the big cities. A remote job in a vacation spot may pose difficulties for some. Winter conditions may also make some remote workers rethink their strategy. He also believes that the housing boom now made people buy houses sooner than later. He thinks many of the workers who moved to the suburbs would’ve done so in a few years. When the pandemic subsides, a smaller group might follow the exodus out of big cities.
The number of people who can afford houses will shrink as well. Many workers’ careers derailed during the year. Many millennials got burned during the financial crisis in the early 2000s. Now, a new career-threatening crisis is in full swing. The post-coronavirus landscape may depend on how well the economy rebounds. We’ll have next year to find out.
Watch this as CNBC reports on the US housing sales boom. Redfin CEO Says “people are buying vacation homes, then taking a permanent vacation:
Are you house hunting right now, or have you already bought a house this year? Why are you doing so? Let us know why buying a home is a good idea right now. Share your thoughts in the comments section below.
Biden Plan Could Mean 60% Tax Rates, But Here’s Who Will Get Stuck With Higher Taxes
New York and California may start losing high-income residents by the droves next year if Democratic nominee Joe Biden wins the election in a few weeks.
That’s because the two left-leaning states would have a combined federal and state rate over 60% under Biden tax plan.
Even New York resident and rapper 50 Cent tweeted earlier this week that despite his apparent dislike for President Trump, he said “Vote Trump” and “62% are you out of ya (expletive) mind,” when he learned about Biden’s tax plan.
According to calculations from Jared Walczak of the Tax Foundation, California residents earning more than $400,000 per year could face a combined tax rate as high as 62.6% under the Biden plan. New Jersey residents could see taxes reach 58.2% and New York would top out at just over 62%.
But somehow, it could get even worse.
Tax Rates Can Still Go Higher Under Biden
Walczak points out that if you include the contributions to the tax hikes by employers, which are often passed along to employees, the combined rates would jump to over 65% in California, 62.9% in New Jersey and 64.7% in New York City. They could still go even higher if California and New York raise taxes on high earners. This is something some legislators have proposed to try and close multibillion-dollar budget gaps.
“These rates would be the highest in about three and a half decades,” said Walzcak, “and imposed on a broader tax base than was in place previously.”
The Middle Class Will Suffer?
But Home Depot co-founder Ken Langone believes the wealthy won’t pay higher taxes at all – the middle class will.
“The middle class will not be exempt. Tragically, it will punish them. It isn’t going to punish us,” said Langone.
Appearing on Fox Business yesterday, Langone said due to Biden’s tax hikes, “the middle class will be in peril.”
He said that despite Biden saying the wealthy should pay more in taxes, the middle class will feel the effects of Biden’s tax plan. Langone said he is in favor of a tax code that is more progressive and equitable. This includes eliminating loopholes that favor the rich and large corporations.
“I don’t know if there’s any of us that have done well that will have a problem with paying more taxes, but it’s a ruse to think that hitting us and us alone is going to get the job done,” Langone said, adding ““It won’t and the middle class will be in peril and when you take money out of the hands of the middle class, you do a dramatic impact negatively on the economy.”
He said that increasing taxes on the middle class will lead to a recession.
“The problem is, when you go after the middle class, you begin to attack the backbone of the economy and we will have a bad recession. We will have a very bad recession,” Langone said.
“These are very precarious times and not the time to be screwing around,” he added.
Market Volatility Rises As Election Polls Show Tightening Race
The relatively calm markets earlier this month are giving way to more volatility as we approach the election. This is according to a team of strategists at JPMorgan.
“While it is perhaps true that during the first two weeks of October risk markets were supported by a widening of US presidential odds, which by itself implied a lower probability of a close or contested US election result, over the past week or so these odds have started narrowing again,” said a team of strategists at JPMorgan Chase, led by Nikolaos Panigirtzoglou.
According to recent polls by RealClearPolitics, in key battleground states, Democratic nominee Joe Biden leads President Trump by 3.9 percentage points, 49.1 vs. 45.2. That lead has shrunk from a 5 percentage point advantage for Biden about a week ago.
A general election nationwide poll by RCP shows a wider 8.6 percentage-point lead for Biden. However, there are many who feel those polls are not correcting for sampling bias.
MarketWatch recently interviewed Phil Orlando, the chief equities strategist at Federated Hermes. There, he said he doesn’t believe the polls accurately reflect how close the race is. In relation to this, he pointed to the surprise win by Trump against Democrat Hillary Clinton in 2016.
“Our base case is that the polls are wrong, there’s an oversampling biased error that a lot of polls aren’t correcting for,” Orlando said.
With a tightening race for the White House, volatility has returned to the market. It will also likely increase in the final two weeks leading up to the election.
A report put out yesterday by SentimenTrader showed that the CBOE Volatility Index or VIX, jumped to levels last seen during the Great Financial Crisis, and tends to rise as stocks fall as it is typically used as a hedge against market downturns.
Market analysts use the ratio to measure how speculative traders are getting. A rise in the put/call ratio means that investors are expecting plenty of volatility between now and November 3.
The VIX, which measures investor bullish or bearishness on the S&P 500 for the next 30 days, is currently near 29, well above its historical average between 19 and 20. This week alone the VIX jumped 6.3%.
Source of Volatility
Jeffrey Mills, the chief investment officer at Bryn Mawr Trust, said some of the volatility likely comes from investors trying to position their portfolios based on who they perceive will win the election. “There could be some front-loaded selling but I do feel like that’s a near-term phenomenon,” he said. But he says no matter who wins, there’s really only one place to invest, and that’s the stock market.
“There is going to be this continued pull toward equity markets — where else are you going to go when you need to earn a certain percentage to fund retirement, fund education?”
If investors are moving money today based on who they think will win the election, Daniel Clifton, head of policy research at Strategas Securities said each candidate will likely benefit different sectors.
A Biden victory will be good for stocks in the infrastructure, renewable energy and technology sectors, said Clifton.
If President Donald Trump is reelected, Clifton said there’s “huge upside” in some sectors. These include defense, financials and even the for-profits like prisons, education and student loan lenders.
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