The market’s biggest winners and losers in climate, health and tax accounting

US Senate Majority Leader Chuck Schumer (D-NY) walks outside the US Capitol on August 2, 2022 in Washington, US.

Jonathan Ernst | Reuters

Want to know what the Depreciation Act means for big companies and your wallet? When it comes to politics, you should always follow the money – and remember that the devil is in the details.

The Senate passed a bill designed to fight climate change, make sweeping tax changes, reduce the federal deficit, lower drug costs for Medicare recipients and fight expanded health insurance subsidies under the Affordable Care Act. As it moves to the House of Representatives, the list of winners and losers under the bill is coming into sharp focus even before it goes to President Joe Biden.

For both winners and losers, as the number increases, the impact is more modest than you might think. That’s because of strings attached to some new or extended tax breaks, or the timetable for implementing Medicare’s negotiations with big drug companies on drug prices.

The changes will be gradual, as many headlines suggest.

From the big-dollar provisions of a 10-year package of spending and tax cuts, these are the effects that American corporations and citizens will see from the legislation. The two biggest changes are the bill’s deficit reductions — just two provisions of the bill that cover 80 percent of the $300 billion deficit, according to Moody’s Analytics.

Losers: Corporations that don’t pay big taxes

Members of Patriot Millionaires hold a Federal Tax Filing Day protest outside the apartment of Amazon founder Jeff Bezos to demand that he pay his fair share of taxes, in New York City, May 17, 2021.

Brendan McDermid | Reuters

The biggest offer of the bunch is the $313 billion Moody’s Analytics says would be raised over 10 years by imposing a lower tax rate of 15% on businesses earning at least $1 billion a year.

The law restricts the practice of allowing companies to report one profit figure to investors, while on the other it exposes the government to using a set of numbers that contain tax loopholes. This is done by applying a 15 percent rate to Wall Street’s “book rate” profits, says the liberal-leaning Roosevelt Institute.

The institute said 55 of the largest companies, including names like Nike,, Archer Daniels Midland and FedEx, paid no net federal taxes in 2020. In the year In 2020, $8.5 billion would be owed at a typical corporate tax rate of 21%, the firm said.

The Center for American Progress reports that only 19 companies in the Fortune 100 will pay little or no taxes by 2021. Among the companies that paid 6% or less, as calculated by the liberal think tank: Amazon, Exxon Mobil, AT&T Bank of America, and both Ford and General Motors. All will pay more.

Losers: Drug Companies (But Not In The Way You Think)

Participants hold signs as then-Democratic presidential candidate U.S. Sen. Bernie Sanders (I-VT) speaks at a news conference to introduce the “Medicare for All Act of 2019” on Capitol Hill in Washington, April 10, 2019.

Aaron P. Bernstein | Reuters

Moody’s says the government will save $288 billion by negotiating drug prices, a win for seniors — but some experts say the change will be slower and more gradual than many consumers expect.

That’s because the law only allowed Medicare to negotiate on a few drugs in the first few years of its implementation. Medicare could close more than 10 drugs by fiscal year 2026, and new drugs won’t be negotiated for nine to 13 years after they hit the market, said Tricia Neumann, executive director of the Medicare Policy Program at the Kaiser Family Foundation. .

“Savings are much smaller than the bottom line. [2019] The House bill that covered many more drugs,” Neuman said. The bill would have allowed Medicare to negotiate contracts with 25 major drugs initially and expand quickly.

One win for seniors is a $2,000 annual cap on their contribution toward prescription drug costs. A 2019 study found that most recipients now spend less, but cancer patients can easily spend $10,000 or more. This gives Medicare recipients certainty about drug costs, Neumann said.

The impact on companies is not entirely clear because it is not clear which drugs will be the first to negotiate prices, Newman said. In 2020, Medicare spent more than $1 billion on each of nearly 40 drugs. Bristol Myers Squibb’s blood clotting treatment Eliquis ($9.9 billion), Bristol Myers Squibb’s cancer treatment Revlimid ($5.4 billion) and Johnson & Johnson’s blood clotting drug Xarelto ($4.7 billion) topped the list.

What about the expense section of the bill?

Among the so-called expenditures in the bill are actually tax cuts, which the Congressional Joint Committee on Taxation calls tax expenditures. The health care law extension is one of the three largest in the package, accounting for three-quarters of the $313 billion in tax relief.

It would also extend Obamacare subsidies for health insurance that were added during the Covid-19 pandemic, causing the benefit increases to expire on December 31.

People buying insurance under Obamacare are among the winners. An estimated $64 billion would be a package of tax credits for people who buy health insurance on Internet exchanges like, according to Moody’s. These credits subsidize the cost of coverage for people whose employers don’t offer benefits and who earn too much to qualify for Medicaid, and were expanded in the Vivid Relief Act to make policies more affordable.

The provision would extend the credit for three years, adding nothing to the deficit after fiscal year 2026, Moody’s said. Without it, an estimated 3.1 million Americans would have lost health care coverage, the Center on Budget and Policy Priorities estimates.

Winners: Car companies (but maybe not Tesla)

GM launched ‘EV Live’, an online platform that connects electric vehicle owners or consumers with questions about zero-emission cars and trucks with experts.

Courtesy: G.M

The other big headlines in the bill’s “spending” are an extension of the $7,500 consumption tax credit for new electric vehicle purchases and a new $4,000 credit for buying used EVs. But the details of the bill make assessing short-term winners and losers complicated.

First, the bill would cover eligible new cars under $55,000, excluding the very popular Tesla Model 3 (as well as all Model S and X vehicles). Trucks and vans can get the credit if their value is less than $80,000. Even that’s a modest win for Tesla, which used the 200,000 credit allocated under existing law to offer no tax credit to its buyers. Most or all vehicles from startups like Lucid Motors and Rivian will not be covered by the new bill until they introduce at least planned cheaper models.

“The Model 3 is right on the border,” said Chris Lafakis, an energy economist at Moody’s Analytics.

More critically, the bill would include domestic production of EVs and their battery components to qualify for the extended credit. As written, the law requires 40% of battery components to be sourced from factories located in the US or its free trade agreement partners. Batteries to be US by 2029; And Chinese bodies and minerals will disappear from 2024.

Currently, it’s unclear whether any US battery factories will be able to meet the law’s requirements. The Biden administration will have to waive some provisions of the soon-to-be-passed law to allow the credits to flow after the law takes effect next year.

One unintended consequence of the law is to underline Tesla CEO Elon Musk’s comments on the EV maker’s most recent conference call, and his earlier comments that demand for EVs will make the next half-decade a good time to be an entrepreneur. Mining or refining the lithium that powers electric vehicle batteries. The Act’s Buy American provisions only add to those pressures.

“It’s basically like money right now. There are software margins in the lithium process right now,” Musk said on a recent earnings call. “So I really want to encourage entrepreneurs to get into the lithium refining business.” They cannot be defeated.”

Winners: utilities and homeowners

The wind farm shares space with corn fields in Latimer, Iowa, US.

Jonathan Ernst | Reuters

About one-third of the tax breaks in the bill — up to $113 billion — are to extend tax credits to encourage renewable electricity generators, four times the size of the U.S. market a decade ago.

Lafakis said this is a big advantage for utilities that build their own plants or buy power from independent operators. Utilities will benefit from selling more energy as electricity powers more cars, trucks and appliances as a result of the tax breaks created in the bill.

New wind power plants are much cheaper than new facilities burning coal or natural gas, so a greater reliance on renewables should also benefit ratepayers, according to investment bank Lazard. In some cases, a new wind farm can be cheaper than even continuing to operate an existing coal plant with existing tax incentives, Lazard said.

Homeowner ratepayers can claim a tax credit for switching more of their home appliances to electricity instead of natural gas. It’s unclear whether the law will make a big difference in market share, since most electric hot water heaters and furnaces are gas models.

“The clear winners are clean energy, solar and other renewables,” said Robert Howarth, senior director of investment strategy at US Bank Wealth Management. “And he’s working hard to make sure there’s not too much incentive for fossil fuels.”

Winners: Hedge Fund (for now)

Losers: Public company shareholders

US Senator Kirsten Sinema (D-AZ) August 2, 2022. They wait for an elevator to go to the Senate floor in the US Capitol in Washington.

Jonathan Ernst | Reuters

In a last-minute deal with Arizona Sen. Kirsten Sinema, Democrats dropped a plan to impose an ordinary income tax on bonuses, closing a loophole that would have allowed those financiers to cash in on lower capital gains rates on the bonuses of hedge fund and venture capital managers. Never in danger.

Instead, the plan imposes a 1% tax on stock buybacks — a corporate finance tactic companies use to boost earnings by reducing the number of shares that are shown in surplus cash.

Proponents of the repatriation tax, such as Vermont Sen. Bernie Sanders, argue that companies can use the money to invest in plants and higher wages. Opponents say it will hurt pension plans and pension fund returns.

Companies in the S&P 500 stock index spent $850 billion on acquisitions last year.

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