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    New minimum tax could hit Berkshire Hathaway and Amazon hardest, study shows

    The UNC Tax Center used 2021 financials to predict the effect of the Inflation Reduction Act’s minimum corporate tax.
    The 15% minimum tax would impact around 78 companies, with Berkshire Hathaway and Amazon paying the most.
    President Joe Biden signed the tax into law, along with the rest of the Inflation Reduction Act, in August.

    Berkshire Hathaway Chairman Warren Buffett seen at the annual Berkshire shareholder shopping day in Omaha, Nebraska, U.S., May 3, 2019.
    Scott Morgan | Reuters

    Researchers applied the Inflation Reduction Act’s new 15% corporate minimum tax onto 2021 company earnings and found that the burden would only be felt by about 78 companies, with Berkshire Hathaway and Amazon paying up the most.
    The study from the University of North Carolina Tax Center used past securities filings to map the tax, which goes into effect in January, onto companies’ 2021 earnings.

    The researchers found that the 15% minimum would have taken a total of $31.8 billion from 78 firms in 2021. Berkshire led the estimated payout with $8.33 billion, and Amazon follows behind with $2.77 billion owed based on its 2021 earnings.
    The study notes the limitations of looking solely at public company data within a single year. The researchers recognized that these estimates may be subject to change, especially as company operations change under the tax in 2023.
    President Joe Biden signed the minimum book tax into law, along with the rest of the Inflation Reduction Act, in August. The tax is specifically meant to target companies earning more than $1 billion per year.
    The Joint Committee on Taxation had previously estimated that it would affect around 150 firms, with the costs falling specifically on the manufacturing industry. The bipartisan JCT also predicted $34 billion in revenue in the first year of the tax, slightly more than the theoretical 2021 revenue estimated at UNC.
    According to the study, the next-highest taxes would be paid by Ford, AT&T, eBay and Moderna, all of which would owe more than $1.2 billion in payments based on their 2021 financials.

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    Atlanta Fed President Bostic expects job losses but says there’s a really good chance to get to 2% inflation without killing the economy

    Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, signaled optimism for the Fed’s policies to temper inflation in a “Face the Nation” interview Sunday morning.
    He said that job losses could be “smaller than what we’ve seen in other situations.”
    Noting strong employment, he believes in the “ability for the economy to absorb” rate hikes.

    President and Chief Executive Officer of the Federal Reserve Bank of Atlanta Raphael W. Bostic speaks at a European Financial Forum event in Dublin, Ireland February 13, 2019.
    Clodagh Kilcoyne | Reuters

    Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, appeared on CBS’ “Face The Nation” Sunday morning with a continued commitment to the 2% inflation target and a cautiously optimistic outlook on the path to get there.
    The nation’s central bank hiked the targeted federal funds rate by 75 basis points to between 3 and 3 1/4 Wednesday. Bostic believes that the Federal Reserve can achieve its goal of 2% inflation without severely damaging the economy.

    “I do think that we’re going to do all that we can at the Federal Reserve to avoid deep, deep pain.” Bostic told “Face the Nation.”
    The most recent report clocked inflation at 8.3% through the past year. The Fed is aiming to temper demand in the economy so prices can stabilize, but some fear that the strict policies might initiate further economic turmoil.
    Bostic recognized that there will likely be job losses as a result of the Fed’s actions. However, compared to prior Fed tightening, Bostic believes that “there is a really good chance that if we have job losses it will be smaller than what we’ve seen in other situations,” he said on “Face the Nation.”
    Bostic sees “positive momentum” in the economy despite two consecutive quarters of negative GDP growth, a signifier used by some to identify a recession.
    “We’re still creating lots of jobs on a monthly basis. And so I actually think that there is some ability for the economy to absorb our actions,” Bostic said, noting “considerable job growth” in his bank’s hometown of Atlanta. “My expectation is that as we move along and we start to get inflation more under control.”

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    Central Banks Accept Pain Now, Fearing Worse Later

    Federal Reserve officials and their counterparts around the world are trying to defeat inflation by rapidly raising interest rates. They know it will come at a cost.A day after the Federal Reserve lifted interest rates sharply and signaled more to come, central banks across Asia and Europe followed suit on Thursday, waging their own campaigns to crush an outbreak of inflation that is bedeviling consumers and worrying policymakers around the globe.Central bankers typically move slowly. That’s because their policy tools are blunt and work with a lag. The interest rate increases taking place from Washington to Jakarta will need months to filter out across the global economy and take full effect. Jerome H. Powell, the Fed chair, once likened policymaking to walking through a furnished room with the lights off: You go slowly to avoid a painful outcome.Yet officials, learning from a history that has illustrated the perils of taking too long to stamp out price increases, have decided that they no longer have the luxury of patience.Inflation has been relentlessly rapid for a year and a half now. The longer that remains the case, the greater the risk that it is going to become a permanent feature of the economy. Employment contracts might begin to factor in cost-of-living increases, companies might begin to routinely raise prices and inflation might become part of the fabric of society. Many economists think that happened in the 1970s, when the Fed tolerated out-of-control price increases for years — allowing an “inflationary psychology” to take hold that later proved excruciating to crush.But the aggressiveness of the monetary policy action now underway also pushes central banks into new and risky territory. By tightening quickly and simultaneously when growth in China and Europe is already slowing and supply chain pressures are easing, global central banks risk overdoing it, some economists warn. They may plunge economies into recessions that are deeper than necessary to curb inflation, sending unemployment significantly higher.“The margin of error now is very thin,” said Robin Brooks, chief economist at the Institute of International Finance. “A lot of this comes down to judgment, and how much emphasis to put on the 1970s scenario.”In the 1970s, Fed policymakers did lift interest rates in a bid to control inflation, but they backed off when the economy began to slow. That allowed inflation to remain elevated for years, and when oil prices spiked in 1979, it reached untenable levels. The Fed, under Paul A. Volcker, ultimately raised rates to nearly 20 percent — and sent unemployment soaring to more than 10 percent — in an effort to wrestle the price increases down.That example weighs heavily on policymakers’ minds today.“We think that a failure to restore price stability would mean far greater pain later on,” Mr. Powell said at his news conference on Wednesday, after the Fed raised rates three-quarters of a percentage point for a third straight time. The Fed expects to raise borrowing costs to 4.4 percent next year in the fastest tightening campaign since the 1980s.The Bank of England raised interest rates half a point to 2.25 percent on Thursday, even as it said the United Kingdom might already be in a recession. The European Central Bank is similarly expected to continue raising rates at its meeting in October to combat high inflation, even as Russia’s war in Ukraine throws Europe’s economy into turmoil.As the major monetary authorities lift borrowing costs, their trading partners are following suit, in some cases to avoid big moves in their currencies that could push up local import prices or cause financial instability. On Thursday, Indonesia, Taiwan, the Philippines, South Africa and Norway lifted rates, and a large move by Switzerland’s central bank ended the era of below-zero interest rates in Europe. Japan has comparatively low inflation and is keeping rates low, but it intervened in currency markets for the first time in 24 years on Thursday to prop up the yen in light of all of the action by its counterparts.The wave of central bank action is expected to have consequences, working by design to sharply slow both interconnected commerce and national economies. The Fed, for instance, sees its moves pushing U.S. unemployment to 4.4 percent in 2023, up from the current 3.7 percent.A housing development in Phoenix. Climbing interest rates are already making it more expensive to borrow money to buy a car or purchase a house in many nations.Adriana Zehbrauskas for The New York TimesAlready, the moves are beginning to have an impact. Climbing interest rates are making it more expensive to borrow money to buy a car or a house in many nations. Mortgage rates in the United States are back above 6 percent for the first time since 2008, and the housing market is cooling down. Markets have swooned this year in response to the tough talk coming from central banks, reducing the amount of capital available to big companies and cutting into household wealth.Yet the full effect could take months or even years to be felt.Rates are rising from low levels, and the latest moves have not yet had time to fully play out. In continental Europe and Britain, the war in Ukraine rather than monetary tightening is pushing economies toward recession. And in the United States, where the fallout from the war is far less severe, hiring and the job market remain strong, at least for now. Consumer spending, while slowing, is not plummeting.That is why the Fed believes it has more work to do to slow the economy — even if that increases the risk of a downturn.“We have always understood that restoring price stability while achieving a relatively modest increase in unemployment, and a soft landing, would be very challenging,” Mr. Powell said on Wednesday. “No one knows whether this process will lead to a recession, or if so, how significant that recession would be.”Many global central bankers have painted today’s inflation burst as a situation in which their credibility is on the line.“For the first time in four decades, central banks need to prove how determined they are to protect price stability,” Isabel Schnabel, an executive board member of the European Central Bank, said at a Fed conference in Wyoming last month.A FedEx worker making deliveries in Miami Beach. Consumer spending in the United States, while slowing, is not plummeting.Scott McIntyre for The New York TimesBut that does not mean that the policy path the Fed and its counterparts are carving out is unanimously agreed upon — or unambiguously the correct one. This is not the 1970s, some economists have pointed out. Inflation has not been elevated for as long, supply chains appear to be healing and measures of inflation expectations remain under control.Mr. Brooks at the Institute of International Finance sees the pace of tightening in Europe as a mistake, and thinks that the Fed, too, could overdo it at a time when supply shocks are fading and the full effects of recent policy moves have yet to play out.Maurice Obstfeld, an economist at the Peterson Institute for International Economics and a former chief economist of the International Monetary Fund, wrote in a recent analysis that there is a risk that global central banks are not paying enough attention to one another.“Central banks clearly are scrambling to raise interest rates as inflation runs at levels not seen for nearly two generations,” he wrote. “But there can be too much of a good thing. Now is the time for monetary policymakers to put their heads up and look around.”Still, at many central banks around the world — and clearly at Mr. Powell’s Fed — policymakers are treating it as their duty to remain resolute in the fight against price increases. And that is translating into forceful action now, regardless of the imminent and uncertain costs.Mr. Powell may have once warned that moving quickly in a dark room could end painfully. But now, it’s as if the room is on fire: The threat of a stubbed toe still exists, but moving slowly and cautiously risks even greater peril. More

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    Bank of England hikes by 50 basis points, says UK may already be in recession

    U.K. inflation was 9.9% in August, well ahead of the BoE’s 2% target.
    Higher rates come as the U.K. faces a falling pound, recession forecasts and a set of economic reforms under new Prime Minister Liz Truss.

    The Bank of England warned that the U.K. will enter recession later this year. The expected recession is forecast to be the longest since the global financial crisis.
    Vuk Valcic | SOPA Images | LightRocket | Getty Images

    LONDON — The Bank of England voted to raise its base rate to 2.25% from 1.75% Thursday, lower than the 0.75 percentage point increase that had been expected by many traders.
    Inflation in the U.K. dipped slightly in August but at 9.9% year-on-year remained well above the bank’s 2% target. Energy and food have seen the biggest price rises, but core inflation, which strips out those components, is still at 6.3% on an annual basis. 

    The BOE now expects inflation to peak at just under 11% in October, down from a previous forecast of 13%.
    The smaller-than-expected hike came as the bank said it believed the U.K. economy was already in a recession, as it forecast GDP would contract by 0.1% in the third quarter, down from a previous forecast of 0.4% growth. It would follow a 0.1% decline in the second quarter.
    Numerous analysts, along with business association the British Chambers of Commerce, have previously said they expect the U.K. to enter a recession before the end of the year. As well as energy price shocks, it faces trade bottlenecks due to Covid-19 and Brexit, declining consumer sentiment and falling retail sales.
    The BOE dropped its key rate, known as the Bank Rate, down to 0.1% in March 2020 in an attempt to prop up growth and spending at the onset of the coronavirus pandemic. However, as inflation began to rise sharply late last year, it was among the first major central banks to kick off a hiking cycle at its December meeting. 

    Seventh consecutive rise

    This is its seventh consecutive rise and takes U.K. interest rates to a level last seen in 2008.

    In a release explaining its decision, the bank noted volatility in wholesale gas prices but said announcements of government caps on energy bills would limit further increases in consumer price index inflation. However, it said there had been further signs since August of “continuing strength in domestically generated inflation.”
    It added: “The labour market is tight and domestic cost and price pressures remain elevated. While the [energy bill subsidy] reduces inflation in the near term, it also means that household spending is likely to be less weak than projected in the August Report over the first two years of the forecast period.”
    Five members of its Monetary Policy Committee voted for the 0.5 percentage point rise, while three voted for a higher 0.75 percentage point rise that had been expected by many. One member voted for a 0.25 percentage point rise.
    The bank said it was not on a “pre-set path” and would continue to assess data to decide the scale, pace and timing of future changes in the Bank Rate. The committee also voted to begin the sale of U.K. government bonds held in its Asset Purchase Facility shortly after the meeting and noted a “sharp increase in government bond yields globally.”
    The bank’s decision comes against a backdrop of an increasingly weak British pound, recession forecasts, the European energy crisis and a program of new economic policies set to be introduced by new Prime Minister Liz Truss. 
    Sterling hit fresh multi-decade lows against the dollar this week, trading below $1.14 through Wednesday and dipping below $1.13 early Thursday. It has fallen precipitously against the greenback this year and was last at this level in 1985. It was up 0.2% after the BOE decision with the 0.5 percentage point rise fully priced in.

    Loading chart…

    The devaluation of the pound has been caused by a combination of strength in the dollar — as traders flock to the perceived safe-haven investment amid global market volatility and as the U.S. Federal Reserve hikes its own interest rates — and grim forecasts for the U.K. economy. 

    Mini-budget Friday

    Meanwhile, the country’s newly-formed government has set out numerous significant economic policy proposals this month ahead of a “fiscal event,” dubbed a mini-budget, when they will be officially announced on Friday.
    This is expected to include a reversal of the recent rise in National Insurance tax, cuts in taxes for businesses and home buyers, and a plan for “investment zones” with low taxes.
    Truss has repeatedly stressed a commitment to lowering taxes in a bid to boost economic growth.
    However, the energy crisis has also meant the government has announced a huge spending package to curb soaring bills for households and businesses.
    Data published Wednesday showed the U.K. government borrowed £11.8 billion ($13.3 billion) last month, nearly twice as much as forecast and £6.5 billion more than the same month in 2019, due to a rise in government spending.

    ‘Critical moment’

    David Bharier, head of research at business group the British Chambers of Commerce, said the bank faced a “tricky balancing act” in using the blunt instrument of rate rises to control inflation.
    “The bank’s decision to raise rates will increase the risk for individuals and organisations exposed to debt burdens and rising mortgage costs – dampening consumer confidence,” he said in a note.
    “Recent energy price cap announcements will have provided some comfort to businesses and households alike and should place downward pressure on the rate of inflation.”
    “The bank, looking to dampen consumer demand, and government, looking to increase growth, could now be pulling in opposite directions,” he added, saying the coming economic statement from the finance minister Friday was a “critical moment.”
    Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, said the bank was hiking at a “sensible pace” given the lower inflation outlook and emerging slack in the economy.
    Tombs forecast a 50 basis point hike at the bank’s November meeting, with risks titled toward a 75 basis point hike given the hawkishness of three committee members. He said this was likely to be followed by a 25 basis point hike in December, taking the bank rate to 3% at the end of the year, with no further hikes next year.
    The U.K. is not alone in raising interest rates to combat inflation. The European Central Bank raised rates by 75 basis points earlier this month, while Switzerland’s central bank hiked by 75 basis points Thursday morning. The U.S. Federal Reserve raised its benchmark rate range by the same amount Wednesday.

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    The Fed Intensifies Its Battle Against Inflation

    Federal Reserve officials made another large rate increase and signaled more to come, pledging to quash inflation despite expected pain.The Federal Reserve raised interest rates by three-quarters of a percentage point in an attempt to lower inflation back to 2 percent.Drew Angerer/Getty ImagesFederal Reserve officials, struggling to contain the most rapid inflation in 40 years, delivered a third big rate increase on Wednesday and projected a more aggressive path ahead for monetary policy, one that would lift interest rates higher and keep them elevated longer.The Fed raised its policy interest rate by three-quarters of a percentage point, boosting it to a range of 3 to 3.25 percent. That’s a significant jump from as recently as March, when the federal funds rate was set at near-zero, and the increases since then have made for the Fed’s fastest policy adjustment since the 1980s.Even more notably, policymakers predicted on Wednesday that they would raise borrowing costs to 4.4 percent by the end of the year and forecast markedly higher interest rates in the years to come than they had previously expected. Jerome H. Powell, the Fed chair, warned that those moves would be painful for the U.S. economy — but said curbing growth to contain price increases was essential.“We have got to get inflation behind us,” Mr. Powell said during his post-meeting news conference. “I wish there were a painless way to do that; there isn’t.”Together, the Fed’s stark projections and the Fed chair’s comments amounted to a declaration: The central bank is determined to crush inflation, even if doing so comes at a cost to the economy in the near term. That message got through to markets, which slumped in reaction to the news, with the S&P 500 index closing down 1.7 percent.“We want to act aggressively now, and get this job done, and keep at it until its done,” Mr. Powell explained.His stern remarks reflect a challenging reality for the Fed. Inflation has been stubbornly rapid, and it is proving difficult to wrestle back under control.Prices continue to increase at more than three times the central bank’s target rate of 2 percent, making everyday life hard to afford as everything from rent to food to household goods continues to grow more expensive. The jump in inflation, which is being felt globally, stems partly from supply chain disruptions caused by the pandemic and war in Ukraine. But the price pressures also come from sustained consumer demand, which has allowed companies to charge more without losing customers.In fact, people have continued to buy cars, retail goods and dinners out even as the central bank has begun to sharply raise interest rates. Companies have continued to rake in big profits while hiring at a rapid clip, lifting wages as they compete for scarce workers — and sending prices relentlessly higher.The Fed is trying to change that, a statement the central bank delivered clearly on Wednesday.“It’s consistent with the message that inflation is public enemy No. 1: They have to keep going,” said Priya Misra, head of global rates research at T.D. Securities.What the Fed’s Rate Increases Mean for YouCard 1 of 4A toll on borrowers. More

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    Regulators Accuse Amazon of Singling Out Union Organizers for Discipline

    National Labor Relations Board officials said the company had applied its workplace rules unfairly, and asked it to change or scrap the regulations.Federal labor regulators have moved to force Amazon to scrap a rule that governs employees’ use of nonwork areas, accusing the company of illegally singling out union supporters in enforcing the policy.A complaint issued on Tuesday by the National Labor Relations Board’s Brooklyn office said Amazon “selectively and disparately enforced the rule,” which applied to distributing materials and to solicitation activities, “by discriminatorily applying it against employees who engaged in union activity.”The complaint amounted to a finding of merit in a charge brought by the Amazon Labor Union, which mounted organizing efforts — one successful, one not — at two warehouses on Staten Island this year. The case will be litigated before an administrative law judge unless it is settled beforehand, and Amazon could appeal an adverse ruling to the national labor board in Washington.The complaint said the company applied the solicitation policy unlawfully when it prohibited workers from posting a pro-union sign in a nonwork area at one of the Staten Island warehouses, known as LDJ5. The company threatened discipline if the workers posted the sign or did not remove the sign, according to the complaint, which also said at least one worker was disciplined under the solicitation policy.The complaint also accuses the company of disciplining two workers to discourage them from engaging in union activity.After winning a vote to represent roughly 8,000 workers at another Staten Island warehouse, JFK8, the union lost an election at LDJ5 by a wide margin in May.Under Amazon’s stated policy, employees are prohibited from soliciting co-workers for, say, financial contributions on company grounds during work time, or from distributing nonwork-related material in work areas. The policy also prevents nonemployees from conducting any kind of solicitation on company grounds.The labor board’s complaint said Amazon could reinstate the policy only if it explicitly stated that the policy did not apply to organizing and related activity by workers, known as protected concerted activity. The complaint also seeks to require that all supervisors, managers, security personnel and outside consultants hired by Amazon receive training on workers’ federally-protected labor rights. It could affect most of the company’s roughly one million employees nationwide.(The complaint is not clear on whether the training would be nationwide or only in the New York region, and a spokeswoman for the labor board was not immediately able to clarify.)“Amazon is committing flagrant human rights violations by unlawfully disciplining A.L.U. supporters and prohibiting union organizing in the company’s break rooms,” said Connor Spence, the union’s treasurer, in a statement. “Union organizing in employer break rooms is a protected right mandated by the National Labor Relations Board.” Paul Flaningan, an Amazon spokesman, said in a statement, “These allegations are completely without merit, and we look forward to showing that through the process.”The complaint comes at an important moment for the Amazon Labor Union. This month, a hearing officer for the labor board recommended rejecting Amazon’s formal challenge to the union’s JFK8 victory. (Amazon has said it will probably appeal a ruling on this question.) But defending the victory consumed time that the union had hoped to spend on pushing for a contract at the warehouse.In October, the labor board will hold an election involving the union and roughly 400 workers at an Amazon warehouse in Albany, N.Y.Karen Weise More