JPMorgan Chase CEO Jamie Dimon will testify before the Senate’s banking committee today on his firm’s recent unexpected trading losses (TheHill). In his prepared remarks, Dimon will be apologetic, but will argue that the bad trades, with estimated losses of more than $2 billion, were an isolated event for the financial giant, which earned $19 billion in 2011 (Reuters). Dimon will also say that profits from the firm’s trading strategy helped it weather the financial crisis in 2008 and that “We will lose some of our shareholders’ money — and for that, we feel terrible — but no client, customer or taxpayer money was impacted by this incident.”
Shifting Tax from Corporations to Owners?
In an opinion piece in the New York Daily News, noted economist Luigi Zingales proposes reducing the corporate tax rate from 35 to 10 percent while increasing the individual capital gains rate from 15 to 35 percent. Zingales argues that the large size of many corporations means they can individually realize more potential benefit from tax loopholes than wealthy individuals, and have greater incentive and ability to lobby for such breaks. Josh Barro does not dispute Zingales’ main arguments, but cautions against relying upon capital gains taxes for significant revenue because they can be deferred or circumvented (Bloomberg).
With the highest statutory corporate tax rate in the world—35 percent for federal taxes only—the United States faces a potential competitive disadvantage. This CFR Backgrounder by Jonathan Masters discusses the effect of current policy, and proposals for U.S. Corporate Tax Reform.
Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.
U.S. Solar Market Expected to Double in 2012
Government subsidies and falling panel prices are expected to double the U.S. solar market in 2012 (WSJ). Surging panel production—much of it in China—and reduced demand in other nations due to expiring government subsidies, has pushed average solar panel prices down by half since 2011. U.S. developers are expected to double solar installations this year to 3.3 gigawatts—an 11 percent share of global production—making the U.S. the fourth largest solar market. 2013 is expected to be difficult if tariffs proposed by the Department of Commerce are implemented.
The CFR’s Campaign 2012 discusses how the debate over support for the solar industry and other alternative energy sources will affect the upcoming U.S. presidential contest.
Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.
Education and Human Capital
How the Obama Administration Approaches School Reform
Through No Child Left Behind (NCLB) waivers and competitive grants such as Race to the Top, the Obama administration has used stimulus funds and executive authority to reform education (Education Week). Obama’s agenda includes greater teacher accountability for student performance, expansion of charter schools, aggressive intervention in failing schools, and common academic standards. Projected GOP nominee Mitt Romney has criticized the effectiveness of elements of the president’s agenda and spending, while teachers’ unions are unhappy about linking student performance to teacher evaluations, and the growth of charter schools.
More States Pursuing School Choice
Stateline discusses the efforts of many state lawmakers to enact greater levels of school choice. While only thirteen states have voucher or tuition tax credit programs today, Virginia’s new tuition tax credit plan will go into effect this year, and New Hampshire legislators recently passed their own plan. Earlier this year, Louisiana made its voucher program statewide, and raised the income threshold. Tennessee and Michigan will open programs this fall based upon Louisiana’s example, while Alabama and other states are considering similar measures.
Choice-based school reforms have attracted considerable debate among experts. The state of Louisiana has become a kind of national laboratory for proponents of choice-based reform. Renewing America contributor Steven J. Markovich discussed recent Louisianan educational reforms in a Policy Initiative Spotlight.
Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.
Prescriptions for Innovation Ails
Wim Roelandts, the former CEO of semiconductor maker Xilinx, drew upon his long career to distill five principles of innovation to revitalize what he sees as the U.S. high-tech’s ailing innovation culture (HBR). He believes that the majority of employees want to do a great job, and are often willing to bear personal costs to make a contribution even if discouraged by management, but that the work must have meaning and value. He thinks corporate leaders need to give employees a sense of community and empower them to act as owners while stressing learning throughout the organization.
Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.
The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.