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How the tax bill gets passed is more important than the bill itself · The Financial Exchange Show

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Speaker 2: Good morning, Happy Independence Day week.
1:14
Speaker 3: Here from the Financial Exchange, it's Mike, Paul and Tucker
1:18
Speaker 3: with you on a Monday of a shortened trading week.
1:21
Speaker 3: We have markets that will be closing obviously on Friday
1:24
Speaker 3: and observance of the Independence Day holiday, but also at
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Speaker 3: one pm on Thursday, July third, we will have equities
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Speaker 3: closed on the New York Stock Exchange, so very shortened
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Speaker 3: trade in week.
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Speaker 2: Here.
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Speaker 3: We've got some economic data that will be pouring over
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Speaker 3: as well. We have some speeches from Federal Reserve members,
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Speaker 3: including Jay Powell, who will be going tomorrow. We've got
1:46
Speaker 3: some construction spending data, and then really it's a labor
1:50
Speaker 3: market week, so we have the Job Opening's Labor Turnover
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Speaker 3: Report that Jolts report that we frequently report on coming
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Speaker 3: out tomorrow, ADP Employment coming out Wednesday, and then Thursday. Hey,
2:00
Speaker 3: we're just going to get slammed with labor market data
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Speaker 3: because the Friday typical Friday Jobs report is coming out
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Speaker 3: a day early on Thursday at eight thirty. We'll also
2:09
Speaker 3: get the weekly jobless claims numbers coming out on Thursday
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Speaker 3: morning at eight thirty, so tune in on Thursday. That
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Speaker 3: will be a heavy heavy labor market day to cover
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Speaker 3: and work through. But before we go any further this week,
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Speaker 3: we have the big beautiful bill also being worked through
2:27
Speaker 3: in the Senate as we speak. We just had Scott Bessent,
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Speaker 3: the Treasury Secretary, speaking on Bloomberg about said bill, and
2:35
Speaker 3: we're starting to get I guess, a bit more clarity
2:38
Speaker 3: as to what this thing might actually look like when
2:42
Speaker 3: all is said and done. It'sufice to say, though it
2:44
Speaker 3: can still change here as the Senate works through their
2:48
Speaker 3: vote rama, I think is how they term it on
2:52
Speaker 3: what's going to be in, what's going to be out.
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Speaker 3: But your take, Paul, I guess on the likelihood of
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Speaker 3: this getting done, it seems very likely that something gets passed.
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Speaker 4: To me, I think that that seems to be the case.
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Speaker 5: A lot of the major issues seem to have been
3:06
Speaker 5: ironed out the vote that they had over the weekend.
3:09
Speaker 5: I believe it was a fifty one to forty nine
3:12
Speaker 5: vote that was conducted through the Senate and now it
3:16
Speaker 5: will move to the House later this week. Is that
3:20
Speaker 5: right in terms of the procedural idea of it. And
3:24
Speaker 5: it seems like some of the big hang ups were
3:26
Speaker 5: included the salt, the state and local income tax cap
3:31
Speaker 5: that was bumped in this proposed bill from ten thousand
3:34
Speaker 5: to forty thousand. We'll get into some of the nitty
3:36
Speaker 5: gritty as the show goes on, but it does seem
3:38
Speaker 5: like that is what is going to happen. Is is
3:42
Speaker 5: it's going to get past. But the question that I'd
3:45
Speaker 5: like to maybe kick around, Mike, is this idea that
3:47
Speaker 5: got posted me on one of the radio calls I
3:49
Speaker 5: did this morning, that by having these cuts we'd see
3:54
Speaker 5: GDP growth commensurate to the cuts in place. Just posing
3:57
Speaker 5: the question, and I think it's something that's worth spending.
4:00
Speaker 4: So a little bit of time on.
4:02
Speaker 3: GDP growth, what in relation to the number of cuts
4:07
Speaker 3: that are being done on taxes?
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Speaker 2: Well, what's the question?
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Speaker 5: Some politicians suggesting this idea that by having these tax
4:12
Speaker 5: cuts in place, you're gonna get more economic growth that's
4:15
Speaker 5: going to pay for the tax cuts, and.
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Speaker 2: So it never happened, never will.
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Speaker 5: Yeah, Well that's a short way to look at it.
4:21
Speaker 5: But I'd like to expand a little bit more on this.
4:23
Speaker 5: The short of it is, first of all, these aren't
4:25
Speaker 5: going to be tax cuts. This is going to be
4:27
Speaker 5: for the marginal income tax bracket rates. These are just
4:31
Speaker 5: staying the same that they've been since twenty seventeen. So
4:34
Speaker 5: that's one thing that's important to note. You're adding to
4:36
Speaker 5: the deficit, but you're keeping rates the same. And we
4:38
Speaker 5: can talk about in a moment just the maneuvers that
4:41
Speaker 5: they're utilizing in terms of extending these lower brackets. But historically,
4:45
Speaker 5: if you look at economic evidence out there and any
4:48
Speaker 5: type of analysis, that if you cut one dollar of
4:51
Speaker 5: taxes to the American person, whether it be Mike or myself,
4:54
Speaker 5: it does not translate into us spending that full net
4:58
Speaker 5: dollar that we're getting as a bene from tax breaks.
5:01
Speaker 5: Perhaps twenty cents of that dollar or a certain other
5:05
Speaker 5: percentage goes to me spending more, Mike spending more to
5:08
Speaker 5: boost income growth. But whatever you look at from an
5:11
Speaker 5: economic study standpoint, it is not a dollar for dollar
5:14
Speaker 5: benefit that you get.
5:15
Speaker 4: You might short uptick.
5:17
Speaker 3: Furthermore, Paul, even if you did spend every penny of it,
5:19
Speaker 3: it's unlikely, for instance, that every dollar that you went
5:22
Speaker 3: and spent would stay here in the United States and
5:25
Speaker 3: contribute to us GDP.
5:26
Speaker 4: True.
5:27
Speaker 3: So you know, if you even went with that assumption
5:29
Speaker 3: that hey, tax cuts put dollars in people's pockets, people
5:32
Speaker 3: turn around and spend them, which they buy and large do.
5:35
Speaker 3: They're usually buying products rather than experiences, and a lot
5:39
Speaker 3: of those products are made overseas. They might be sold here,
5:41
Speaker 3: they might be sold by Amazon, which gets some you
5:43
Speaker 3: know boost to GDP, but ultimately a lot of those
5:46
Speaker 3: end up in China or in other parts of the world,
5:48
Speaker 3: which I know through tariffs.
5:50
Speaker 2: The President is also trying to rectify. But the entire
5:52
Speaker 2: premise is a bit baked.
5:54
Speaker 3: Right now, here is a fair thing to say, in
5:57
Speaker 3: the absence of this tax bill getting past, tax rates
6:01
Speaker 3: would shoot up pretty dramatically for sixty to seventy percent
6:05
Speaker 3: of Americans.
6:06
Speaker 2: I'm surprise.
6:07
Speaker 4: Why wasn't more than that.
6:10
Speaker 3: There are just a lot of people that a don't
6:13
Speaker 3: pay taxes at all. There are a number of them
6:17
Speaker 3: that So if the tax bills just went away entirely,
6:20
Speaker 3: then remember that the salt cap that was put in
6:23
Speaker 3: place back in twenty sixteen would disappear. So oh true,
6:26
Speaker 3: it would be able to hear In mass Chusetts, there's
6:27
Speaker 3: a whole bunch of people who if you're making like
6:29
Speaker 3: two hundred grand, you will actually pay lesson taxes if
6:33
Speaker 3: the tax bill went away, makes sense. But it's fair
6:36
Speaker 3: to question on the other side of that equation. Hey,
6:39
Speaker 3: would we be faced with maybe a recession if the
6:42
Speaker 3: Congress did not extend.
6:43
Speaker 2: These tax cuts. It's a reasonable question.
6:46
Speaker 3: I'm not sure you would get there, but it is
6:48
Speaker 3: a reasonable question to ask on the other side of
6:50
Speaker 3: that equation. Yeah, will these tax cuts boost GDP to
6:54
Speaker 3: the point of paying for the tax cuts themselves? Almost definitely.
6:58
Speaker 3: Not any seriousomous that's looked at. It says almost definitely,
7:02
Speaker 3: not very unlikely to happen. Remember that the tax cuts
7:05
Speaker 3: that are being done here are relatively minor. You know,
7:09
Speaker 3: they're getting a lot of play because you're talking about
7:12
Speaker 3: taxes on tips and all these other things, But they
7:14
Speaker 3: are relatively minor cuts compared to where we are today.
7:17
Speaker 3: Could you convince me that in the absence of this
7:19
Speaker 3: getting done, you know, tax increases on the average American
7:23
Speaker 3: lead us into a slower economy where you could have
7:25
Speaker 3: a recession combined with tariffs and other things. Yeah, you
7:28
Speaker 3: could get me to that point. I'm not making a
7:31
Speaker 3: statement about which one I think is better for the
7:33
Speaker 3: long term state of the economy, because quite Honestly, the
7:36
Speaker 3: way that this is getting done and deficits are being
7:38
Speaker 3: ignored on this entire subject, I think really raises some
7:42
Speaker 3: questions about how you and I are going to end
7:45
Speaker 3: up paying for these massive debt bills that the United
7:48
Speaker 3: States government continues to run up. But in terms of
7:51
Speaker 3: what we are seeing in this entire bill, obviously the
7:55
Speaker 3: most important thing. You are extending the tax cuts from
7:58
Speaker 3: the twenty seventeen tax cuts and object which are I
8:00
Speaker 3: set to expire by December thirty first for all income groups.
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Speaker 3: That includes the current tax rates with a top marginal
8:07
Speaker 3: rate of thirty seven percent. Remember not that long ago
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Speaker 3: that top marginal rate was thirty nine point six percent
8:14
Speaker 3: pre twenty seventeen. There's gonna be a boost to defense
8:17
Speaker 3: spending in the Senate bill, more funding for immigration enforcement
8:22
Speaker 3: as part of this bill, ending a whole bunch of
8:25
Speaker 3: clean energy tax credits. So I'll be interested to see
8:27
Speaker 3: how this takes place. It's going to impose new taxes
8:30
Speaker 3: on wind and solar projects. But for instance, right, I mean,
8:34
Speaker 3: I put panels on my home back in twenty twenty,
8:39
Speaker 3: I believe, and will that still be as feasible? When
8:42
Speaker 3: I was looking at a new HVAC system. There are
8:44
Speaker 3: a whole bunch of green energy tax credits that apply
8:47
Speaker 3: there to basically even out the cost of the project.
8:50
Speaker 3: Will it still be the case unsure tax deductions for tips,
8:54
Speaker 3: overtime and car loans will be going into place, it
8:57
Speaker 3: looks like, but they won't last for very long. They're
8:59
Speaker 3: going to be in there for maybe three years, at
9:01
Speaker 3: which point you'll have this fun game again. Instead of
9:05
Speaker 3: a no tax on Social Security, it looks like we
9:07
Speaker 3: are going to be seeing a six thousand per person
9:10
Speaker 3: tax deduction for senior citizens, so effectively crediting you. Instead
9:15
Speaker 3: of cutting the tax on Social Security, which makes sense
9:18
Speaker 3: given the process, they're using big cuts to Medicaid spending.
9:21
Speaker 3: This has obviously garnered a lot of attention, a lot
9:24
Speaker 3: of questions about how this is going to affect rural
9:26
Speaker 3: hospitals and millions of Americans who are on Medicaid.
9:29
Speaker 2: So we will see how that plays out.
9:31
Speaker 3: Of course, this will have to raise the debt ceiling
9:33
Speaker 3: by some five trillion dollars, prompting a no vote from Kentucky.
9:39
Speaker 2: Senator Ran Paul.
9:41
Speaker 3: They will lift the salt cap to forty thousand dollars
9:43
Speaker 3: from the current ten thousand. We'll talk about what that
9:45
Speaker 3: exactly means later. And then having states pay for more
9:49
Speaker 3: food aid programs is in here as well, raising the
9:52
Speaker 3: child tax credit, transforming the student loan repayment program, new
9:57
Speaker 3: limits on pel grant eligibility, tax on college endowments. A
10:01
Speaker 3: lot of different pieces in this bill, hence the voter
10:05
Speaker 3: rama that I described earlier. So we will see what
10:07
Speaker 3: makes it through, but these ones look fairly fairly likely
10:10
Speaker 3: in terms of the changes that are coming via this
10:12
Speaker 3: tax bill.
10:12
Speaker 5: The last one that I'll just sort of get in
10:14
Speaker 5: a little bit more detail on just because it probably
10:17
Speaker 5: is interesting to listeners out there, that Social Security piece.
10:20
Speaker 5: So typically the standard deduction for a married couple is
10:22
Speaker 5: thirty thousand dollars that you can take off your taxes
10:25
Speaker 5: for a senior today, right first scene, Well, so I'm
10:27
Speaker 5: just talking married couple and then drilling down to there's
10:30
Speaker 5: an additional credit. There's additional deduction that you get today
10:34
Speaker 5: if you're over the age of sixty five. They are
10:37
Speaker 5: proposing to increase that to six thousand a person above
10:41
Speaker 5: and beyond the regular standard deduction of a married couple
10:43
Speaker 5: getting thirty thousand, So.
10:44
Speaker 3: Ty to get this straight like forty two thousand dollars
10:47
Speaker 3: in total standard deduction for a married couple exactly.
10:50
Speaker 2: It's pretty huge.
10:51
Speaker 4: It's big.
10:51
Speaker 3: H It's a big, big tax cut for retirees. Yeah,
10:54
Speaker 3: let's take a quick break when we come back. Want
10:56
Speaker 3: to come back to how we're going to cover all
10:59
Speaker 3: of this increase spending, because they are a whole bunch
11:01
Speaker 3: of tax cuts.
11:02
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12:11
Speaker 3: Well, we are continuing to talk about the megabill, the
12:14
Speaker 3: big beautiful bill that it's working its way through the
12:17
Speaker 3: Senate as we speak, and as we do so, there's
12:20
Speaker 3: been you know, a lot of attention on the cost
12:23
Speaker 3: of these tax cuts. And again to pulse point earlier,
12:27
Speaker 3: a lot of them are not new tax cuts. These
12:30
Speaker 3: are extending the tax cuts that were passed in twenty
12:32
Speaker 3: seventeen as part of the Tax Cuts and Jobs Act,
12:36
Speaker 3: and so are being looked at a bit differently in
12:38
Speaker 3: terms of their impact on the state of the overall economy.
12:41
Speaker 3: But to be really clear, the US federal budget and
12:45
Speaker 3: you take a look at things such as the government's
12:48
Speaker 3: own projections of where it's nation, of where the national
12:51
Speaker 3: debt is going to go right now.
12:54
Speaker 2: Because this is.
12:55
Speaker 3: The law on the books, it assumes that the tax
12:58
Speaker 3: cuts that were placed in twenty seventeen will be phased
13:04
Speaker 3: out come twenty twenty six, meaning tax rates go up
13:07
Speaker 3: in twenty twenty six, which lowers the rate of the
13:10
Speaker 3: increase of the overall deficits. What the Senate Republicans are
13:16
Speaker 3: talking about doing here is pretty uniquely misrepresentative. But they're
13:22
Speaker 3: working through the budget reconciliation process, and there are a
13:26
Speaker 3: lot of specific rules when it comes to reconciliation, one
13:31
Speaker 3: of which is that you cannot increase the deficit over
13:35
Speaker 3: a ten year budget window. So to dodge the Senate
13:38
Speaker 3: filibuster rule, which usually takes sixty votes, you have to
13:43
Speaker 3: use fast track reconciliation, which forbids bills from increasing deficits
13:47
Speaker 3: beyond the ten year budget window and therefore only needs
13:51
Speaker 3: a simple majority. Here's what Republicans are doing. They are
13:54
Speaker 3: basically saying, which isn't really true. But what they're doing
13:58
Speaker 3: is they're saying, hey, look, the impact of this tax
14:00
Speaker 3: bill that we are passing actually does not have a
14:04
Speaker 3: budget impact at all, because all we're doing is continuing
14:07
Speaker 3: the current laws. What they're seemingly ignoring is the fact
14:11
Speaker 3: that the current laws say that these tax cuts expire
14:14
Speaker 3: on December thirty first of this year. But it is
14:18
Speaker 3: pretty uniquely unprecedented in terms of the way that they're
14:21
Speaker 3: handling this because this tax bill, right, if you compare
14:23
Speaker 3: what they're talking about doing compared to the expiring tax cuts,
14:27
Speaker 3: it's a three point eight trillion dollar increase in the
14:30
Speaker 3: deficit over a decade long period. But basically what they're
14:33
Speaker 3: saying is, look, don't count that three point eight trillion
14:35
Speaker 3: because that involves, you know, comparing where tax rates would
14:40
Speaker 3: be if tax rates went up compared to where they
14:42
Speaker 3: are right now. I don't know if I'm doing a
14:44
Speaker 3: great job explaining that, Tucker, Do you have any idea
14:46
Speaker 3: what I'm saying?
14:48
Speaker 4: Not at all?
14:48
Speaker 3: Okay, well then I don't think I did a great job.
14:50
Speaker 3: But here's why it's a bit worrisome. So again, to
14:56
Speaker 3: pass a bill without the sixty votes that you typically
14:59
Speaker 3: would need and avoid the filibuster. Like I said, there
15:02
Speaker 3: are a bunch of specific budget rules that you have
15:04
Speaker 3: to follow. Here's how this kind of paves the way
15:07
Speaker 3: for things to be done differently down the road. Let's
15:10
Speaker 3: say you're going to use this new math accounting rule
15:14
Speaker 3: that the Senate goes ahead and goes forward with and
15:16
Speaker 3: nobody objects to.
15:18
Speaker 2: Here's what somebody else can do down the road.
15:19
Speaker 3: But what would be the So I would generally describe
15:23
Speaker 3: the boogeyman that Democrats use described Republicans would be tax
15:28
Speaker 3: cuts for the wealthy, right, like, that's a constant co input.
15:30
Speaker 3: What's the opposite of Republicans For Democrats? Incentives for what
15:37
Speaker 3: you know, free payments to all sorts of different groups
15:40
Speaker 3: would be would be how I would describe it. So,
15:44
Speaker 3: if you are Democrats and you really want to pass
15:46
Speaker 3: a new bill that gives I don't know, tax credits
15:50
Speaker 3: to wind, solar, and electric vehicles, right, that's the boogieman
15:54
Speaker 3: for Democrats. You previously couldn't really do that via reconciliation
15:58
Speaker 3: because of these budgets rules. Here's what you can do
16:01
Speaker 3: now if this all works, say hey, we're going to
16:05
Speaker 3: have these new tax credits that are only going to
16:07
Speaker 3: be in place for two years, and we are going
16:10
Speaker 3: to expire them at the end of two years, and
16:13
Speaker 3: in the meantime, you get a new fifty percent tax
16:15
Speaker 3: credit for all evs, solar and wind projects at the
16:19
Speaker 3: end of the two years. Democrats go back to the
16:21
Speaker 3: bill and say, well, we are going to make these permanent,
16:26
Speaker 3: but there's no real budget impact because these were current law.
16:29
Speaker 3: It doesn't matter that they were set to expire at
16:31
Speaker 3: the end of this year. We're going to extend this
16:33
Speaker 3: as current law, and so now tax credits for evs
16:36
Speaker 3: and solar projects are permanent and there's there's no real
16:39
Speaker 3: budget impact because of the way that we did this math.
16:42
Speaker 3: So I'm less worried about this because I tend to
16:47
Speaker 3: agree with most of what's in this bill. Like I
16:49
Speaker 3: do want tax cuts to be to go forward. I
16:53
Speaker 3: don't want tax rates to snap back to where we
16:55
Speaker 3: were pre twenty seventeen. I think that would be pretty
16:59
Speaker 3: damaging to the economy. But the precedent they're setting by
17:03
Speaker 3: doing this kind of math is a little bit worrisome
17:06
Speaker 3: to me. It makes it a lot easier to pass
17:10
Speaker 3: unfunded bills down the road, and we already seem to
17:15
Speaker 3: be on a very unsustainable debt path.
17:19
Speaker 5: Yes there is, it's it's hard to uh to articulate
17:23
Speaker 5: the full impact. I started getting into the real nitty
17:25
Speaker 5: gritty of how sort of shady this maneuver is, But
17:30
Speaker 5: ultimately it comes back to what the point you made earlier.
17:35
Speaker 5: They were the idea of keeping these tax rates in
17:37
Speaker 5: place and maybe let's play a Democrat Republican This was
17:40
Speaker 5: gonna happen either way. Democrats in office Republicans. These rates,
17:43
Speaker 5: the marginal income tax rates that we were talking about,
17:46
Speaker 5: there was not a lot of support to have them
17:48
Speaker 5: revert back to what they were supposed to be after
17:50
Speaker 5: the conclusion of nine.
17:53
Speaker 3: I think if had you had Democrats win the White House,
17:56
Speaker 3: I think what you would have seen happen is maybe
17:59
Speaker 3: the top march rate would have gone back to thirty
18:01
Speaker 3: nine point six.
18:01
Speaker 5: Percent, possibly, but ultimately the big crux of it would
18:06
Speaker 5: still stay in place.
18:07
Speaker 3: Ye to revisit this, right, like most people that fall
18:10
Speaker 3: into the twelve percent bracket used to be paying fifteen, right,
18:13
Speaker 3: that wasn't moving.
18:14
Speaker 5: Back twenty two. It used to be twenty five percent,
18:17
Speaker 5: twenty four used to be twenty eight percent. Those brackets,
18:19
Speaker 5: those were going, Yeah, they weren't going anywhere. So when
18:22
Speaker 5: I step back and look at from that lens, this
18:25
Speaker 5: was going to get done one with the other. I
18:26
Speaker 5: don't agree with the accounting tactic either. I was trying
18:28
Speaker 5: to think of a household finance situation to explaining I don't.
18:31
Speaker 3: Think I can because at the same time that they're
18:33
Speaker 3: saying that three point eight trillion dollars isn't happening. They're
18:36
Speaker 3: also extending the debt ceiling by five trillion dollars to
18:40
Speaker 3: be able to pay for it.
18:41
Speaker 5: Yeah, So I'm trying to think if you're a household
18:43
Speaker 5: that's spending your adding ten thousand dollars of debt to
18:46
Speaker 5: your household finances every single year, and then you go
18:49
Speaker 5: to buy a new boat, which is going to add
18:51
Speaker 5: more to that debt. Basically, what you'd be saying, husband
18:54
Speaker 5: and wife between each other. Well, that ten thousand dollars
18:56
Speaker 5: that we're running as a deaths every year, that was
18:58
Speaker 5: already in place.
18:59
Speaker 2: So this boat, it doesn't really doesn't quite as much.
19:02
Speaker 4: It doesn't the ten thousand were already doing.
19:04
Speaker 5: That was already in place, So it doesn't really have
19:06
Speaker 5: the same impact that was already there. We already were
19:09
Speaker 5: incurring ten thousand of dead a year. That was the
19:11
Speaker 5: best I could do. But that's not a perfect analogy
19:14
Speaker 5: for this.
19:15
Speaker 3: I think it's always just I always have to check
19:16
Speaker 3: myself because it's really dangerous when you just overlook the
19:20
Speaker 3: way something is getting done because you agree with the
19:22
Speaker 3: end result, right, And that's where I land on this
19:25
Speaker 3: quick break. Wall Street Watches coming up.
19:27
Speaker 1: Next, like us on Facebook and follow us on Twitter
19:43
Speaker 1: at TFE show. Breaking business news is always first right
19:47
Speaker 1: here on the Financial Exchange Radio Network. Time now for
19:53
Speaker 1: Wall Street Watch a complete look at what's moving market
19:56
Speaker 1: so far today right here on the Financial Exchange Radio.
19:59
Speaker 6: New markets are adding to their recent record highs as
20:02
Speaker 6: investors ready for shortened holiday trading week, highlighted by a
20:06
Speaker 6: jobs report on Thursday. Trades also back on the spotlight
20:10
Speaker 6: after Canada withdrew its digital service tax and an effort
20:13
Speaker 6: to move trade talks along with the US. And of course,
20:16
Speaker 6: we await developments on President Trump's Big Beautiful Bill for
20:19
Speaker 6: final passage.
20:21
Speaker 4: In the Senate.
20:22
Speaker 6: Right now, the Dow is up by three tenths of
20:25
Speaker 6: one percent, or one hundred and twenty seven points. S
20:27
Speaker 6: and P five hundred is up two tenths of one
20:30
Speaker 6: percent or thirteen points. In the Nasdaq, also up by
20:33
Speaker 6: two tenths of one percent or forty three points. Russell
20:36
Speaker 6: two thousand is up about a quarter percent higher, ten
20:39
Speaker 6: year treasure reel down by one basis point now four
20:41
Speaker 6: point two seven percent, and crude oil retreating about six
20:46
Speaker 6: tenths of one percent, trading just above sixty five dollars
20:51
Speaker 6: a Barrel shares a Moderna up by over two percent
20:54
Speaker 6: after the local biotech company's experimental flu vaccine showed a
20:58
Speaker 6: positive response in a late stage trial, opening the way
21:01
Speaker 6: for the standalone shot and a combination COVID shot. Meanwhile,
21:06
Speaker 6: the Justice Department settled its lawsuit challenging Hewlett Packard Enterprises
21:10
Speaker 6: fourteen billion dollars deal to buy Juniper. Shares in Hewlett
21:14
Speaker 6: Packard OR up by thirteen percent, while Juniper stock is
21:18
Speaker 6: seeing gains of eight percent elsewhere. Both Bloomberg and The
21:22
Speaker 6: Information reported over the weekend that Meta has hired four
21:25
Speaker 6: artificial intelligence researchers from open Ai to join its new
21:31
Speaker 6: super intelligence team group led by Alexander Wang. Metas shares
21:37
Speaker 6: are up by one and a half percent. Bank stocks,
21:40
Speaker 6: including Goldman Sacks and Wells Fargo are seeing gains after
21:44
Speaker 6: the Federal Reserve announced late on Friday that America's large
21:47
Speaker 6: banks cleared its annual stress tests. Both stocks in Goldman
21:51
Speaker 6: Sacks and Wells Fargo OR up by about two percent,
21:54
Speaker 6: and Disney share is rising over one percent higher after
21:57
Speaker 6: Jeffries upgraded the stock to buy from hold, with the
22:00
Speaker 6: investment firm said Disney's Park's business is holding up well
22:04
Speaker 6: and that the cruise revenue could jump next year when
22:07
Speaker 6: two new ships are launched. I'm Tucker Silvan. That is
22:12
Speaker 6: Wall Street Watch.
22:13
Speaker 3: Canada and the US were in the midst of negotiations
22:16
Speaker 3: when the President president of the United States, President Trump,
22:19
Speaker 3: walked out of those negotiations on trade tariffs and where
22:24
Speaker 3: things will go next. In response, Canada has now dropped
22:28
Speaker 3: their digital services tax that was beginning to get collected,
22:32
Speaker 3: I believe today or this that week. So I want
22:36
Speaker 3: to start off with just where these taxes are coming from,
22:39
Speaker 3: because according to the Tax Foundation, there's some eighteen countries
22:43
Speaker 3: that have now implemented digital services taxes. Canada is not
22:47
Speaker 3: the only one, and they are a I think somewhat
22:51
Speaker 3: logical response to American dominance in the tech space. That
22:54
Speaker 3: doesn't surprise me, but obviously hits American tech companies more
22:59
Speaker 3: than just about anybody else. So let's imagine for a
23:02
Speaker 3: moment that you are creating tax policy in Canada. I
23:07
Speaker 3: suppose you do not have a whole lot of big
23:10
Speaker 3: social media companies headquartered in Canada, but whether you're Facebook, Google, Amazon, Amazon,
23:19
Speaker 3: Amazon to some degree, but they have actual sales in Canada.
23:24
Speaker 3: I like to focus this on companies that just sell
23:29
Speaker 3: digital assets, digital ads, different different types of things, because effectively,
23:33
Speaker 3: how Facebook makes money and they are really clear about this.
23:36
Speaker 3: They have an acronym called ARPU Average Revenue per User
23:40
Speaker 3: and they break it out territory by territory, and so
23:42
Speaker 3: I don't know if you still can, but you could
23:44
Speaker 3: traditionally take a look and say, oh, yeah, they make
23:46
Speaker 3: seventeen bucks per American user, eleven per European user, and
23:52
Speaker 3: you can break that stuff out. There wasn't a great
23:54
Speaker 3: way for European governments, for example, to easily make some
23:58
Speaker 3: tax revenue off of Facebook's advertising ultimately where they would
24:03
Speaker 3: make some revenue. So if you're scrolling on Facebook and
24:07
Speaker 3: eventually you see an ad for a grill and then
24:11
Speaker 3: you purchase that grill within the European Union, yeah they're
24:14
Speaker 3: making the sales tax at that point, but they are
24:18
Speaker 3: not getting a piece of the basically the revenue that
24:22
Speaker 3: Facebook's generating on that advertisement, because those dollars all come
24:25
Speaker 3: back to the United States, they're all conducted there. And
24:27
Speaker 3: so this was the Digital Services taxes was a way
24:30
Speaker 3: of saying, Okay, this is the gross revenue that you
24:33
Speaker 3: are deriving from Canadian citizens, so we want a piece
24:38
Speaker 3: of that.
24:39
Speaker 2: And it was a three percent rate.
24:41
Speaker 3: And so these are being looked at pretty closely, mainly,
24:43
Speaker 3: you know, in these negotiations, because they're not a form
24:48
Speaker 3: of tariff, but they are a form of taxation that
24:51
Speaker 3: the Trump administration has deemed as somewhat unfair and certainly
24:55
Speaker 3: mostly target US companies. And so we will see where
24:59
Speaker 3: this one go. Oh if this has the power to
25:01
Speaker 3: really permanently drive some change here, because these countries have
25:07
Speaker 3: kind of coming up short, I would argue, hey, you know,
25:10
Speaker 3: focus a little bit less on figuring out how to
25:12
Speaker 3: tax these companies and more on how to innovate so
25:14
Speaker 3: that you create the next Facebook rather than taxing hours.
25:18
Speaker 3: But they have been a big revenue raiser. They have
25:22
Speaker 3: been a big way of these countries trying to find
25:24
Speaker 3: ways to tax companies that don't really have a presence
25:27
Speaker 3: in their country without kicking them out of the country.
25:31
Speaker 3: And in the absence of it, I'll be interested to
25:33
Speaker 3: see where it goes. I was asked this question this morning,
25:37
Speaker 3: is hey, is this a bad sign or a good
25:39
Speaker 3: sign for the negotiations. The fact that they walked out
25:41
Speaker 3: and now Canada is coming back to the table with this,
25:44
Speaker 3: and my conclusion was, I think this is actually probably
25:49
Speaker 3: one of the moves that happens in the eleventh hour,
25:53
Speaker 3: right like in the fourth quarter of the game. This
25:55
Speaker 3: is when you walk out and drive for the hardest bargain.
25:58
Speaker 3: So I would say that I think this is indicative
26:00
Speaker 3: of a deal that does get done soon, not just
26:02
Speaker 3: the digital services tax, I mean a whole negotiated trade
26:06
Speaker 3: deal with Canada, rather than oh, we're about to blow
26:09
Speaker 3: this up and start at square one.
26:10
Speaker 5: That's the way I viewed it too. Yeah, it was
26:12
Speaker 5: just likely a positive development to fall from it.
26:16
Speaker 3: Yeah, I tend to think so. But we will see
26:20
Speaker 3: an interesting just similar stories. I was talking about tariffs
26:24
Speaker 3: generally and Canada specifically with a personal friend of mine
26:28
Speaker 3: who works I'll just say they work in sports manufacturing
26:34
Speaker 3: company based in the New England area, and they, surprisingly
26:39
Speaker 3: to me, manufacture most of their stuff here in the
26:41
Speaker 3: United States.
26:42
Speaker 2: You know, they source materials from all over.
26:44
Speaker 3: The world to manufacture their stuff, but they primarily do
26:47
Speaker 3: the actual manufacturing here in the United States for most
26:50
Speaker 3: of their goods, certainly all of the ones that get
26:52
Speaker 3: consumed in the United States because of the trade tariffs
26:56
Speaker 3: between the United States and Canada, their product of shipped
26:59
Speaker 3: to Canada from the US would face a big tariff.
27:02
Speaker 3: And that's the case for a whole bunch of countries
27:04
Speaker 3: right now. And so what they are in the midst
27:07
Speaker 3: of doing is rather than expanding their manufacturing in the
27:12
Speaker 3: United States due to tariffs, which you know is kind
27:15
Speaker 3: of the goal of these tariffs is to say, hey,
27:17
Speaker 3: companies that are manufacturing overseas, we want you to bring
27:20
Speaker 3: that manufacturing back to the US. Well, they've already done so.
27:23
Speaker 3: And so what they're finding is, hey, if we ship
27:26
Speaker 3: our product to Canada or to Europe, we're going to
27:29
Speaker 3: face a big old tariff because of reciprocal you know,
27:32
Speaker 3: things that have been put in place here. We actually
27:35
Speaker 3: need to set up a manufacturing base elsewhere in the
27:37
Speaker 3: world or expand our existing ones elsewhere in the world
27:40
Speaker 3: so that we can ship. In their case, I think
27:42
Speaker 3: they were manufacturing or increase in their manufacturing capability in
27:47
Speaker 3: Thailand in order.
27:48
Speaker 2: To ship to Canada and avoid tariffs, which is the
27:52
Speaker 2: exact opposite.
27:53
Speaker 3: I mean, we've talked about this type of example over
27:55
Speaker 3: and over again of how teriffs just add weird complexities
27:58
Speaker 3: into the supply chains. But if they manufacture that product
28:01
Speaker 3: here in the United States and ship it to Canada,
28:03
Speaker 3: they're gonna face a tariff. If that same American company
28:06
Speaker 3: goes and hires fifteen new people in Thailand to manufacture
28:10
Speaker 3: that sports equipment and then ship it to Canada, they're
28:13
Speaker 3: actually far better off financially and probably save on labor
28:16
Speaker 3: and a whole bunch of other things.
28:17
Speaker 5: It's incredible to play it out that way. The counter
28:20
Speaker 5: argument would be that they are a unique example, right
28:23
Speaker 5: of a company that does manufacturing.
28:25
Speaker 4: I totally those.
28:26
Speaker 5: Are few and further between between. Then the reverse side
28:31
Speaker 5: of that coin.
28:32
Speaker 3: Yeah, but I don't know how you prevent that, right, Like, okay,
28:34
Speaker 3: do we give an even bigger tax credit then to
28:37
Speaker 3: those that do manufacture here to offset the effect of that?
28:41
Speaker 3: And you know carrot and stick approach again, where Okay,
28:45
Speaker 3: we're gonna measure the total percentage of your manufacturing base
28:47
Speaker 3: that goes on in the US versus I don't know
28:49
Speaker 3: how to address.
28:50
Speaker 5: Just makes your head spin and then ultimately it gets
28:52
Speaker 5: back to your point before about you know, Canada or
28:55
Speaker 5: someone else developing this fake Facebook. The focus should rather
28:58
Speaker 5: be on innovation and productivity gains, rather than making our
29:02
Speaker 5: head dizzy with the terror frights.
29:04
Speaker 3: Instead of figuring out ways to innovate, we are figuring
29:06
Speaker 3: out ways to pay accountants and attorneys a whole bunch
29:09
Speaker 3: more money, to office gate and get around tariff rules.
29:12
Speaker 3: So a plus, Let's take a quick break when we
29:14
Speaker 3: come back when we're joined by Todd Lutsky from the
29:16
Speaker 3: law firm of Chushing and Dolan talk about their guide
29:19
Speaker 3: for the month of June. It's the last day of
29:20
Speaker 3: the month, last opportunity to grab it. We'll be back
29:22
Speaker 3: with Todd just next.
29:24
Speaker 1: Breaking business news as it happens only here on the
29:28
Speaker 1: Financial Exchange Radio Network. The Financial Exchange streams live on YouTube.
29:35
Speaker 1: Subscribe to our page and stay up to date on
29:37
Speaker 1: breaking business news all morning. Long Face is the Financial
29:41
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29:51
Speaker 3: Joining us now is Todd Lutsky from the law firm
29:54
Speaker 3: of Cushing and Dolan talking to us about their new
29:57
Speaker 3: guide for the month of June, Unlocking the power of
29:59
Speaker 3: irrevocable Medicaid trust.
30:01
Speaker 2: Todd, thanks for joining us.
30:02
Speaker 7: Appreciate it always oppressure pressure. Thank you.
30:05
Speaker 3: So let's start with some basics, because I think most
30:08
Speaker 3: people that are listening generally understand that, hey, irrevocable medicaid
30:13
Speaker 3: trusts can be designed to protect from a nursing home instance.
30:18
Speaker 3: But I guess operationally how because I've also heard, hey,
30:23
Speaker 3: can't I just kind of gift assets away? Maybe I
30:25
Speaker 3: give my kids my home and that that also achieves
30:28
Speaker 3: some protection. Why a medicaid trust?
30:32
Speaker 7: Yeah, I think it's it's a great a great analysis
30:35
Speaker 7: because the home is the biggest asset most people have
30:38
Speaker 7: and they generally want to protect it. And you're right.
30:41
Speaker 7: Some people say, oh, the quick fix is give it,
30:43
Speaker 7: give it to the kids. Now. Well, if you do that,
30:46
Speaker 7: you you know, you talk about irrevocable trust and the
30:48
Speaker 7: idea anyway that people have in their head that somehow
30:51
Speaker 7: they're losing control or that they're you know, giving up things,
30:56
Speaker 7: Well just stop for a minute and think about the alternative,
30:59
Speaker 7: which is, imagine if I gave it to my kids,
31:02
Speaker 7: do I have any control anymore? Now it's not mine
31:05
Speaker 7: at all? I mean, arguably I can get thrown out.
31:07
Speaker 7: I can't sell it. I can't buy a new house
31:09
Speaker 7: with my proceeds. I can't, you know, And even reserving
31:12
Speaker 7: a life estate, it's subject to the kid's creditors. I mean,
31:16
Speaker 7: why would I want to do that? You know, even
31:18
Speaker 7: if I reserve a life estate and keep the right
31:20
Speaker 7: to live there, there's still a lot that you're giving
31:22
Speaker 7: up control over by just keeping a little nugget to
31:25
Speaker 7: live there, when in reality you could put it into
31:28
Speaker 7: one of these irrevocable trusts, and practically you're saying, how
31:32
Speaker 7: does it work right? You could still live there. You
31:35
Speaker 7: don't have to worry about anyone ever throwing you out.
31:38
Speaker 7: You could sell it anytime you want to sell it,
31:40
Speaker 7: just direct the trustee you. They're drafted in a way
31:43
Speaker 7: where you get capital gains tax exclusions, so they're they're
31:47
Speaker 7: you know, income tax neutral. You don't have to worry
31:50
Speaker 7: about a kid having a financial problem while you're living,
31:53
Speaker 7: which is good for you and good for the child
31:56
Speaker 7: or the children. So just tons of reasons tax wise
32:01
Speaker 7: and credit or protection wise and control wise that you would.
32:05
Speaker 4: Do in era of trust Todd.
32:06
Speaker 3: There's another misconception or just misunderstanding that I hear from
32:10
Speaker 3: folks all the time, because any type of trust can
32:13
Speaker 3: be designed to do a whole bunch of things. Avoid
32:15
Speaker 3: probate is a common one here in Massachusetts, as state taxes.
32:19
Speaker 2: Are another big one.
32:21
Speaker 3: What does the five year look back period actually apply
32:25
Speaker 3: to and what does it not apply to? Because I
32:27
Speaker 3: hear this one all the time, like, oh, you know,
32:30
Speaker 3: I've got to have it in there five years for
32:32
Speaker 3: probate avoidance or a state tax avoidance.
32:36
Speaker 2: Cover that five year look back window for me.
32:39
Speaker 7: Yeah, and really important because some people going back to
32:43
Speaker 7: that house idea that you talked about earlier, Mike, right,
32:45
Speaker 7: the idea that you could give it to your kids
32:47
Speaker 7: and somehow avoid the five year waiting period. No, the
32:50
Speaker 7: five year waiting period applies all the time, right, if
32:55
Speaker 7: you give it to your children, if you make any
32:57
Speaker 7: kind of an outright gift to anybody, if you put
33:01
Speaker 7: it in a trust, any of those transfers is going
33:06
Speaker 7: to Maine. You gotta outlive that trand not outlive you
33:09
Speaker 7: got to stay out of the nursing home for five
33:11
Speaker 7: years after you make that transfer. There are very very
33:15
Speaker 7: few exceptions to when the five year rules doesn't apply,
33:19
Speaker 7: and they would only really be used when you're actually
33:23
Speaker 7: entering a nursing home last minute, with no planning. So
33:26
Speaker 7: there you go. Folks. Don't don't think that there's a
33:29
Speaker 7: quick fix that you can avoid the five year. It's
33:31
Speaker 7: pretty much included. But I will say that you know
33:36
Speaker 7: this trust, this guide, it's the end of the month.
33:39
Speaker 7: If you've never knew whether or not an irrevocable trust
33:44
Speaker 7: is right for you or not, if you ever were
33:47
Speaker 7: unsure of it. In thirty years, I've put together question answer,
33:51
Speaker 7: question answer about how these trusts work. And that's what
33:54
Speaker 7: this guy does, and it explains the day to day activities,
33:58
Speaker 7: the trust activities, the protection and the fits. When you're
34:01
Speaker 7: done reading it given to know whether it's right for
34:03
Speaker 7: you or not. So if you're not sure, call and
34:05
Speaker 7: get it eight sixty six eight four eight five six
34:09
Speaker 7: ninety nine or Legal Exchange Show dot com. It's the
34:12
Speaker 7: end of the month, folks eight six six eight four
34:15
Speaker 7: eight five six nine nine or Legal Exchange Show dot com.
34:20
Speaker 2: Todd, great, talk to you, appreciate it, have great fourth
34:22
Speaker 2: and we'll chat with you in July.
34:25
Speaker 7: You as well. Take care.
34:26
Speaker 1: The proceeding was paid for and the views expressed are
34:28
Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
34:31
Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
34:34
Speaker 1: Cushing and Armstrong do not endorse each other and are
34:36
Speaker 1: not affiliated.
34:37
Speaker 3: Well, increasing mounting questions being placed on the Federal reserve.
34:42
Speaker 3: Here's what it all is coming down to to me,
34:45
Speaker 3: will we or will we not see tariff impacts in
34:48
Speaker 3: prices this summer? Because the Fed has staked a lot
34:52
Speaker 3: of their credibility on the answer to that question, and
34:57
Speaker 3: not that they have definitively said, hey, we are expecting
34:59
Speaker 3: prices to go up and react to tariffs. But they
35:01
Speaker 3: have held off on interest rtings, setting, on interest rates
35:04
Speaker 3: setting policy. They have held off on cutting interest rates,
35:08
Speaker 3: making you know, a cost of borrowing significantly higher for
35:12
Speaker 3: a lot of Americans. There's a lot of confusion. You know,
35:14
Speaker 3: it's not as though they control mortgage rates, and who
35:16
Speaker 3: knows where those would go if they cut anyway. But
35:19
Speaker 3: mounting pressure on the FED to say, hey, we're not
35:23
Speaker 3: seeing the effects of tariffs on prices to this point,
35:27
Speaker 3: how long do we wait before we wait for these
35:29
Speaker 3: things to show up? Because to this point we'll get
35:33
Speaker 3: another CPI reading in a few weeks here, But I
35:36
Speaker 3: cannot point to a single reliable data point that tells me, yeah,
35:39
Speaker 3: prices are increasing as a result of tariffs right now.
35:42
Speaker 5: No, it's a difficult situation that they find themselves in
35:45
Speaker 5: as usual. It's just it's never, never an easy gig.
35:48
Speaker 5: But to your point, they're all else equal. Without the
35:53
Speaker 5: potential for tariff shocks on prices, they likely would have
35:56
Speaker 5: been cutting. I mean they cut a full percent heading
35:58
Speaker 5: into this year late last year, and ultimately I.
36:02
Speaker 3: Don't think it would have been another Just to be
36:03
Speaker 3: clear there, like I don't think it would have been
36:04
Speaker 3: another full percentage, No.
36:06
Speaker 4: Just a quarter basis point.
36:07
Speaker 3: They might have done something like it in May would
36:09
Speaker 3: be best guests.
36:10
Speaker 5: But ultimately they have hung their hat on this idea
36:13
Speaker 5: that there could be supply chain shocks and as such
36:17
Speaker 5: you would get a pass through on inflationary price increases.
36:19
Speaker 5: And to this point, we're running at headline CPI year
36:23
Speaker 5: over year of about two point four percent. If you
36:25
Speaker 5: look at other inflationary measures, there really hasn't been a
36:29
Speaker 5: tremendous impact. And we were on with a journalist from
36:33
Speaker 5: Wild Cars in New York Times last week where they
36:35
Speaker 5: were studying prices and just not seeing any sort of
36:38
Speaker 5: changes on some of those big ticket items that you
36:41
Speaker 5: normally would see price increases on.
36:42
Speaker 3: And if the New York Times can't find it. Nobody's
36:46
Speaker 3: gonna find.
36:46
Speaker 5: It exactly, and so the question remains to me, and
36:50
Speaker 5: I've brought this up before, is this a situation? And
36:54
Speaker 5: this journal said the same thing that talking with executives,
36:56
Speaker 5: that perhaps the walmarts and the targets and you mentioned
36:59
Speaker 5: that personal earlier from the weekend, that companies don't want
37:02
Speaker 5: to be the first ones to get out in front
37:04
Speaker 5: and increase prices to consumers. So perhaps is this a
37:08
Speaker 5: situation where everyone's holding on to that rope for as
37:11
Speaker 5: long as possible, and does it break over the summer
37:14
Speaker 5: where you see price increases. That's what the FED is
37:17
Speaker 5: staking its claim on this idea that that could potentially happen.
37:20
Speaker 3: And it's really wild to me in terms of the
37:22
Speaker 3: order of all these things and where it leads us.
37:24
Speaker 3: Because if you're negotiating in the Trump White House right
37:28
Speaker 3: now and you're taking a look at these tariffs and
37:30
Speaker 3: you're trying to take measure the impact stock markets at
37:34
Speaker 3: an all time high, YEP, FED is under pressure to
37:37
Speaker 3: cut and you have seen no meaningful impact on prices
37:42
Speaker 3: by implementing these tariffs. I'm going to drive a hard bargain.
37:47
Speaker 3: Why wouldn't I I'm going to continue to use this threat.
37:50
Speaker 3: They clearly respond when things get hairy.
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Speaker 4: Right.
37:52
Speaker 3: We're going to cover story on immigration later. We're going
37:54
Speaker 3: to cover all sorts of things where the Trump administration
37:56
Speaker 3: is decided to back down in reaction to how these
38:01
Speaker 3: policies are being perceived. But on the trade of the
38:04
Speaker 3: and tariff side of things, I've heard a lot of
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Speaker 3: bluster but seen nothing in pricing.
38:08
Speaker 2: I'm gonna drive that hard bargain. We've got to take
38:10
Speaker 2: a quick break.
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Speaker 3: Markets are in positive territory, likely heading for new all
38:14
Speaker 3: time highs today. We'll cover that in a whole lot
38:16
Speaker 3: more next on the financial exchange