"President Biden Unveils Bold Tax Reforms in State of the Union Address"

President Joe Biden delivered the State of the Union address on March 7, 2024, in the House Chamber of the U.S. Capitol in Washington, D.C. During his address, Biden outlined plans to reshape the tax system and reduce costs for Americans. He emphasized the need for big corporations and the wealthy to pay their fair share in taxes to fund investments in areas like healthcare, education, and defense. Biden proposed instituting a 25% minimum tax on unrealized income for households with a net worth exceeding $100 million, as well as ending tax breaks for executive pay over $1 million and for certain industries such as pharmaceutical and oil companies. The president also pledged to expand progressive economic accomplishments, including raising the corporate minimum tax to at least 21% and giving Medicare the authority to negotiate prices for 500 drugs over the next decade. In his speech, Biden highlighted efforts to crack down on corporations engaging in price gouging and deceptive pricing, particularly in sectors like food and healthcare. He also mentioned the practice of "shrinkflation" where products are reduced in quantity but prices remain the same. The administration proposed a $400 a month mortgage tax credit for two years to assist individuals purchasing a first home or upgrading to a larger space. Biden reaffirmed his commitment to using federal funds for projects to support American workers and domestic materials in manufacturing. Despite the achievements in the economy and infrastructure, Biden's approval rating on handling the economy remains low, with just 36% of voters approving, and he trails Trump in a hypothetical general election vote. Biden acknowledged the need to ensure Americans feel the benefits of the administration's efforts and hinted at more work to be done. President Biden is reportedly proposing to increase the tax companies pay on stock buybacks from 1% to 4% in his State of the Union speech. Despite debates on the theory, companies are currently engaging in a significant buyback spree. Estimates suggest that 2024 could be a near-record year for buybacks, with predictions showing an increase from previous years. Many observers anticipate that solid earnings growth will be the primary driver for buybacks in the coming years. Large tech companies are expected to drive buyback growth, with the "Magnificent 7" accounting for a significant portion of S&P 500 repurchases. Corporate America has shown a preference for buybacks over dividends and capital expenditures in recent years. Buybacks can boost share prices by reducing outstanding shares, therefore improving earnings per share. Some big tech companies like Meta Platforms are starting to consider dividends alongside buybacks. The decision to invest in buybacks, dividends, or capital expenditures is influenced by factors like economic growth and technological growth. The impact of higher taxes on buybacks in influencing companies to divert cash to capital expenditures is uncertain. Howard Silverblatt from S&P Global notes that companies would likely prioritize capital expenditures and hiring in a growing economy over buybacks. Americans are facing challenges in buying homes due to high interest rates and surging home values. President Joe Biden proposed a new tax credit of $10,000 for first-time home buyers and a separate $10,000 tax credit for homeowners looking to upgrade. Advocates of affordable housing, including National Housing Council CEO David M. Dworkin, praised Biden's proposals as the most significant in over 50 years. Moody's associate economist Nick Luettke highlighted the importance of housing affordability in the current economic climate. Biden's proposals aim to provide relief for homebuyers amidst rising home prices and mortgage rates. The tax credits would be temporary and available for homebuyers in 2024 or 2025. The Federal Reserve is expected to cut its key interest rate, which could lessen the cost of borrowing for various types of loans including mortgages. Qualifications for the tax credits include first-time homebuyers earning a tax credit of $5,000 per year for two years, and current homeowners selling starter homes below the median home price in their county. The tax credits are geared towards middle-class families with household incomes under $200,000. The Biden administration expects the tax credits to stimulate the real estate market and make homeownership more affordable for millions of Americans. Congress would need to pass legislation to implement the tax credits, with the potential for them to go into effect in 2024 or 2025. The Biden administration aims for Congress to enact the tax credits this year. The proposed tax credits are intended to address the challenges faced by Americans in the housing market and alleviate the financial burdens associated with purchasing a home.