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<ul class="summary-list"><li>One Democratic plan would overhaul how companies pay taxes on overseas profits.</li><li>It could generate $800 billion, or enough to finance two $1,400 stimulus checks.</li><li>Democrats may clash on taxes as they assemble a party-line spending package.</li></ul>Fresh off a House vote to <a href="https://www.businessinsider.com/house-democrats-advance-spending-plan-showdown-pelosi-moderates-ilhan-omar-2021-8">advance a $3.5 trillion budget blueprint</a>, Democrats must now draft a massive social spending package. A major point of contention? Taxes. Before Democrats pass the package with likely unanimous GOP opposition, they're facing some internal disagreements over how fund it - likely a collection of tax hikes on the wealthiest Americans, investors, and large companies. President Biden proposed a 28% corporate rate, higher than the current 21% level. But moderate Democrats like Joe Manchin are already uneasy and say they'd prefer to see a 25% rate instead.In the process, they would partially roll back President <keyword id="11914386" type="UNKNOWN" weightage="60" keywordseo="donald-trump" source="Orion">Donald Trump</keyword>'s 2017 tax law. Read more: <a href="https://www.businessinsider.com/biden-white-house-staff-aides-guide-2021-1">The ultimate White House org chart to 600+ members of Biden's staff and who makes six figures</a>A part of that 2017 law includes how the government taxes US-based multinational firms depending on the location of their headquarters and where they earn profits. Democrats want to overhaul this element to raise enough money to pay for measures like President <keyword id="99719" type="UNKNOWN" weightage="60" keywordseo="joe-biden" source="Orion">Joe Biden</keyword>'s child allowance, universal pre-K, and tuition-free community college among others.Kyle Pomerleau, a tax expert at the conservative-leaning American Enterprise Institute, <a href="https://www.nbcnews.com/politics/meet-the-press/house-moderates-provide-even-more-leverage-joe-manchin-reconciliation-n1277592">told NBC News</a> the tax changes could raise $800 billion. That's <a href="https://www.pgpf.org/blog/2021/03/what-to-know-about-all-three-rounds-of-coronavirus-stimulus-checks">enough money</a> for the federal government to finance two $1,400 stimulus checks similar to the ones most Americans received in the $1.9 trillion Biden stimulus law during the pandemic.Sens. <keyword id="11931195" type="UNKNOWN" weightage="60" keywordseo="ron-wyden" source="Orion">Ron Wyden</keyword> of Oregon, Mark Warner of Virginia, and Sherrod Brown of Ohio are taking the lead. On Wednesday, this trio <a href="https://www.finance.senate.gov/imo/media/doc/section%20by%20section%20-%20WBW%20Framework%20discussion%20draft%208.20.21%20FINAL.pdf">released a draft framework</a> aimed at ending incentives for companies to move operations out of the US and encourage more to expand domestically. Many firms have used them to cut their tax bill <a href="https://www.washingtonpost.com/business/2019/12/16/corporations-paid-percent-tax-rate-last-year-steep-drop-under-president-trumps-law/">well below the official 21% rate.</a>"To right the ship, we're ending incentives to ship jobs overseas and closing loopholes that allow companies to stash their profits in tax havens," Wyden said in a statement.The Trump administration's tax law <a href="https://www.washingtonpost.com/us-policy/2021/04/20/corporate-tax-loopholes-biden/" target="_blank" rel="noopener noreferrer">enacted a system</a> that included exemptions on where companies must pay taxes on overseas profits. That was a change from the prior arrangement where firms could stash it abroad and completely avoid paying the full corporate tax.Democrats are in favor of the current set-up, but they want to levy higher tax rates to a wider range of profits, as well as tailor tax rates to individual countries and not impose them uniformly. Conservatives argue this will stymie the ability of companies to compete abroad and incentivize them to keep their headquarters and profits overseas.That's part of the reason the Biden administration is pushing for a 15% minimum tax <a href="https://www.businessinsider.com/global-minimum-tax-130-countries-support-g20-biden-yellen-oecd-2021-7">as part of an agreement</a> with nations in the Organization of Economic Cooperation and Development. Democrats are attempting to persuade other countries to levy the 15% rate so large firms can't evade their taxes.Read more: <a href="https://www.businessinsider.com/whats-in-the-3-trillion-biden-infrastructure-plan-democrats-are-working-on-2021-8" target="_blank" rel="noopener">From free community college to higher taxes on the rich: How the $3.5 trillion plan House Democrats just voted on would affect you</a>

The tax overhaul Democrats are pushing that could raise enough money for 2 $1,400 stimulus checks

<ul class="summary-list"><li>The Group of 7 leaders have agreed on a <keyword id="11051768" type="UNKNOWN" weightage="60" keywordseo="global-minimum-tax">global minimum tax</keyword> rate of at least 15%, a historic step.</li><li>That tax, along with a revised foreign tax, could bring in $150 billion, according to Bloomberg.</li><li>But the measure could face GOP resistance in the US, narrowing its chances of being enacted.</li></ul>The <a href="https://www.businessinsider.com/white-house-g7-more-fair-inclusive-economy-cornwall-communique-2021-6">Group of 7 summit</a> didn't just give leaders <a href="https://www.businessinsider.com/biden-g7-leaders-barbecue-and-sea-shanties-at-g7-summit-2021-6">toasted marshmallows and sea shanty serenades</a>: It also provided crucial momentum for a new tax measure that could revolutionize international taxation.The <a href="https://www.businessinsider.com/what-is-global-minimum-tax-explained-janet-yellen-biden-taxes-2021-4">global minimum corporate tax rate</a> is a measure that's gained increased prominence amidst tax talks. It would impose a non-binding minimum rate on multinational companies, a disincentive to those companies fleeing one country for another with lower taxes.That tax could also bring in $150 billion, according to a <a href="https://www.bloomberg.com/news/articles/2021-06-14/-150-billion-prize-is-in-sight-for-global-talks-on-minimum-tax?sref=BLKWHazc">Bloomberg report</a> which cited Pascal Saint-Amans, who directs the Organization for Economic Cooperation and Development (<keyword id="6356984" type="ORGANIZATION" weightage="60" keywordseo="oecd">OECD</keyword>)'s center for tax <keyword id="28351" type="ORGANIZATION" weightage="60" keywordseo="policy">policy</keyword>. Presumably speaking about an annual figure, Saint-Amans told the French channel BFM Business that it is "not an anecdotal amount.""In some ways," Saint-Amans said, "this is the end of the work on regulating globalization for greater tax justice." The figure he put forward also includes "a revised version of existing US measures on taxing foreign profits known as GILTI," according to Bloomberg.The <keyword id="2296592" type="PERSON" weightage="60" keywordseo="G7-summit">G7 summit</keyword> represented a major diplomatic and political step forward for the tax measures, as leaders agreed to a minimum rate <a href="https://www.businessinsider.com/g7-nations-announce-support-corporate-minimum-tax-15-percent-2021-6">of at least 15%</a>. That's what the US had <a href="https://www.businessinsider.com/global-minimum-tax-rate-corporations-janet-yellen-15-percent-nyt-2021-5">reportedly proposed</a>, a rate lower than the anticipated proposal of 21%, but still in line with the Treasury Department's proposal.Saint-Amans also addressed concerns that companies like Amazon could <a href="https://www.businessinsider.com/amazon-could-avoid-key-g7-tax-boosting-measure-low-profit-2021-6">dodge the tax</a> due to low profit margins, saying that the OECD would specifically look at its higher-margin cloud services.Big tech companies and governments are already lining up behind the measure, <a href="https://www.businessinsider.com/facebook-amazon-google-react-positively-g7-minimum-global-tax-deal-2021-6">lauding the historical step</a>. But there's still a long road ahead before it's enacted. The measure will go to the G20 next, and then to the OECD. Countries like the US would also have to craft legislation to officially enact the tax once it's agreed upon, which may prove tricky. As <a href="https://www.businessinsider.com/why-gop-wont-support-minimum-tax-on-corporations-like-amazon-2021-6">Insider previously reported</a>, the GOP's likely opposition to the measure could potentially sink it. "Why would we want to commit to doubling our global minimum tax? That's a very bad policy," Sen. Pat Toomey, the ranking Republican on the Senate Banking Committee, previously told Insider. There's already domestic partisan turmoil over proposed changes to US tax law. President Joe Biden wants to raise the <a href="https://www.businessinsider.com/biden-corporate-tax-hike-infrastructure-big-companies-average-americans-2021-4">corporate tax rate</a> from 21% to 28% to offset infrastructure spending, a proposal that's already drawn Republican resistance. That increase is a <a href="https://www.capito.senate.gov/news/in-the-news/capito-corporate-tax-hike-a-nonnegotiable-red-line">red-line for the GOP</a>.But, according to the figure cited by Saint-Amans, leaving behind the global minimum proposal could also leave billions of dollars in potential revenue behind.

The new global minimum tax could bring in $150 billion for worldwide governments, report says

<ul class="summary-list"><li>US banking giant <a href="https://markets.businessinsider.com/stocks/gs-stock">Goldman Sachs</a> says it expects <keyword id="9135690" type="UNKNOWN" weightage="60" keywordseo="sp-500-earnings">S&amp;P 500 earnings</keyword> per share to drop 60% in the second quarter, the biggest decline since 2009 during the financial crisis.</li><li>"If realized, 2Q 2020 <keyword id="179896" type="CITY" weightage="60" keywordseo="EPS">EPS</keyword> growth would be the weakest since 4Q 2009," the analysts said, noting that EPS fell 65% in that quarter.</li><li>For the full year of 2020, <keyword id="6361649" type="UNKNOWN" weightage="60" keywordseo="Goldman-Sachs">Goldman Sachs</keyword> said it expects S&amp;P 500 EPS to be 30% lower at $115 compared to 2019.</li><li>The bank added that a Democratic victory in <keyword id="6421694" type="UNKNOWN" weightage="60" keywordseo="us-elections">US elections</keyword>, and the implementation of an ambitious tax plan by <keyword id="99719" type="PERSON" weightage="60" keywordseo="Joe-Biden">Joe Biden</keyword> could push EPS down by $20 in 2021.</li><li>A number of US banks are reporting <keyword id="6357061" type="SPONSORED" weightage="60" keywordseo="earnings">earnings</keyword> results this week, including <a href="https://markets.businessinsider.com/stocks/jpm-stock">JPMorgan,</a> <a href="https://markets.businessinsider.com/stocks/wfc-stock">Wells Fargo</a>, <a href="https://markets.businessinsider.com/stocks/bac-stock">Bank of America, </a>and Goldman itself.</li></ul>As the Q2 earnings season kicks off this week, <a href="https://markets.businessinsider.com/stocks/gs-stock">Goldman Sachs</a> is bracing for S&amp;P 500 earnings per share to plummet by 60%, which if realized would be the sharpest contraction since 2009, during the heart of the financial crisis.Goldman, <a href="https://markets.businessinsider.com/stocks/wfc-stock">Wells Fargo,</a> <a href="https://markets.businessinsider.com/stocks/jpm-stock">JPMorgan,</a> and <a href="https://markets.businessinsider.com/stocks/bac-stock">Bank of America</a> are among the big US banks to report second quarter earnings this week. In a note published on Friday, July 10 analysts led by David Kostin, said they expect earnings per share to plunge almost two-thirds in the second quarter compared to the same period in 2019."2Q earnings season kicks off in earnest next week, with the large US Banks reporting results. Consensus forecasts S&amp;P 500 EPS will decline by 44% year/year in 2Q, but we believe earnings will fall by 60% in the quarter." "If realized, 2Q 2020 EPS growth would be the weakest since 4Q 2009," the analysts said, noting that EPS fell 65% in that quarter.Read more: <a href="https://www.businessinsider.com/stock-picks-to-buy-20-firms-for-megatrend-gains-ubs-2020-7" target="_blank" rel="noopener">UBS says buy these 18 diamond-in-the-rough stocks that will offer massive gains over multiple years, even as their underlying industries suffer</a>For the whole of 2020, its baseline scenario for the S&amp;P 500's average EPS is a fall of 30% compared to 2019. EPS for 2020 will average at $115, Kostin and his team said.However, the bank maintained its previous EPS forecast for full year 2021 at $170, up 48% from 2020. For the year 2022, the US banking giant says EPS will continue to rise, hitting $188, a gain of 11%.These are the bank's baseline scenarios, but in a downside scenario, the analysts said, EPS in 2020 could be as low as $105, 2021 could see EPS of $135, and in 2022 it could be just $160, 14% below the baseline.Goldman Sachs' 2020 outlook is based on predictions that US GDP will shrink by 4.6% in the year, and <keyword id="144508" type="CITY" weightage="60" keywordseo="Brent">Brent</keyword> oil prices will be 35% lower year-on-year at $41 a barrel. <a href="https://markets.businessinsider.com/commodities/news/oil-price">Brent</a> is currently trading at around $42.50 per barrel, so would only need to fall a small amount to meet that target.Read more: <a href="https://www.businessinsider.com/coronavirus-investing-advice-new-diversification-buying-opportunities-blackrock-rick-rieder-2020-7" target="_blank" rel="noopener">BlackRock's bond chief who oversees $2.3 trillion told us how the coronavirus crisis created a game-changing investment opportunity for the first time in almost 20 years — and shared 4 ways he's cashing in</a>The oil sector has been extremely volatile since March, when <a href="https://www.businessinsider.in/stock-market/news/oil-surges-as-saudi-arabia-and-russia-end-price-war-by-agreeing-on-production-cuts/articleshow/75071526.cms">Saudi Arabia kicked off a price war with Russia.</a> The turbulence was made worse by the coronavirus pandemic, which torpedoed demand, and even caused US <a href="https://markets.businessinsider.com/commodities/oil-price?type=wti">oil</a> prices to briefly turn <a href="https://www.google.com/search?q=bears+are+after+blood+business+insider&amp;oq=bears+are+after+blood+business+insider&amp;aqs=chrome..69i57.9519j0j7&amp;sourceid=chrome&amp;ie=UTF-8ome&amp;ie=UTF-8">negative</a> in April amid a huge oil surplus and lack of storage space.<h2>If Joe Biden wins in November, his ambitious tax plan could lower the S&amp;P 500 EPS </h2>The bank also noted that US elections taking place in November adds to the menu of uncertainties facing earnings. In the case of a Joe Biden victory in November, Goldman Sachs says it expects S&amp;P 500 earnings per share will be $20 lower in 2021 than currently expected if he is able to pass his ambitious plan of tax increases."If enacted, we estimate that the Biden tax plan would reduce our S&amp;P 500 earnings estimate for 2021 by $20 per share, from $170 to $150," the note said."This estimate includes raising the statutory federal tax rate on domestic income from 21% to 28%, doubling the GILTI tax rate on certain foreign income, imposing a minimum tax rate of 15%, adding an additional payroll tax on high earners, and a drag on US GDP of a similar magnitude to the boost the TCJA created in 2018."Outside of tax reform, Goldman Sachs identified regulation, infrastructure, and trade policies as potential upside and downside risk factors to S&amp;P 500 EPS. The bank added: "This week, [Democratic nominee Joe] Biden outlined a $700 billion economic plan focused on fiscal stimulus. Large fiscal expansion would likely provide a tailwind to economic growth and S&amp;P 500 EPS."Read more: <a href="https://www.businessinsider.com/stock-market-outlook-3-reasons-for-rally-over-next-year-2020-7" target="_blank" rel="noopener">A Wall Street investment chief dispels the notion that surging stocks are disconnected from the economy — and lays out 3 reasons why the market will continue to climb over the next year</a>

Goldman Sachs says S&P 500 earnings per share will plunge 60% this quarter, the biggest decline since 2009

Prospects of a Modi election victory have induced a dollar flood into Indian bonds and <keyword id="45369" type="CITY" weightage="40" keywordseo="equities">equities</keyword>. The rupee has strengthened to below Rs 60 per dollar. 
 
If the strong rupee was caused by an export boom, everyone would be delighted. In fact, it has been caused by hot money plunging into the speculative froth of a Modi victory. This sort of strong rupee torpedoes India’s export prospects without providing any sustainable gains. 
 Some investment banks see the rupee strengthening further to Rs 58 per dollar. Adam Gilmour of Citigroup says it could strengthen to Rs 40-45 per dollar if Modi wins handsomely. But this would be disastrous for India’s competitiveness and balance of payments. The RBI must send a clear signal to <keyword id="6358355" type="ORGANIZATION" weightage="40" keywordseo="forex">forex</keyword> markets that it will keep the rupee competitive. It must mop up excessive inflows. The consequent increase in rupee money supply should be sterilised by equivalent RBI sales of gilts, checking any inflationary impact. 
 
Many ordinary Indians feel good about a strong rupee. But equating national prestige with a strong rupee is wrong. What matters is that India’s exports are competitive, and current account deficit under control. If this co-exists with a strong rupee, fine. But if this requires a weaker rupee, that’s fine too. The exchange rate is a means to an end, not an end in itself. 
 Last year, Prachi Mishra, <keyword id="192731" type="PERSON" weightage="40" keywordseo="Rohini-Malkani">Rohini Malkani</keyword> and others in the <keyword id="47209" type="ORGANIZATION" weightage="40" keywordseo="Finance-Ministry">finance ministry</keyword> calculated that a reasonable exchange rate might be Rs 58-60 to the dollar. All such calculations are iffy, but many foreign analysts had a similar view. However, the continuing <keyword id="22195" type="COMPANY" weightage="40" keywordseo="Inflation">inflation</keyword> differential between India and the world means that the same model will indicate a reasonable range of Rs 60-62 per dollar today. Inflation is falling but remains well above rates abroad, so a competitive exchange rate might be Rs 63-65 per dollar by the end of 2014. 
 
75% Gilt-y 
 
The composition of the recent dollar inflow is dismaying. Of the $8-billion inflow since January, no less than $6 billion is into gilts. Indian interest rates are sky-high by global standards, with short-term gilts yielding 8.5%. Last year, rupee depreciation made the high rupee yield illusory. 
 But today, foreigners get a high coupon plus currency appreciation, giving a fabulous total return of maybe 10%. No wonder they are flooding in. It’s wrong to <keyword id="25455" type="ORGANIZATION" weightage="40" keywordseo="finance">finance</keyword> India’s current account deficit by borrowing short term at an effective dollar rate of 10%. The RBI must discourage debt inflows of less than two years’ duration. The <keyword id="37018" type="UNKNOWN" weightage="40" keywordseo="interest-rate">interest rate</keyword> for two-year gilts is just a fraction more than for three-month treasuries, but carries a clear exchange rate risk — the rupee will very probably depreciate in two years. Three-month inflows constitute risky hot money, which will flood out if the election results don’t meet expectations. Two-year inflows will be much less volatile. 
 
History has repeatedly shown India’s vulnerability to sudden stops of forex inflows. Such sudden stops can be triggered by global events even if there is no disaster in India itself. The best remedy is continuously rising productivity, making exports more competitive and imports less competitive, ending any significant current account deficit. 
 In less ideal conditions, safety can be improved in two ways. One, limit the current account deficit by letting the rupee depreciate when exports turn uncompetitive. Two, encourage relatively stable dollar inflows, and discourage relatively unstable ones. There are four sorts of forex inflows. The most stable, desirable sort is foreign direct investment (<keyword id="44528" type="ORGANIZATION" weightage="40" keywordseo="FDI">FDI</keyword>). Foreign-owned factories and power stations cannot exit in a panic. 
 
No Running Away 
 The second most stable inflow is into equities. If foreign investors try to exit en masse in a panic, stock prices and the exchange rate plummet. Equity investors can exit only at a very steep loss, so many stay put. This was demonstrated in the Asian Financial Crisis and Great Recession. The third most stable — or second most unstable — inflow is into medium-or long-term rupee bonds. Here too, any mass exit will depress the price and exchange rate too. But bonds are far less volatile than <keyword id="6354298" type="ORGANIZATION" weightage="40" keywordseo="stocks">stocks</keyword>, and so carry a much lower exit penalty. 
 
Red-Hot Greenbacks 
 
The fourth, worst sort of inflow is dollar-denominated debt, which on maturity is repaid in full without any exit penalty. Long-term dollar debt takes time to mature, and is not so hot. But short-term dollar debt matures very quickly and is the hottest-ofhot flows. Rupee-denominated short term debt is not quite so bad, since it carries some currency risks (which are, however, limited because of the short maturity). 
 
These facts should guide the strategy of the next government and of the RBI. Priority should be given to raising productivity and, thus, reducing the current account deficit. As for inflows, FDI is the best. Inflows into equities is also desirable. Dollardenominated debt should not be encouraged. And foreign investment in short-term debt, whether in rupees or dollars, must be strongly discouraged. Hot money must not be allowed to make exports uncompetitive.

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The tax overhaul Democrats are pushing that could raise enough money for 2 $1,400 stimulus checks

Joseph Zeballos-Roig

The new global minimum tax could bring in $150 billion for worldwide governments, report says

Juliana Kaplan

Goldman Sachs says S&P 500 earnings per share will plunge 60% this quarter, the biggest decline since 2009

Saloni Sardana

Short-Term Capital Inflows Boosting The Rupee Will Render Exports Uncompetitive

Economic Times

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