# 704 – 📜 America’s next tax plan – The Average Joe

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    # 704 – 📜 America’s next tax plan

    victorlei

    May 29, 2024

    Good morning. Looking for a high-paying remote job? Perhaps you should try a work-from-someone-else’s-home job, where you can earn up to $150K a year, including 401(k) and benefits. The influx of wealthy individuals into Florida has created a shortage of housekeepers catering to mansions. This demand has driven up wages from $25 per hour in 2020 to $45-50 per hour today. Just remember to brush up on your upper-class etiquette, like never asking about the cost of things unless you plan to buy them.


    TAXES

    With the US Election Just Four Months Away, America’s Next Tax Plan Is Shaping Up

    Americans can run, but they can’t hide from politics — and unfortunately, you’re not safe here either because the country’s next election is just 159 days away. And today, we need to talk about one of the country’s most heavily debated topics: taxes.

    Whichever party wins Congress and the Presidency will win the power to reshape America’s tax code for the first time since 2017 — and the two parties have vastly different visions for taxes.

    Who’s in charge? In 2017, Donald Trump and the Republican party passed the Tax Cuts and Jobs Act (TCJA), temporarily lowering tax rates for individuals, estates, and businesses. While some argue the TCJA provided benefits, it also reduced deductions and tax credits for Americans and small businesses. The TCJA added between $1-2T to the federal debt, making it enormously controversial as its 2025 expiration date approaches.

    • Republicans pledge to make the TCJA’s changes permanent if they win in November — a move that would further enrich wealthy Americans and US businesses.

    • The Congressional Budget Office says the permanent changes could increase the deficit by $4.6T between 2025 and 2034, exasperating America’s debt problem.

    What’s the Alternative?

    If Democrats hold the quill come 2025, the sequel to the TCJA could look dramatically different. By the end of 2025, tax rates for most Americans would revert to pre-2018 levels. The Democrat plan would shift the tax burden to wealthy Americans and businesses, potentially costing them nearly $5T, according to PwC.

    • A memo circulated by the Biden Admin suggests higher corporate tax rates and new levies targeting billionaires, high executive pay, and Americans making more than $400K a year.

    • The Tax Foundation estimates this plan could generate $4.4T in revenue over 11 years — but might impact jobs, GDP, and wages.

    And if no one wins? If no party gains a decisive majority, the next tax bill could be a bipartisan effort, combining elements of both parties’ visions. Americans will have to wait until November to see what will replace the TCJA.


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    LARGECAP RECAP

    💳 Square Embraces Lending for Growth with Small Businesses and Consumer

    Americans might still be spending heavily, but payment processor Square ($SQ) faces more competition than ever. Point-of-sale rivals like Toast ($TOST) and Lightspeed ($LSPD) are gaining ground at checkout counters across the country. To find new growth, Square has turned to lending, writing $4.78B in small and midsize business (SMB) loans in 2023, even as competitors pulled back on lending.

    • Square’s $1.32B in loans grew 17% year-over-year, surpassing the value of SMB loans written by America’s largest bank, JPMorgan Chase ($JPM).

    • In the first quarter alone, Square originated 129K small business loans, structured as advances to be repaid using daily sales.

    On the other side: Square isn’t stopping with small businesses. Its $21B acquisition of buy now, pay later company AfterPay has given Square businesses another way to close sales — and has helped it push into consumer lending. Together, these efforts boosted Square’s subscription and services-based revenue by over 23% in the latest quarter, generating a surprising $5.77B profit. Despite this success, $SQ is down 9.5% year-to-date.

    📉 Not All Chip Stocks Are Benefiting Equally From AI. This Investor Wants That to Change.

    Texas Instruments ($TXN) investors knocked… They’re wondering why one of the most important chipmakers hasn’t benefited from the AI boom lifting other chip stocks. One hedge fund, Elliott Management, thinks it has the answer. Yesterday, the activist investor disclosed a $2.5B stake in Texas Instruments and urged the company to boost its free cash flow.

    • According to Elliott’s letter, the company has underperformed “despite TI’s reputation as one of the best-managed semiconductor companies with strong growth prospects and competitive advantages.”

    • While $TXN’s 17% return has surpassed the S&P 500’s 11% this year, it lags behind the semiconductor industry — with the iShares Semiconductor ETF ($SOXX) up 30% year-to-date.

    Bring back the cash: In the latest quarter, Texas Instruments’ revenue fell 16.4% year-over-year, and net income dropped over 35%. This decline comes two years after the company announced a major investment into US manufacturing — nearly doubling its capital expenditures to about $5B. This investment has left less money for dividends and share buybacks, prompting Elliott to call for increased free cash flow. However, it’s unclear if TI’s new friend is asking them to prioritize shareholder returns over business growth.


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    Markets & Economy

    Gen Z is taking summer jobs: Teen employment has been declining for decades, with students being encouraged to focus on studies more than money. This summer, Gen Z is prioritizing the paycheck, with 38% of 16-to-19-year-olds taking jobs. [Read]

    Democrats and Republicans face different inflation: A new study shows that Republican states have faced higher inflation since Dec. 2019, worsened by inflation fears. [Read]

    First weight loss ETF launches: Roundhill Investments’ new GLP-1 & Weight Loss ETF ($OZEM) is the first thematic fund dedicated to the weight loss industry — hoping to capitalize on fast-growing shares of Eli Lilly ($LLY) and Novo Nordisk ($NVO). But is its 0.59% expense ratio worth the squeeze? [Read]

    Business & Wealth

    Resort day passes are on the rise: Want a luxury resort experience without paying $400 per night? Hotels are embracing new ways of making money — including selling access to its amenities in day passes. [Read]

    PayPal ($PYPL) to build ad business: First, it was Google. Then, it was Meta, Uber, and Amazon. And now, a struggling PayPal is looking to advertising to reignite its growth — becoming the latest tech firm to use customer data in advertising. [Read]

    T-Mobile ($TMUS) acquires U.S. Cellular ($USM): Weeks after acquiring Mint Mobile’s parent company, America’s third-largest mobile carrier announced a $4.4B deal to acquire “most of U.S. Cellular,” aiming to enhance coverage. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


    CHART


    DIGIT OF THE DAY

    2.951M Travelers Took Flight on the Busiest Travel Day Ever In US History

    That’s almost 1% of the US population flying in a single day. Last Friday, the TSA screened the highest number of travelers ever, supporting analysts’ predictions that 2024 would set new travel records. But this year, it’s all about international travel.

    • United Airlines ($UAL) reported up to a 45% increase in demand for flights to European cities hosting Taylor Swift concerts, and Delta ($DAL) also noted its “largest-ever international summer schedule,” with an “increase in flying to Europe around her tour.”

    • During their earnings call this month, Airbnb ($ABNB) said it expects growth to accelerate on stronger international travel demand from the 2024 Paris Olympics and 2024 Euro Cup.

    We have liftoff: Travel is projected to add $11.1T to the global economy this year, surpassing the previous record of $10T in 2019. A significant boost comes from the rebound of Chinese visitors after travel restrictions were lifted in early 2023. A Dragon Tail survey found that only 10% of Chinese travelers don’t plan to go abroad — down from more than 50% a year ago.


    EXTRA JOE

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