Yellen’s Billion Dollar Hypocrisy

Taxing companies is great, but not billionaires, according to our Treasury secretary. May 23, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Yellen’s Billion Dollar Hypocrisy SEAN RING Dear Reader, If you’ve read the Rude for any time, you already know how much I hate taxes. I wrote a piece titled “[A Global Minimum Corporate Tax is Evil]( just under two years ago. It was evil then. It’s evil now. I wince when I think of the US backing it. But now, the US won’t back the same type of tax on billionaires. To be perfectly clear, I’m against both. However, it makes no sense for Janet Yellen to support a global minimum corporate tax and oppose a global minimum billionaires tax. In recent years, the concept of a global minimum tax has gained significant traction, with prominent figures such as Yellen advocating its implementation. Yellen's push for a worldwide minimum tax on corporations marked a pivotal moment in international tax policy. However, the U.S. has notably refrained from supporting a similar tax on billionaires, exposing a glaring hypocrisy in its approach to global taxation. Let’s review the corporate version. The Corporate Global Minimum Tax The idea of a global minimum tax for corporations isn't entirely new. It stems from long-standing concerns about multinational companies' tax avoidance. For decades, these companies have used legislative loopholes in national tax systems, shifting profits to low-tax jurisdictions and (smartly) eroding the tax bases of their home countries. This practice, known as profit shifting, has been a thorn in the side of policymakers worldwide. In response, the Organization for Economic Cooperation and Development (OECD) spearheaded efforts to address these issues through the Base Erosion and Profit Shifting (BEPS) project, initiated in 2013. The project aimed to reform international tax rules and ensure that profits are taxed where economic activities generating the profits are performed, and where value is created. Janet Yellen's endorsement of a global minimum corporate tax in 2021 was a significant milestone, if you can call it that. She argued that a minimum corporate tax rate would level the playing field, preventing a "race to the bottom" where countries continuously slash corporate tax rates to attract investment. Yellen's proposal received widespread support, culminating in an agreement among 136 countries to implement a global minimum corporate tax rate of 15%. The Hypocrisy: No Billionaires' Tax While the U.S. has been a vocal advocate for a global minimum tax on corporations, it has shown a glaring reluctance to endorse a similar tax on billionaires. This discrepancy throws into sharp relief questions about the consistency and fairness of its tax policy stance. The idea of a global minimum tax on billionaires, akin to the corporate tax, is predicated on similar ideas. Wealthy individuals smartly employ sophisticated tax planning strategies to minimize their tax liabilities, including using offshore accounts and other tax havens. This leads to significant disparities in tax burdens between the ultra-rich and ordinary citizens, exacerbating income inequality. Critics argue that a global minimum tax on billionaires would help address these disparities, ensuring that the wealthiest individuals contribute their fair share to society, whatever that means. If they really wanted to be fair, they’d acknowledge the rich pay far more in taxes than the middle and lower classes. Despite this, the U.S. has refrained from supporting such measures, reflecting a double standard in its approach to tax policy. [Nvidia’s 100X Announcement?]( The world’s indisputable #1 AI stock just made an announcement that will accelerate the AI Wealth Window into OVERDRIVE... Let’s just say that they’ve got a brand-new microchip up their sleeves that could spur the largest economic surge in US history. [Click here for the full story.]( [Click Here To Learn More]( A History of Soaking the Rich The notion of taxing the wealthy is not new. Throughout history, various forms of wealth taxes have been proposed and implemented, often with mixed results. One of the earliest examples of a wealth tax can be traced back to the Roman Empire, where Emperor Augustus imposed a 5% inheritance tax to fund military pensions. In more recent history, several European countries have experimented with wealth taxes. France, for instance, implemented a wealth tax in 1982, which was repealed in 2017 due to concerns about capital flight and economic competitiveness. In the United States, the concept of a wealth tax gained prominence with proposals from politicians like Senator Elizabeth Warren and Senator Bernie Sanders, or as I like to call them, Dumb and Dumber. Warren's plan, unveiled during her 2020 presidential campaign, called for a 2% annual tax on wealth above $50 million, with an additional 1% on wealth over $1 billion. Sanders' proposal went even further, suggesting a progressive wealth tax starting at 1% for wealth above $32 million and rising to 8% for wealth over $10 billion. Despite their theoretical appeal to political hucksters, wealth taxes face significant challenges in practice. Critics argue such taxes are difficult to administer, lead to capital flight, and discourage investment and economic growth. Additionally, the wealthy possess the resources to exploit loopholes and minimize their tax liabilities, undermining the effectiveness of these taxes. Why These Taxes Are a Bad Idea There are several reasons these taxes are idiotic. - Administrative Complexity: Implementing a global minimum tax, whether on corporations or individuals, is daunting. It requires unprecedented levels of international cooperation and coordination, which is in short supply nowadays. Ensuring compliance and enforcing such taxes across different jurisdictions adds another layer of complexity. - Economic Distortion: Taxing wealth or corporate profits at a global level distorts economic behavior. Corporations engage in more aggressive tax planning or relocate their operations to jurisdictions with more favorable tax regimes. Similarly, wealthy individuals move their assets to avoid higher taxes, leading to capital flight and potential economic instability. - Competitiveness: Countries often compete to attract investment and talent. A global minimum tax undermines this competition, stifling innovation and economic growth. While the intention is to prevent a race to the bottom, it creates a race to mediocrity, where countries are less incentivized to offer attractive tax policies to businesses and individuals. - Inequity: One of the fundamental criticisms of a global minimum tax is that it disproportionately affects certain countries. Developing nations find it challenging to comply with and enforce such taxes, depriving them of a way to attract capital. Wrap-Up Janet Yellen's advocacy for a global minimum corporate tax is poor. However, the U.S.'s reluctance to support a similar tax on billionaires exposes a glaring hypocrisy in its tax policy stance. While both taxes aim to address income inequality and ensure fair contributions, they don’t work. Ultimately, the debate over global minimum taxes reflects broader questions about fairness, economic efficiency, and international cooperation. Better yet, just lower our goddamn taxes! All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… King: About Rare Earths BYRON KING “You may not be interested in rare earths, but rare earths are interested in you.” That quote is a riff on a famous comment by Leon Trotsky regarding war. Trotsky pointed out how war is “interested in you,” but in this piece, we’ll aim lower, to a group of exotic elements from deep within the periodic table. I’ll give you a couple of ideas on how you might even make a few bucks. We’ll discuss rare earth elements (REEs), which are all around you (see below). Plus, as we’ll see in a moment, the possible lack of REEs is our real problem. Because without REEs, much of the technology around us could come crashing down on our collective head. First, a quick trip down memory lane. As in, did you study chemistry in high school or college? And don’t worry, this isn’t an advanced chemistry class. No slide rules are required. (Oh wait, what’s a slide rule?) All you need is a rudimentary understanding of the periodic table. As in… Just know that the periodic table exists and a few broad details. And voila, here’s a copy, courtesy of the U.S. Geological Survey: Okay, back to school. Do you remember chemistry class? In the olden days, every chemistry classroom had a copy of the periodic table hanging on the wall. Maybe you’d stare at it and try to figure out what all those little letters and numbers meant. And there was the chemistry teacher up in front, discussing protons, electrons, oxygen, hydrogen, carbon, nitrogen, acids, bases, and much more. See? It’s coming back to you (and not in a bad way, I hope). Now, do you remember your chemistry tests? Two hydrogens plus oxygen make water. Sodium and chlorine form table salt. Iron and oxygen make rust. And do you recall how you sometimes wondered what would be on the next test? Of course, there was always this one kid back in school, right? He (or she) was the one who raised a hand and asked the teacher about the elements at the bottom of the chart. The teacher might reply that the two rows at the bottom are called lanthanides and actinides. And the kid would then ask what do we need to know? Are they on the test? The teacher would look at this precocious student, sigh a bit, and say something like, “Don’t worry. That stuff is pretty advanced for this level. It's not the kind of material we cover. No, they’re not on the test.” And everybody in the classroom let out a collective “Whew!” Because you dodged a bullet, right? You didn’t have to learn anything about lanthanides. They weren’t on the test. Except now, fast forward to today. We live in a different world. It turns out that those lanthanide elements at the bottom of the periodic table are important. They comprise the rare earth elements that a lot of people talk about. And now, today… They. Are. On. The. Test. Why do you have to know about lanthanide elements? Or, to say it another way, what’s with those rare earth elements (REEs)? Well, you may or may not realize this, but REEs very much control your life. Indeed, absent REEs, you have no modern existence. Seriously, without REEs, your advanced lifestyle these days would be zero, zippo, nada. You may as well be living in 1824, not 2024. The fact is that you are surrounded by lanthanides. Pretty much everything that makes modern life possible has some basis in them, meaning REEs. Your smartphone and computer? They won’t work without REEs. Television and all the cable or wireless hookups? REEs, amigo. The light bulbs in your house and office? They are probably REE-based unless they’re from an old stash of tungsten filament. But once the old bulbs are gone, you’re living with REEs. Your refrigerator and microwave oven? REEs, absolutely. The electric power in your wires? Ha! Absent REEs, you won’t have electricity. Power plants use REEs in the electronics and generating systems. And solar and wind power use even more REEs in the electronics and related components. Your car won’t work without REEs, and if it’s an electric car, that goes almost without saying. Even if it’s a gasoline car, absent REEs, you won’t have fuel. Refineries require REEs in the process of cracking petroleum. How about agricultural equipment that helps farmers grow food? Yes, REEs. Or equipment that harvests and processes food? REEs. The logistical system that keeps food fresh and distributes it to stores? REEs. If you think you’ll just drop out, go live in a log cabin, and burn wood, I have some news: most flints in fire-starting kits are made of… yes, REEs. (“Mischmetal,” to be exact, is a German word that means a mix of several REEs.) Need I go on? Perhaps this is a surprise. Maybe you didn’t already know how critical REEs are to pretty much everything. Then again, it’s not like our modern world explains itself to everyone. You must dig out the information, although it’s there if you know where to look. Along these lines (and usually when you see news articles about REEs), it’s in the context of how we need REEs for military and defense equipment. Yes, REEs go into ships, airplanes, ground equipment, electronics, and even pretty much all of the ammunition, certainly anything with a guidance element. REEs are in a long list of just about everything. It may just be a fraction of an ounce of REE in one electronic application or another to make the circuitry work. But absent REEs, those circuits won’t do squat. Or it might be a few pounds of REE in the guidance-control fins of a missile. Or about 1,000 pounds of REE in the overall construction of an F-35 fighter jet. Or many tons of REE in a nuclear submarine's drive motors and sonar transducers. You’ll also find REEs in unexpected places, like futuristic tank armor. In fact, a few years ago, I visited the Army Research Lab in Aberdeen, Md., and learned how REEs alloy with iron to make various kinds of steel. Just a small amount of REE additive (essentially “mischmetal,” like from lighter flints above) can significantly improve the strength of armor plate. And here’s something else that’s beyond astonishing. For all the REEs that go into that vast array of products, and for as critical as REEs are to empowering the modern lifestyle, it’s all a recent development by historical standards. Most REE elements were discovered in the late 1700s and through the 1800s, in the olden days of basic science. But REE applications didn’t begin to come to market until about the 1960s and 70s—not long ago at all. [Nearing Retirement? Claim This Exclusive $1 Book Offer Right Away!]( “The Banker” is a hedge fund titan who spent years helping America’s richest families grow even richer. [And today, for the first time ever, he wants to send you his new book – where you’ll find 36 of his never-before-revealed income and wealth generating secrets](. If the potential at steady, predictable income (as well the chance at a few nice, quick windfalls) interests you, then I urge you to act right away. [== > Click here now to claim this exclusive $1 book offer](. [Click Here To Learn More]( If you’re of a certain age, you may recall one of the first uses of REE in mass-market products. The old RCA color television set used the element europium to bring out the color red in a cathode ray tube. Of course, today’s flat-screen televisions are leaps and bounds ahead of the old RCA. But again, you won't see anything absent in REEs in today’s products. To make a long story short, various REEs enhance magnetic properties or improve electronic or optical properties. It’s why REEs are critical to strong permanent magnets or as phosphors in new lighting systems, and much more. This all has to do with quantum chemistry, which is why REEs present unique properties in terms of physics. So, when people say that we can somehow substitute some other element for REEs, generally, they don’t understand the chemistry. Because the only reason you have a certain effect from a certain RE element is because of that element’s unique electron structure. There’s no substituting element X for element Y in the arena of REEs. Maybe you can use less of something and still get about the same field effect. But if you need, say, neodymium for a certain kind of magnet or gadolinium as a certain kind of phosphor, then you need that exact element and not something else. This gets us to the source of REEs. Where do they come from? (Answer: originally, from supernovas of many billions of years ago. But let’s stick with planet Earth.) Well, you’ll hear people say that REEs are relatively “common” in the Earth’s crust, which is not entirely wrong. They are just mostly wrong in our ability to extract them. In terms of crustal abundance, REEs are more common than silver, for example. But regarding ore deposits for REEs, they’re tricky to extract. It gets back to chemistry. In the early days of REEs, in the 1950s and 60s, much of the world’s supply of REEs came from an ore deposit at Mountain Pass, California. Indeed, the europium in old RCA television sets was likely mined from Mountain Pass. But then in the 1980s, along came… China. And yes, you likely know the drill. China has geography and geology that offer REE-bearing ores. Plus, there are low wages, little environmental protection, and state-level tight industrial planning and control. Over not too long a time, China essentially undercut the REE business in the U.S. and the very few other working resources in the rest of the world. By 2010, China controlled about 94% of global REE output. It’s a mere 85% today, depending on whose numbers you want to believe. The point is that when it comes to REE, the issue has been and remains China-China-China. China dominates the production and most upstream output of REE-based products. This means mines, mills, refineries, and early-stage manufacturing of oxides, salts, and powders. They have the people, plants, equipment, research pipelines, universities, and more. How about the rest of the world? Sure, a plant here or there. But make no mistake; China has the world over a barrel when it comes to supplies of REE. For all the happy talk about revising a REE sector in the U.S., Canada, the rest of the West, etc., it’s a hard climb. Precious few people in the West have the chemical and metallurgical skills to make a go of it. Most of the world’s leading people in the field speak Chinese as their first language. Meanwhile, the issue is easy to understate and misunderstand. After all, China’s REE sector probably scales in the range of about $25 billion per year, which doesn’t sound like all that much in a world of multi-trillion-dollar U.S. government deficits. But China’s $25 billion REE sector supports a global range of products (from television sets to sonar transducers) that add up to multi-trillions. China controls the REE pipeline, period. And REE could very well become the next Pearl Harbor for both the U.S. and the West. Of course, we see efforts to rebuild a REE sector in the West, but it’s a generational issue even if everything goes right. And things seldom go right, although I’ve personally visited a couple of companies that are on the right track. Energy Fuels Corp. (UUUU) has a plant in Blanding, Utah that processes uranium and vanadium ores and is just now ramping up a circuit to extract REE. Another company with a much smaller market cap is Ucore (UURAF). It has a working demonstration plant in Kingston, Ontario that can extract REE, and it’s building a much larger facility in Alexandria, Louisiana. Plus, in my view,, one of the best REE ore deposits in North America is in Wicheeda, British Columbia, under the control of Defense Metals (DFMTF), a company with a quite modest market cap. I’m not formally recommending these companies as investment plays, and we won’t track them for you. But they’re worth a look. Follow the charts, buy on down days, never chase momentum, and be patient as the REE saga unfolds at its own pace. Oh, and it’s worth it to appreciate all the lousy policymaking and failed, ignorant leadership in Washington, D.C., over many years that brought us all to the edge of this cliff. That’s all for now… Thank you for subscribing and reading. Best wishes… Byron W. King ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. 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