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close video Hard to get inflation down without a recession: Furman

Harvard economist Jason Furman shares his economic outlook for 2023, focusing on recession fears, the Federal Reserves agenda and geopolitical factors.

A number of business taxes are rising just as the U.S. economy faces the increased risk of a recession, threatening to prolong financial pain for many companies and consumers.

Beginning this year, businesses will face a steeper federal tax burden thanks to several major changes included in the health care and climate change spending bill that Democrats passed over the summer. On top of that, key provisions of the 2017 Republican tax overhaul are set to phase out this year.

Combined, the tax increases are projected to cost businesses about $115 billion this year – a big increase from years' past, according to the Joint Committee on Taxation.

"On the impact of tax increases in a recessionary period, we are highly concerned," Chris Netram, the managing vice president of tax and domestic economic policy at the National Association of Manufacturers (NAM), told FOX Business. "Some of the items that have already taken effect, that Congress failed to reverse at the end of last year, are causing a lot of pain for our members."

NEW YORK, CALIFORNIA SUFFER BIGGEST BLOW AS MORE AMERICANS FLEE TO LOW-TAX STATES

The U.S. Capitol (Anna Rose Layden / Getty Images / File / Getty Images)

Among the increases going into effect this year is a 15% minimum tax on corporations that is based on profits they publicly report on their financial statements to shareholders. The minimum book tax would only hit companies that reported more than $1 billion in income. The levy – a key feature of the Inflation Reduction Act – would affect around 200 of the country's largest corporations with profits exceeding $1 billion and that pay less than the current 21% rate for businesses, according to Democrats.

That spending bill also included a 1% tax on stock repurchases, which will apply to only publicly traded companies.

Experts expect the two taxes to drag on 2023 earnings, with Goldman Sachs forecasting a 1.5% decline per share of S&P 500 companies. The earnings decreases are expected to hit industries like health care and IT because of the low effective tax rate.

UBS strategists led by Solita Marcelli, meanwhile, projected the new taxes would have a "very minimal 1% drag on S&P 500 earnings per share, although some companies will be more affected than others."

President Joe Biden signs the Inflation Reduction Act of 2022 (climate change and health care bill) into law at the White House on Aug. 16, 2022. (Demetrius Freeman / The Washington Post via Getty Images / Getty Images)

NEW IRS TAX BRACKETS TAKE EFFECT IN 2023, MEANING YOUR PAYCHECK COULD BE BIGGER

Those changes come on top of other business tax increases that went into place last year to help pay for Republicans' 2017 tax cuts and will stay in effect until 2026. That includes the gradual phaseout of a 100% bonus depreciation, tighter interest deduction limitation and an increase in international tax rates.

Another provision requires businesses to amortize deductions for research and development expenses over five years instead of taking them all at once. Nearly 180 chief financial officers asked lawmakers in November to reverse course and repeal the law before the end of the year, however, Congress failed to reach an agreement before its last session in December.

Aerospace and defense company Raytheon Technologies said in October that the change already caused its tax bill to spike by $1.5 billion.

Aerospace and defense company Raytheon Technologies said in October that the change already caused its tax bill to spike by $1.5 billion. (AP Photo / Elise Amendola / File / AP Newsroom)

Goldman Sachs sees the R&D, interest and bonus depreciation changes raising the effective corporate tax rate this year by 1.6 percentage points, amounting to a "small" reduction in earnings.

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"Corporate tax policies taking effect in 2023 should have a small hit to aggregate S&P 500 earnings, but the impact will vary across sectors," the bank said in a research note earlier this month.

Netram said NAM is lobbying lawmakers to reverse the changes, particularly on R&D, and indicated there is bipartisan and bicameral support to do so.

"For this current Congress, we are starting in a really strong place," he said. "There is broad support for stopping these tax hikes from going into effect."

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Donald Trump sending ‘top of the line’ weapons to support NATO in Ukraine war

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Donald Trump sending 'top of the line' weapons to support NATO in Ukraine war

Donald Trump has agreed to send “top of the line weapons” to NATO to support Ukraine – and threatened Russia with “severe” tariffs if it doesn’t agree to end the war.

Speaking with NATO secretary-general Mark Rutte during a meeting at the White House, the US president said: “We’ve made a deal today where we are going to be sending them weapons, and they’re going to be paying for them.

“This is billions of dollars worth of military equipment which is going to be purchased from the United States, going to NATO, and that’s going to be quickly distributed to the battlefield.”

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Donald Trump and NATO secretary general Mark Rutte in the White House. Pic: Reuters
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Pic: Reuters

It comes as Ukrainian president Volodymyr Zelenskyy said he had a “very good conversation” with Mr Trump late on Monday. He thanked him for the “willingness to support Ukraine and to continue working together to stop the killings”.

Weapons being sent from to Ukraine include surface-to-air Patriot missile systems and batteries, which the country has asked for to defend itself from Russian air strikes.

Mr Trump also said he was “very unhappy” with Russia, and threatened “severe tariffs” of “about 100%” if there isn’t a deal to end the war in Ukraine within 50 days.

The White House added that the US would put “secondary sanctions” on countries that buy oil from Russia if an agreement was not reached.

Analysis: Will Trump’s shift in tone make a difference?

As ever, there is confusion and key questions are left unanswered, but Donald Trump’s announcement on Ukraine and Russia today remains hugely significant.

His shift in tone and policy on Ukraine is stark. And his shift in tone (and perhaps policy) on Russia is huge.

Read Mark’s analysis here.

Mr Zelenskyy previously criticised Vladimir Putin’s “desire to drag [the war] out”, and said Kyiv was “working on major defence agreements with America”.

It comes after weeks of frustration from Mr Trump over Mr Putin’s refusal to agree to an end to the conflict, with the Russian leader telling the US president he would “not back down” from Moscow’s goals in Ukraine at the start of the month.

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Trump threatens Russia with ‘severe’ tariffs’

During the briefing on Monday, Mr Trump said he had held calls with Mr Putin where he would think “that was a nice phone call”, but then “missiles are launched into Kyiv or some other city, and that happens three or four times”.

“I don’t want to say he’s an assassin, but he’s a tough guy,” he added.

Earlier this year, Mr Trump told Mr Zelenskyy “you’re gambling with World War Three” in a fiery White House meeting, and suggested Ukraine started the war against Russia as he sought to negotiate an end to the conflict.

After Mr Trump’s briefing, Russian senator Konstantin Kosachev said on Telegram: “If this is all that Trump had in mind to say about Ukraine today, then all the steam has gone out.”

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Meanwhile, Mr Zelenskyy met with US special envoy Keith Kellogg in Kyiv, where they “discussed the path to peace” by “strengthening Ukraine’s air defence, joint production, and procurement of defence weapons in collaboration with Europe”.

He thanked both the envoy for the visit and Mr Trump “for the important signals of support and the positive decisions for both our countries”.

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How one man with a hacksaw and an e-bike became a Texas flood ‘hero’

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How one man with a hacksaw and an e-bike became a Texas flood 'hero'

Locals call him the “Bicycle hero,” but Texas man Evan Wayne says he’s just doing what he can to help his community after it was cut off due to the recent devastating and deadly flooding tragedy.

When the local Sandy Creek flooded following torrential rains in Texas, it destroyed the only bridge into one community. Residents were cut off from access to supplies, including everything from necessities like food, water, and medicine to basic comforts.

Although the bridge was impassable to cars, volunteers who quickly organized to help the stranded residents found that the damaged bridge could still be traversed on foot. Or in the case of Evan Wayne, it could be covered by an electric bike.

Evan joined hundreds of volunteers who answered the call of grassroots organizers by working together without any official capacity. While many started by hand-pulling garden carts of supplies uphill to reach the stricken community, Evan jury-rigged a trailer to an e-bike and took on as much of the load as he could, helping shuttle much-needed food and gear into the community over hundreds of round-trip journeys.

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“This was a dog trailer 48 hours ago. I had a hacksaw, hacked the top off, grabbed some bungee cords, and here we are,” explained Evan in an interview with CBS Austin, while waiting for the next load of gear to be stacked on his trailer.

In the first two days of the operation, he made around 100 round trips each day, shuttling food and water as well as critical rescue supplies. “Right now, I’m waiting on a couple of chainsaws that I’ll bring in for a crew that’s been going at it with handsaws so far.”

In addition to delivering needed supplies, Evan has often found himself moving something even more important: information. “I’ve flagged down medics. I’ve been the guy that goes between Austin EMT and STAR Flight because I’m quicker than cell phones sometimes, people don’t have signal a lot of the time.”

Evan quickly points out that he isn’t the only one helping. “I’ve got an e-bike, but other people are pulling carts. People are walking, people are carrying things. Everyone is doing what they can.” But there’s no doubt that his ability to carry more gear at higher speeds and make hundreds of round-trip journeys so far in and out of the stricken neighborhood has helped impact countless lives.

“This is all volunteers here. They’re just taking it upon themselves to get people where they need to go. I think there’s an umbrella company coming in, taking over tomorrow, but until they get here, people are just taking care of people, which is what you’ve got to do.”

E-bikes proving their worth in emergencies

While many people consider electric bicycles just another form of recreation, they’ve proven to be potent transportation alternatives after natural disasters worldwide.

Not only do their small and efficient batteries make performing hundreds of rescue trips like Evans’ possible, but recharging can be done simply and easily with a solar panel when electricity is out after a disaster. And when gas stations are out of fuel (or simply can’t pump it with the power grid down), e-bikes can keep running while gasoline-powered motorcycles or ATVs run dry.

Electric bicycle batteries have also proven to be a handy source of emergency power after hurricanes and other disasters, often helping owners keep their phones charged up for days to remain in contact with family or rescue services.

While most hope to never need theirs for emergency purposes, electric bicycles have proven their worth in countless disaster scenarios, adding benefits far beyond just alternative transportation, recreation, or fitness riding.

E-bikes can be kept running nearly indefinitely after natural disasters with access to solar recharging equipment

Image credits: CBS Austin (screenshots), used under fair use

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New electric car grants of up to £3,750 aims to drive sales

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New electric car grants of up to £3,750 aims to drive sales

The taxpayer is to help drive the switch to non-polluting vehicles through a new grant of up to £3,750, but some of the cheapest electric cars are to be excluded.

The Department for Transport (DfT) said a £650m fund was being made available for the Electric Car Grant, which is due to get into gear from Wednesday.

Users of the scheme – the first of its kind since the last Conservative government scrapped grants for new electric vehicles three years ago – will be able to secure discounts based on the “sustainability” of the car.

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It will apply only to vehicles with a list price of £37,000 or below – with only the greenest models eligible for the highest grant.

Buyers of so-called ‘Band two’ vehicles can receive up to £1,500.

The qualification criteria includes a recognition of a vehicle’s carbon footprint from manufacture to showroom so UK-produced EVs, costing less than £37,000, would be expected to qualify for the top grant.

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It is understood that Chinese-produced EVs – often the cheapest in the market – would not.

BYD electric vehicles before being loaded onto a ship in Lianyungang, China. Pic: Reuters
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BYD electric vehicles before being loaded onto a ship in Lianyungang, China. Pic: Reuters

DfT said 33 new electric car models were currently available for less than £30,000.

The government has been encouraged to act as sales of new electric vehicles are struggling to keep pace with what is needed to meet emissions targets.

Challenges include the high prices for electric cars when compared to conventionally powered models.

At the same time, consumer and business budgets have been squeezed since the 2022 cost of living crisis – and households and businesses are continuing to feel the pinch to this day.

Another key concern is the state of the public charging network.

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The Chinese electric car rivalling Tesla

Transport Secretary Heidi Alexander said: “This EV grant will not only allow people to keep more of their hard-earned money – it’ll help our automotive sector seize one of the biggest opportunities of the 21st century.

“And with over 82,000 public charge points now available across the UK, we’ve built the infrastructure families need to make the switch with confidence.”

The Government has pledged to ban the sale of new fully petrol or diesel cars and vans from 2030 but has allowed non-plug in hybrid sales to continue until 2025.

It is hoped the grants will enable the industry to meet and even exceed the current zero emission vehicle mandate.

Under the rules, at least 28% of new cars sold by each manufacturer in the UK this year must be zero emission.

The figure stood at 21.6% during the first half of the year.

The car industry has long complained that it has had to foot a multi-billion pound bill to woo buyers for electric cars through “unsustainable” discounting.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said the grants sent a “clear signal to consumers that now is the time to switch”.

He went on: “Rapid deployment and availability of this grant over the next few years will help provide the momentum that is essential to take the EV market from just one in four today, to four in five by the end of the decade.”

But the Conservatives questioned whether taxpayers should be footing the bill.

Shadow transport secretary Gareth Bacon said: “Last week, the Office for Budget Responsibility made clear the transition to EVs comes at a cost, and this scheme only adds to it.

“Make no mistake: more tax rises are coming in the autumn.”

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