Economy

LAS VEGAS/RENO, Nevada (Reuters) – Two decades into her work as a unionized bartender in Reno, Nevada, Kristie Strejc has the comfort of job stability, her pick of the best shifts, and, unlike many in the hospitality industry, enough income that she’d actually benefit from plans floated by both U.S. presidential candidates to exempt tips from federal income tax.But that isn’t influencing a vote she said is solidly for Vice President Kamala Harris, the Democratic candidate who has the endorsement of Nevada’s powerful Culinary Workers Union Local 226 and in recent polls is leading former President Donald Trump, the Republican challenger, in this battleground state.”I’m kind of at a point where I could either go on ‘this’ vacation or buy ‘this’ for the house … I could probably do a little more of both if I had that money in my pocket,” she said when asked in an interview last month about the prospect of a tipped-income exemption. “That’d be a bonus, but I’m not going to vote because of one thing.”Proposals to exempt tipped income from federal taxes have emerged as Harris and Trump use competing economic proposals in areas like tariffs and taxes to vie for the votes of different constituencies, a strategy Trump has since extended to include a tax exemption for overtime pay. Some of the ideas are expensive. The Committee for a Responsible Federal Budget, a non-partisan public policy organization, recently estimated that eliminating taxes on overtime would cut government revenue by $1.7 trillion from 2026 to 2035.At least in Nevada, however, where the tip-heavy hospitality industry still comprises more than a fifth of jobs, the proposal to exempt tips from taxes has landed with a bit of a shrug.David Schmidt, chief economist for the Nevada Department of Employment, Training, and Rehabilitation, said the state had about $95 billion in annual wages reported to a Bureau of Labor Statistics quarterly census of wages in 2023. He estimates no more than about 1.5% was from tips.”It is not nothing, but it is not close to the lion’s share,” he said. “I don’t think you’d see really huge impacts … It is a pretty person-to-person kind of thing.”WORKING-CLASS ISSUEJeremy Gelman, an associate professor of political science at the University of Nevada, Reno, said he construed Trump’s proposal as an attempt to “sow doubt” among the roughly 60,000 members of the Culinary Workers Union Local 226 and Bartenders Union Local 165, whose well-organized voter mobilization program is “really effective when it’s turned on,” as it has been for Harris.The fact that both candidates have made the offer blunts the advantage for either of them, particularly when “the economy is going okay … It is not the best, but is not in a recession,” he said.Ted Pappageorge, the secretary-treasurer of the Culinary Workers Union, said there was little credence given to Trump’s proposal on an issue the union official regards as more complicated than a no-tax-on-tips approach alone can reflect. He sees it tied into broader national issues like the below-minimum wages tipped workers are paid in many states, and how best to help lower-income families that may pay no taxes but need help meeting basic expenses.”We’ve been fighting about fair taxation on tips for 30 years,” Pappageorge said in an interview last month, noting tips are not the same as a promised wage for an hour of work, but a gift at a customer’s discretion that can cause hourly earnings to vary widely.While Nevada is one of seven states that don’t allow employers to pay less than the minimum wage to tipped workers, he said the union still regards the issue as part of a larger set of questions that figured into its endorsement of Harris.”It’s a working-class voter issue,” Pappageorge said. “You could see a package that raised the minimum wage and perhaps didn’t eliminate tax on tips but reduced it or something.”LIMITED IMPACTThe Internal Revenue Service has not published detailed estimates of tipped income since 2018, when 6.1 million workers reported $38.3 billion of tipped income for purposes of Social Security payroll taxes.Recent research from the Budget Lab at Yale, a non-partisan policy research center, estimated as few as 3% of taxpayers nationally would benefit from a tipped-earnings exemption, with many others who collect tips making too little to owe any federal taxes.The exact impact, however, would depend on the details of the changes to the tax code and on how workers and employers respond.Harris has suggested the exemption should have an income limit, a detail that would lessen the effect on the federal deficit but further curb the number of workers who benefit. For whatever tax change was approved, economists would look for evidence of how behavior changed, and whether, for example, guaranteed pay gets reduced by employers if their workers got a “raise” through the tax exemption.”Both camps see their proposals as a way to improve the economic standing of low-wage workers,” Brookings Institution researchers Ian Berlin and William Gale said in a recent analysis. “We agree that this is an important goal, but there are much better ways to achieve it,” including minimum wage changes or expanded child care or earned income tax credits.”Exempting tips from taxation does nothing to help most low-income workers, and it may do little for many tipped workers,” they wrote.’A LITTLE BIT MORE’Mike Bosma, a Reno-based certified public accountant and Trump supporter, said the tipped earnings exemption represented “pandering for votes” by both candidates when he believes the focus should be on how inflation surged and led to high interest rates that have pressured small business owners in particular.”It has hurt a lot of people,” he said, adding that he holds Harris and President Joe Biden accountable for not doing more in the moment to try to curb price increases.In Las Vegas, Rocelia Mendoza gathered with colleagues at the Culinary Union Hall one afternoon last month to prepare for a day of door knocking, despite the stifling heat, to encourage other union members to vote for Harris.An assistant server at a casino restaurant, she said taxes took “too much” from the just-over $16 an hour she earns, and she’d love to “make a little bit more money for my family.”But she didn’t trust Trump to deliver.”My sister, my granddaughter, my husband, all my family is supporting Kamala Harris,” Mendoza said. 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DUBLIN (Reuters) – Ireland has leapfrogged the Bahamas to become the world’s ninth most significant tax haven, according to a ranking by pressure group the Tax Justice Network, which campaigns for tax transparency.Ireland first appearance in the global top ten puts it alongside countries such as the British Virgin Islands, which tops the list, and the Netherlands, having edged up from eleventh place in the previous report in 2021.The study measures the amount of corporate financial activity in countries, including money flows, as well as transparency and tax schemes on offer, assigning a points-based ranking. The Tax Justice Network is highly critical of Britain’s overseas territories, such as the Virgin Islands. But it also highlights the growing importance of Ireland.The list was published shortly after Ireland received $14 billion in back taxes from Apple (NASDAQ:AAPL), after the European Court of Justice said the country’s favourable tax treatment of the iPhone maker had been unlawful.A spokesperson for Ireland’s Department of Finance said Ireland was not a tax haven and that it had taken steps to tackle aggressive tax planning by reforming its tax code and that it supported international tax reform.Nessa Ni Chasaide of Ireland’s Maynooth University said Dublin had responded to criticism by changing rather than dropping favourable tax schemes, allowing international companies write off the value of intellectual property against profits to pay less tax.”Ireland plays global tax games in a very sophisticated way,” she said. “Every time it comes under pressure, it has a new game. Ireland is laughing all the way to the bank.”Corporate tax revenues have exploded in Ireland over the last decade, jumping from 4.4 billion euros in 2015 to an expected 29.5 billion euros this year, not including the Apple windfall.The receipts, mainly paid by a handful of U.S. multinationals, now make up 28% of all tax collected in Ireland each year, propelling its public finances to becoming the strongest in Europe. More

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In a note to clients, the analysts pointed to comments on Monday from ECB President Christine Lagarde, who said that recent economic data had “strengthened” policymakers’ confidence that inflation will return to their 2% target level in a timely manner.”We will take that into account in our next monetary policy meeting in October,” Lagarde noted.The BofA analysts said that her language echoed similar justification that was used for a quarter-point rate cut in September, adding that it is “a quasi-clear ‘go’ for October, absent data surprises until then.”Mixed inflation and economic activity figures out of the eurozone had earlier led the analysts to project that the ECB would skip an October rate drawdown.Following the anticipated reduction this month, the BofA analysts are now predicting “back-to-back cuts of 25 basis points each,” taking the ECB’s crucial deposit facility rate down to 2% by June 2025 — a quarter earlier than their prior forecasts. The ECB steers monetary policy through the deposit rate.They also see two additional quarterly cuts in September and December 2025, which would bring the terminal rate to 1.50% six months earlier than they previously projected.”That is where we still differ from consensus (2.25% for end-[20]25 and 2.20% for 2026) and market pricing,” the analysts flagged.At its last gathering in September, the ECB slashed rates for the second time in three months, as officials mulled sluggishness in the eurozone economy and fading inflationary pressures.The deposit rate was lowered by 25 basis points to 3.5%. In July, the European Central Bank left the benchmark rate unchanged at 3.75%, after cutting it from an all-time high of 4% in the preceding month.Speaking in a press conference at the time, Lagarde stressed that the central bank was not “committed” to a particular rate path and would remain data-dependent when making future policy moves. More

BUENOS AIRES/SALTA, Argentina (Reuters) – In Argentina’s poor barrios a food emergency is taking hold as poverty rises, with malnutrition on the increase and medics treating children for eye diseases and even scurvy linked to a vitamin-deficient diet.Years of recessions and high inflation in the resource-rich South American nation have left over half the population in poverty, including around seven in 10 children.Food insecurity has risen sharply in recent years, and is now being aggravated by a tough austerity campaign under libertarian President Javier Milei, whose new government has slashed billions of dollars of spending as part of a “zero deficit” plan to right the embattled economy.Official data last week showed that poverty hit 53% in the first half of the year, up from around 42% at the end of last year. Some 18% of people are in extreme poverty, meaning their household incomes don’t cover the cost of the basic food basket.”There are times when I don’t have enough food to feed (my children),” said Silvina Rizo, a mother of three in a shantytown on the outskirts of Salta in Argentina’s mountainous north.Rizo said she now cooks with wood because she cannot afford gas for the stove. Her youngest daughter is terrified of the wind and rain that rattle the tin roof and walls made of plastic bags.”When it rains, the neighborhood floods. But where am I going to go?” said Rizo. “I don’t have anywhere to go with my children. Rent is so expensive.”The number of Argentines facing moderate-to-severe food insecurity has almost doubled to 36% over the last seven years, a United Nations report said this year. A million and a half kids miss a meal each day and are eating fewer nutritious foods like meats and vegetables that have become more costly.”We are seeing cases of scurvy, cases of eye injuries due to Vitamin A deficiency, with corneal injuries,” said Norma Piazza, a pediatrician specializing in nutrition.”These things existed in Central America, Africa, Asia, but we had never seen patients here who had eye lesions due to a lack of vitamin A.”She said some kids were being admitted with neurological issues and convulsions where the only underlying pathology was deficiency of vitamins like B12, indicating a lack of meat in a country that has long prided itself on its beef-rich diet.The Milei government, which took power in December 2023, has recognized a “food emergency”. It says it has responded with increased payouts on certain welfare subsidies like universal child allowance and food cards.”In the face of the food emergency, our priority is for people to receive assistance with direct transfers, which puts money in people’s pockets,” the Secretariat of Childhood, Adolescence and Family said in written comments to Reuters.The government also says there are signs the worst is over. Data from the Catholic University of Argentina suggest poverty peaked at the start of the year and has improved since. Inflation is slowing though remains in the triple digits on an annual basis.The presidency office said last week that high poverty levels were “horrendous” and it was doing all it could to turn around the situation that it blames on decades of poor economic management and over-spending by mainstream political parties.’AID COMPLETELY STOPPED’Milei, a political outsider and former economic pundit, often campaigned brandishing a chainsaw as a crude illustration of his plans to slash the size of the state.His government has withdrawn funding for some soup kitchens, which it says are inefficient or even scams, drawing criticism from aid groups and religious bodies who say they play a crucial role ensuring the poorest are fed. Many have closed or had to reduce meals.The UN Committee on the Rights of the Child said in a report in September it was concerned food insecurity had “increased alarmingly” in Argentina in recent years. It cited the “negative impact on children” of the cuts to community kitchens.”From December last year, aid from the national government completely stopped,” said priest Adrian Bennardis in Villa Soldati, an impoverished Buenos Aires neighborhood. “It breaks my heart to know that out of 10 kids, seven are below the poverty line… and that a part of society does not want to see it.”Many Argentines still support Milei’s tough medicine reforms after years of crisis. But his approval numbers have started to slip and some of those suffering are resentful. Angel Arce, 32, is out of work and angry, saying he has had to send his son to live with relatives because he cannot afford to look after him.”With this president everything went downhill. The lower class people don’t get anything any more, the soup kitchens neither,” he said. “I want to be with my son and I can’t.”MORE RICE, LESS MEATIn a soup kitchen in Villa Soldati, Maria Benitez Osorio, 36, said demand for the food she serves was rising but funding had fallen, meaning the quality of meals was “deteriorating.””What we try to do is serve more rice and noodles, which is what we have the most of. Meat and chicken in general are what we have the least,” she said, stirring a huge stew that she was serving to neighbors crowding the door on a cold spring day.In Villa Fiorito, the hardscrabble neighborhood where soccer star Diego Maradona was born, 32-year-old Cynthia suffers from malnutrition, aggravated by the fact that she is missing a kidney and a lung.”I don’t have enough food,” she said from her bed under a perforated metal roof where water drips when it rains. She shares the room with her two children, mother and sister. “The soup kitchen said they can only give food one day a week.”Diets that lack nutrients like zinc and certain vitamins can lead to stunted growth and higher chance of disease, while cheaper carbohydrates are linked to higher instances of obesity, on the rise in Argentina.”The quality of the food poor children in Argentina are having is clearly deteriorating,” said Sergio Britos, nutritionist and director of Argentina’s Center for Studies on Food Policies and Economics.Some 10% of Argentine under-5s were malnourished, he said, a figure that has crept up in recent years as food prices have risen.Susana De Grandis, a pediatrician specializing in child nutrition in central Cordoba province, said cases of illnesses like eye diseases and scurvy linked to poor diets were a “warning” sign.”It had been many years since we saw scurvy, perhaps decades. It is exceptional that one sees illnesses in Argentina that are related to vitamin deficiency,” she said.”We take these cases as markers of a serious situation because we hadn’t seen them before.” More

NAIROBI (Reuters) – Major shareholders at the International Monetary Fund are urging Kenya to request an IMF assessment of corruption and governance issues as part of a push to unlock lending that has been stalled by the shelving of tax hikes, two diplomatic sources said. Disbursement of around $600 million under an IMF plan that expires next year has been held up since the Kenyan government in June withdrew $2.7 billion in tax increases in response to mass protests. The demonstrations, in which more than 50 people were killed, brought to the fore issues of corruption and misgovernance, with young protesters complaining that their taxes were being used to fund politicans’ lavish lifestyles. Western governments have been encouraging a governance diagnostic, or IMF assessment, of corruption and governance vulnerabilities, said the two sources. They spoke on condition of anonymity to discuss private conversations. A governance diagnostic must be requested by the country in question. One source said such a request would facilitate discussions about further IMF support. Kenya’s finance ministry did not respond to requests for comment. Spokespeople at the Washington-based IMF did not immediately respond to a request for comment.The IMF has published governance diagnostic reports on 14 countries since 2014, including Ukraine, Cameroon and Sri Lanka, and additional diagnostics are underway, according to the Fund’s website. Kenyan authorities are looking for fresh revenue-raising measures after rescinding the tax increases. Finance Minister John Mbadi said in August that the government would have to restore some measures from the scrapped bill. However, last month Mbadi said he would seek suggestions from the public on new legislation to boost revenue. Diplomatic sources say the government will need to present a credible plan to narrow its fiscal deficit before the IMF will consider new disbursements. More

JERUSALEM (Reuters) – A two-notch downgrade of Moody’s (NYSE:MCO) Israel credit rating may not be the last, analysts say, as war on two fronts spurs state spending and raises fears that the economy may not recover as quickly as in past conflicts.The surprise move by Moody’s on Friday to lower Israel’s credit rating to “Baa1” from “A2″ was criticised by government officials but reflected uncertainty over Israel’s economic prospects as conflicts rage.”The ratings would likely be downgraded further, potentially by multiple notches, if the current heightened tensions with Hezbollah turned into a full-scale conflict,” Moody’s said.Bank Hapoalim economist Victor Bahar noted that “a Baa1 debt rating usually characterises countries that are much less wealthy and developed than Israel”.The downgrade kept Israel’s rating three notches into investment grade, down from six earlier this year.”There are a lot of issues that we have to do in order to keep this current rating,” said Yair Avidan, a former Israeli banking regulator.Israel’s year-old war against the Palestinian Islamist group Hamas in Gaza has cost an estimated 250 billion shekels ($67 billion). At the same time, it has been responding to rocket fire from Hezbollah in Lebanon.MOODY’S QUESTIONS CHANCES OF RAPID RECOVERY  Moody’s said the unusual length of the conflict and the lack of a clear prospect of resolution raised doubts about how fast the economy would recover.”It’s definitely quite a strong indication that they believe the risks are moving up further than they thought before, and the deterioration is fast,” said Karnit Flug, a former central bank chief now at the Israel Democracy Institute.Israeli politicians, including Finance Minister Bezalel Smotrich, said the Moody’s downgrade, which followed cuts by Fitch and S&P Global, underestimated the strength of the Israeli economy.Fitch expects Israel to increase defence spending long-term from pre-war levels by close to 1.5% of GDP, and S&P Global also bemoaned ever-rising geopolitical risks and a widening budget deficit.Israeli Accountant General Yali Rothenberg said it was clear that war on several fronts would exact an economic price, but said there was “no justification” for the latest Moody’s downgrade.But growth has taken a clear hit over the past year, slowing to an annualised 0.7% in the second quarter – or a contraction of 0.9% on a per capita basis as Israel’s population expands – increasing the pressure on government finances.WAR WITH HEZBOLLAH COULD SHRINK ECONOMY, EXPAND DEFICITAccording to the Aharon Institute for Economic Policy at Reichman University, an all-out war with Hezbollah including a land campaign would lead to an economic contraction of 3.1% this year and a budget deficit of 9.2% of GDP.With the defence budget ballooning and Prime Minister Benjamin Netanyahu’s coalition partners insisting on keeping favoured spending programmes in the delayed 2025 budget, Moody’s has been critical of fiscal policy.Finance Minister Bezalel Smotrich’s draft targets a deficit of 4% of GDP and 35 billion shekels in spending cuts.A senior government official said Moody’s should have waited until the 2025 budget was approved, but that process has already been delayed by two months amid coalition wrangling. “What is clear is that they do not have confidence in the government regarding the fiscal outlook,” Flug of the Israel Democracy Institute said.For many in Israel’s business sector, the underlying strength of the economy and its dynamic high tech sector outweigh questions over government spending targets.Yossi Abu, chief executive at NewMed Energy, called Moody’s decision “a colossal mistake” that “reflects a lack of understanding of Israeli resilience and the Israeli spirit”.For its part, the Bank of Israel has been urging spending cuts and tax hikes to rein in a deficit that the government had projected at 6.6% of gross domestic product for 2024 but is currently running at 8.3%. Moody’s sees a 7.5% deficit this year.($1 = 3.7074 shekels) More

MEXICO CITY (Reuters) – The Bank of Mexico’s governing board may consider larger cuts to its benchmark interest rate going forward as inflation in Latin America’s second largest economy cools, bank governor Victoria Rodriguez told Reuters in an interview late on Monday.Banxico, as the Mexican central bank is known, lowered its key rate by 25 basis points to 10.50% on Thursday, the second straight cut as price pressures ease. It previously cut rates by a quarter of a percentage point in March.”We could assess the magnitude of the adjustments to the reference interest rate at our meetings going forward, given the levels of inflation that we have been observing,” Rodriguez said.Banxico will announce its next monetary policy decisions on Nov. 14 and Dec. 19.To be sure, the latest rate cut approved by Banxico’s five-member governing board was not unanimous. Deputy Governor Jonathan Heath voted to hold the rate at 10.75%.Mexico’s annual headline inflation slowed to 4.66% in the first half of September, official data showed on Tuesday, its fourth consecutive fortnight of declines. Core inflation moderated to 3.95%, its lowest level since early 2021.”The adjustment to the inflationary outlook indicates to us that it’s appropriate to reduce the level of restrictive monetary policy, though we also recognize we continue to face challenges,” said Rodriguez.Last week, Banxico revised its forecast for annual headline inflation in the fourth quarter slightly downward to 4.3%, from 4.4% previously, while also adjusting its expectations for core inflation to 3.8% from 3.9%.”The inflation outlook has been improving very significantly,” the Mexican central banker said.Incoming Mexican President Claudia Sheinbaum takes office on Tuesday, and according to Rodriguez the country’s first woman president will take over the economy in a “solid position.”In Rodriguez’s words, Mexico has sustainable external accounts, a very moderate current account deficit, a resilient banking system, and with adequate levels of international reserves. More