Biden’s assault on wealth: US president plans to tax the rich to fund public spending and Britain might just copy him, says ALEX BRUMMER
Joe Biden is a US president in a hurry. His effort to put the federal government back at the centre of national affairs is drawing comparisons with Franklin D Roosevelt’s ‘New Deal’ and Lyndon B Johnson’s ‘Great Society’.
To mark his first 100 days in office the White House has unveiled his third trillion dollar-plus fiscal package, the American Families Plan.
The £1.3 trillion proposal comes on top of his £1.6trillion infrastructure renewal blueprint and the £1.4trillion pandemic relief fund, which bestowed cheques on all US households.
Big spender: To mark his first 100-days in office the White House President Joe Biden (pictured) has unveiled his third trillion plus fiscal package, the American Families Plan
Biden’s first effort sailed through Congress smoothly, with Republican conservatives the main dissenters. Work on the second package has barely begun.
It has a fair wind behind it because of the dilapidated state of the nation’s roads, bridges and airports.
It includes climate change funding and money to fight racial inequality.
The latest bill has echoes of the Big Society, with its focus on bettering the lives of families and young people with subsidised child care, free nurseries and free community college education.
A sting in the tail of the latest package is that the focus is on taxing the wealthy.
If Biden is successful there could be some encouragement for Rishi Sunak to head in similar directions as he addresses the UK’s £2trillion-plus debt mountain. Certainly, it could provide fodder for Keir Starmer.
The main element of Biden’s soak-the-rich plan is a rise in income tax for households earning more than $400,000 a year from 37 per cent to 39.6 per cent (where it would still be well below the UK’s 45 per cent top rate).
As was proposed by the UK’s Wealth Tax Commission, taxes on capital gains would be equalised with those on income. In the US that would mean a near-doubling of the current 20 per cent top band for people earning more than $1million a year.
That would be a tax grab on the bloated share options common on Wall Street and in American boardrooms.
There is a specific proposal for the higher capital gains tax to be levied on the ‘carry interest’ – the surplus which private equity partners make on their investments.
It is all bold stuff and it would be a huge political achievement were most of this to make its way through Congress.
The fiscal largesse ought to propel US growth, with forecasters predicting a 6.5 per cent uplift this year.
Civil defence
Emma Walmsley is not the daughter of a vice-admiral for nothing.
Faced with an unwelcome incursion into Glaxosmithkline shares by corporate troublemakers Elliott Partners, and whispered demands that she curtail her ambitions to head the group’s pharmaceutical arm after it does the splits, she has come out with all guns blazing.
Walmsley firmly rejected the assumption that you must be a scientist to run a pharma and vaccines giant, arguing that it is the job of a chief executive to set strategy.
She sought to cheer up investors (including this writer) by reporting real progress on its drugs pipeline, disclosing that the number of compounds in late-stage development had reached 20.
And she expressed confidence that sales of the blockbuster shingles vaccine, Shingrix, would bounce back from Covid doldrums.
There was an indication that Glaxo is making good progress on a next-generation vaccine for the coronavirus.
An unanswered question is what will happen to the healthcare arm (in which Pfizer holds a 32 per cent minority stake) when it separates next year. The leading option is that existing investors will receive shares in a divested quoted company.
Another possibility is a trade sale or merger which could thrust Unilever, Reckitt or one of the other consumer hygiene giants into the frame.
Rule of law
Mishcon de Reya will become the highest-profile legal firm to float if it goes ahead with a £750million initial public offering later this year.
The 176 partners, who each earn an estimated £1million a year, plan to use the new status as a public company to finance overseas expansion and deeper exposure to tech.
Mishcon is being advised by investment bankers JP Morgan. One trusts the latter will provide more sensible advice than it offered to Deliveroo and the crushed European Super League football syndicate.
No one wants to see legal clients waving hostile placards outside plush Holborn offices just yet.