Scare Taxes and Preventative Trading

Hey Influence Traders,

There is a ton of stuff going on in DC.

The Capitol was on near lockdown this weekend over the planned protest for those being held in regard to the January 6th riot. 

One armed person detained … turns out it was an undercover FBI agent. Well done!

The White House managed to tick off France, which got its beret in a knot over our nuclear-powered submarine deal with Australia.

In protest, France retreated, I mean recalled, its ambassadors in the U.S. and Australia.

Spending

The big focus of course is the Democrats’ mad scramble to push through their $3.5 trillion boondoggle spending bill.

Committees are pushing out tax proposals like sausage out of a grinder.

The House Ways and Means Committee approved and moved forward the biggest set of U.S. tax increases in decades – $2.1 trillion mostly targeting corporations and the wealthy.

The package includes an extension of refundable child tax credits, and incentives for clean energy.

But in a move that’s sure to anger environmentalists, the committee left breaks for oil and gas companies untouched.

Also, the $10,000 cap on the federal deduction of state and local taxes, or SALT, was not addressed.

On the Senate side, the big question for the White House and the Dems is “what does Sen. Joe Manchin want that will cause him to get on board?” Manchin still ain’t sayin’.

One proposal that has not been getting a lot of attention caught my eye. I find it troubling on multiple levels. Actually, I find it horrifying.

Taxing Out of Business

The Biden Administration, through the Treasury Department, is planning to increase the reporting requirements for financial institutions.

A proposal by the Treasury that is buried in the $3.5 trillion boondoggle bill “would create a comprehensive financial account information reporting regime.”

The goal, of course, is to increase tax revenue by making sure no income avoids detection.

The plan is to leverage financial institutions like banks.

As laid out in the proposal, the “requirement would apply to all business and personal accounts from financial institutions … including bank, loan, and investment accounts, with the exception of accounts below a low de minimis gross flow threshold of $600 or fair market value of $600.”

This is, quite frankly, a horrifyingly low threshold.

Financial institutions will be required to report any flows in and out of business AND personal accounts of more than $600.

The current level is $10,000.

Not only is this a tremendous invasion of financial privacy, but it is going to cause an exponential increase in the burdens of tax reporting since filers will now have to prove that every small transaction was not in fact taxable income.

It will also cause reporting costs to skyrocket at financial institutions, which will be passed down to consumers.

The fact is, many small businesses rely on cash transactions to stay in business, particularly in the trades.

This proposal will cause many small businesses to go out of business. This is a business and job killer!

But this will also impact individuals – imagine selling a used sofa for $800, depositing that money into your account, and being audited and having that money declared income!

When that happens you will be charged taxes, penalties, and interest on a used sofa. FUN!

And using a pay app won’t save you because the proposal also targets third-party providers like Venmo, CashApp, and PayPal, as well as cryptocurrency reporting.

The proposal will also include a beefed up enforcement mechanism for the IRS, which should scare no one.

According to a 2017 report by the Treasury Inspector General for Tax Administration:

      • The IRS’s Criminal Investigation Division was found to regularly violate taxpayers’ rights and skirted or ignored due process requirements when investigating taxpayers for allegedly violating the $10,000 currency transaction reporting requirements.
      • Just one in ten investigations uncovered violations of tax law.

Imagine when that threshold is dropped to $600!

Infrastructure

Does the $1.2 trillion infrastructure bill even exist anymore?

It does, but you wouldn’t know if from the rhetoric coming from the Hill or the White House. Democrats want to link the two bills, which could cause Republican support for the infrastructure bill to drop.

Perhaps it was never about infrastructure.

COVID

Biden’s vaccination plan took a hit when an FDA panel recommended Pfizer (Ticker: PFE) booster shots only for people 65 or older, or at high risk of severe Covid-19.

Biden had hoped to get everyone already approved for jabs boosters as well. But he made that announcement prior to FDA approval.

It’s not all bad news for PFE, as the administration also announced that it was negotiating to buy another 500 million PFE doses to donate overseas, which means that PFE would have been paid to “donate” 1.15 billion doses to date.

The White House continues to fight with state governors over vaccine mandates – I’m long lawyers!

At the forefront of that fight has been Florida Governor DeSantis.

One of the things that he’s been pushing hard, which many people don’t want to discuss, is early treatment to stifle the virus.

Monoclonal antibodies have been shown to be a highly effective early treatment as they are able to disrupt virus pathology by blocking receptors or interfering with cell-to-cell transmission.

But DC is rationing supply (technically, socializing supply by giving equal amounts to states whether or not they need or ask for it) and that is creating opportunity.

The US in general is running low on monoclonal antibody supply, but particularly states with growing infection numbers.

DeSantis and other governors are looking to buy directly, and that is going to require a ramp up in supply.

PFE and AstraZeneca (Ticker: AZN) are the two big suppliers, but there is a smaller one that I like.

I’m putting Regeneron Pharmaceuticals, Inc. (Ticker: REGN) into the Capitol Gains starting line-up.

REGN is an American biotechnology company headquartered in Westchester County, New York.

It’s been around since 1988, and has created Veloclmmune, a genetic engineering platform that enables the fast and efficient creation of fully human monoclonal antibodies for drug development.

Regardless of what’s happening in DC or elsewhere, trading guru Andrew Giovinazzi has been making #powermoves in the Capitol Gains portfolio.

The live Power Moves Portfolio trade log is here.

Cutting Through the Noise for You.

Frank

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