Corporate America fumes at Biden’s economic package

This is an audio transcript of the FT News Briefing podcast episode: Corporate America fumes at Biden’s economic package

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, August 10th, and this is your FT News Briefing.

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President Joe Biden’s economic package looks like it’s going to pass, and corporate America isn’t too happy about it. We’ll get an update on Russia’s invasion of Ukraine. And tennis legend Serena Williams is retiring. We’ll look at what’s next for her. I’m Marc Filippino and here’s the news you need to start your day.

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One of Taiwan’s biggest technology companies is stuck in the middle of heightened US-China tensions. Foxconn is a major contract manufacturer for Apple and other tech giants. Now, Taiwanese officials want to force Foxconn to unwind a big investment it just made in a mainland Chinese chip company. The move comes as Beijing escalates threats towards Taiwan, which it considers its own territory. Taipei’s move to unwind Foxconn’s $800mn investment in China is seen as a way to align itself more closely with the US. Taipei is concerned that Foxconn’s investment in the mainland company could bolster China’s tech ambitions and give China an edge over the US.

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President Joe Biden’s tax and climate package looks like it’s going to pass the House of Representatives and become law in just a few days. It’s a huge win for the president and Democrats. But the tax part of it has left America’s biggest companies very unhappy. The FT’s Washington bureau chief, James Politi, explains.

James Politi
Well, they’re quite upset, mainly because of the tax increases that are included in the package, which are used, really, to pay for some of the spending measures, and also to make sure that the deal actually ends up reducing the deficit, which is one of the key claims to sort of the fact that it can bring down inflation over time. But the business community is not happy with the fact that the bill sets 15 per cent minimum tax on the income of the largest corporations and also introduces a 1 per cent tax on share buybacks. Those are the two main features that are most upsetting to corporate America.

Marc Filippino
This can’t be a surprise, though, James, can it? I mean, the Biden administration must have known that it was going to anger big business with these tax provisions.

James Politi
Yes, and actually the Biden administration wanted to go much further when it comes to corporate taxation. It wanted to actually increase the corporate tax rate from 21 per cent to 28 per cent and introduce a series of other corporate tax increases and individual tax increases in order to, as they put it, sort of make sure that the wealthy and the largest companies pay their fair share. That in the end, the spending measures were smaller than the Biden administration actually wanted originally. So there was less that needed to be paid for. And there was opposition from some, you know, moderate Democrats to some of the more aggressive tax measures. And so this is where we landed.

Marc Filippino
So how much is this going to dent corporate earnings, James?

James Politi
I don’t think it’s a huge threat to them. I mean, business has benefited from a huge tax cut back in 2017, which was enacted by former president Trump with the support of congressional Republicans. So they’re starting from a very sort of good position in terms of corporate taxation.

Marc Filippino
James Politi is the FT’s Washington bureau chief.

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The US this week approved $1bn in additional military aid for Ukraine, just as Kyiv is getting ready for a new offensive in the southern part of the country. To find out more about what’s happening on the military front, I’m joined by the FT’s John Paul Rathbone. Hi, John Paul.

John Paul Rathbone
Hi.

Marc Filippino
So John Paul, a big focus for Ukraine right now is regaining control of the city of Kherson. Why is Kherson so important?

John Paul Rathbone
So the battle line in the Ukraine is sort of stabilised and there are two main areas. In the east there’s the Donbas, where Russia has been having this grinding advance, a lot of artillery and they’ve captured some extra ground. And now the attention has focused to this southern city of Kherson, which was the first city to fall to the Russians after the invasion. And if the Ukrainians could take it back, it would represent that they’re kind of regaining control of the narrative that the war effort still has momentum and they have something to show for all the military aid that the west has given them.

Marc Filippino
John Paul, did the US ever send Ukraine the long-range rockets that Kyiv had been pushing western allies for? And how important are these rockets?

John Paul Rathbone
So you’re quite right. Ukraine did ask for some long-range weapons and the US, the UK and other allies have not sent them. But what they have sent are these relatively long-range artillery called Himars. It’s allowed the Ukrainians to sit back from the front lines and fire these highly accurate rockets that have taken out Russian ammo dumps and command centres. And this extra load of rockets for these Himars was in the latest US package, $1bn package as you mentioned. Hundreds of Himars being sent to Ukraine is good, but is it material enough to make a difference to the fundamental course of the war? No, it’s not. And in fact, both sides have kind of got bogged down at the moment. Neither has quite enough men or quite enough material to fundamentally change the course of the war, even if Ukraine manages to take Kherson, which would be a big reach in its own right.

Marc Filippino
John Paul Rathbone is the FT’s defence and security correspondent. Thanks, JP.

John Paul Rathbone
Thank you.

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Marc Filippino
She changed tennis. She changed tennis fashion. And now Serena Williams is planning to change the world of business. Yesterday, the tennis legend announced that she plans to retire soon. She wants to focus on her family and her financial ventures. Here’s the FT’s Sara Germano with more details.

Sara Germano
Serena has this venture capital firm called Serena Ventures, which earlier this spring closed its first funding round of $111mn. And to date, they’ve made 55 investments, mostly seed stage investments in, you know, start-up companies. And what Serena Williams is saying she wants to do and she is doing with this entity is that she’s trying to change the face of women in finance, particularly black women in finance, of whom there are very, very few, if any, notable individuals making waves in that sense.

Marc Filippino
And Serena Williams is also incredibly active in sports ownership, right?

Sara Germano
Yeah, I definitely think we should talk about her influence in sports ownership. You know, she has a minority stake in the Miami Dolphins, which is the NFL team. She is one of the founding co-owners of the new women’s football team. That’s soccer in the US. In Los Angeles it’s called Angel City. And she was part of what was ultimately a losing bid for Chelsea Football Club. And so outside of these venture investments, we’re seeing Serena get more into the direction and ownership of sports clubs. And that’s something that is a realm of the industry that there definitely could be more female and especially black influence in.

Marc Filippino
Serena is, she so extraordinary. She’s so unique. Could she be hard to emulate? I guess, to what extent could people follow in her footsteps?

Sara Germano
It’s a great question. And we’ve already seen her do that with tennis, right? Naomi Osaka, who has exceeded Serena already in net worth, has been very vocal and open about how, you know, she got into tennis because of Serena Williams and we’re already seeing that next generation come and achieve success. She made it OK for women to be who they are and not necessarily conform to what society traditionally expects women to do, how they behave, how they celebrate victories, how they express frustration. There are very few people in her league who have this amount of demonstrated tangible success, and if she’s setting out her expectation that she wants to translate all of those skills to the business realm, you know, people better watch out.

Marc Filippino
Sara Germano is the FT’s US sports business correspondent.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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