Daily Brief: The US Has Worked Out How It’s Going To Pay For That $2 Trillion Infrastructure Plan…

Daily Brief: The US Has Worked Out How It’s Going To Pay For That $2 Trillion Infrastructure Plan…

almost 3 years ago3 mins

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The US reckons new tax rules for multinational companies are long overdue, so it proposed a new plan this week to make it happen.

What does this mean?

The world’s governments have spent billions keeping their economies ticking over during the pandemic, so it's not surprising that they’re keen to replenish their coffers by raising taxes. What is surprising is that the OECD – the economic organization that’s been locked for years in efforts to revamp the global tax system – has finally made headway on exactly that.

It’s thanks in large part to the US, which last week laid out plans for a minimum global tax rate of 21% – a big jump from the 12.5% the OECD’s long been proposing. The US is now reportedly suggesting countries should be able to tax all the biggest multinational companies based on how much they earn there. And while that wouldn’t necessarily change how much they’d have to pay, it’d certainly change who they’d have to pay.

Corporate tax rates in OECD countries
Source: Reuters, OECD

Why should I care?

For markets: Those taxes should come in handy.

The US’s sudden enthusiasm for global taxation isn’t bureaucratic selflessness: a higher worldwide minimum would allow the country to raise its national corporate tax rate from 21% to 28% without the risk other countries will undercut them and lure its companies overseas. Any extra cash in the bank wouldn’t hurt either – especially now it has a $2 trillion infrastructure plan to pay for.

The bigger picture: At least it’s something new to worry about.

US companies won’t be best pleased: analysts reckon the proposed overhaul would cut their earnings growth by up to 9% next year, with the tech and pharma sectors at risk of even heftier shortfalls. That might be why tax is now number two on the list of things investors are worried about, according to a survey by Royal Bank of Canada – right behind central bank policies, but ahead of last quarter’s inflation fears.

Pessimistic on equities

Keep reading for our next story...

BlackRock Just Raised $4.8 Billion To Invest In Renewables

BlackRock image

BlackRock thinks this whole “habitable planet” trend could really catch on – so much so that the world's biggest investment manager announced on Thursday it’s raised $4.8 billion for a new clean energy fund.

What does this mean?

Most of the money BlackRock looks after is invested in exchange-traded funds that passively track groups of stocks, but this new fund will fall into a division that invests in physical assets. In this case, that’ll be things like wind and solar farms, as well as electric vehicle-charging infrastructure.

Over 100 institutional investors put their money into the fund, which raised almost twice as much money as it was targeting. And that influx of cash is just the latest sign of how in-demand the renewable energy sector is becoming – not to mention the growing popularity of investing directly in wind and solar farms, rather than simply companies that operate in the space.

BlackRock Renewables
Source: Bloomberg, BlackRock

Why should I care?

For markets: There’s gold in them hills.

The huge demand isn’t just driven by investors trying to get in on the fastest-growing part of the energy sector, but those looking for steady returns too. Wind and solar farms, after all, generate relatively stable cash flows, which means they can provide a reliable source of income in a world of ultra-low bond yields. That might be why Norway’s sovereign wealth fund – the biggest in the world – has now diversified beyond stocks, bonds, and property by making its first direct investment in renewable energy.

For you personally: The problem – and opportunity – isn’t going away.

According to new data out this week, methane levels in the atmosphere rose by a record amount in 2020. So if you’re looking to stop pumping money into the fossil fuel and animal agriculture companies responsible for the majority of those emissions, you might want to start looking at the vegan, electric vehicle, and clean energy sectors instead…

Global CH4 monthly means
Global methane levels
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