The Daily Valet. - 6/9/21, Wednesday

✔️ Those Clever Loopholes

June 09, 2021

Wednesday, June 9th Edition

Cory Ohlendorf, Editor in Chief of Valet.

It’s not that I’m above a loophole, I just don’t have any at my disposal.

Cory Ohlendorf, Editor ⋯ @coryohlendorf

Today’s edition is presented by

Today’s Big Story

Those Tax Loopholes

You might not be as rich as Elon Musk or Jeff Bezos, but you probably paid more in taxes than they did

Benjamin Franklin once famously said that “in this world, nothing is certain except death and taxes.” Perhaps we should add that the more money you have, the more likely you are to take advantage of loopholes that keep you from paying those taxes.

On Tuesday, an analysis from ProPublica (based on a trove of IRS tax data) found that the 25 wealthiest Americans paid relatively little—and sometimes no—federal income taxes between 2014 and 2018.

The report showed that while the median American household earning roughly $70,000 per year paid 14% in federal taxes, the 25 richest Americans paid a “true tax rate” of just 3.4%, according to a tabulation by Forbes.

The documents reveal the stark inequity in the American tax system, as guys like Jeff Bezos, Warren Buffett and Elon Musk were able to benefit from a complex web of loopholes in the tax code and the fact that the United States puts its emphasis on taxing labor income versus wealth.

This is also why some top executives take infamously low salaries. Mark Zuckerberg, for example, takes just $1 each year. Why? Wages are taxed at a high rate, while the sale of stocks and bonds are taxed much lower. Even Warren Buffett, an advocate of higher taxes on the rich, paid a “true tax rate of 0.10%,” because most of his income comes in the form of lower-taxed capital gains.

There’s an important discussion to be had here about the tax gap—the difference between federal taxes owed and those actually collected. This is because the way the ultra-wealthy earn the bulk of their money has changed over the years. These relatively tiny tax bills sound unfair, but this is more of a conversation about political willpower. Until public pressure forces the tax laws to change, the loopholes aren’t going anywhere.

↦ Meanwhile: U.S. Republicans vow to oppose Treasury Secretary Janet Yellen’s G7 tax deal, casting doubt on its future.

Senate Passes Bill to Boost Tech Industry

The wide margin of support reflected a sense of urgency among both political parties

It was a rare case of bipartisanship. An agreement against a common foe and a belief that something must be done for the betterment of America ... if you will.

The Senate overwhelmingly passed legislation on Tuesday that would pour about $250 billion (over the next five years) into scientific research and development to bolster competitiveness against China.

The centerpiece of the bill is a $50 billion emergency allotment to step up semiconductor development and manufacturing. Supporters described it as the biggest investment in scientific research America has seen in decades. It comes as the nation's share of semiconductor manufacturing has eroded from 37% in 1990 to about 12% today—and as a chip shortage has exposed vulnerabilities in the U.S. supply chain.

The bill must now pass the House of Representatives before being sent to the White House for Biden to sign into law. It's not clear, of course, what changes the House might make or when it might take up the bill.

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A New Meme Stock

Clover Health’s stock price surges after becoming new Reddit darling

Investors glued to social media helped push the shares of one new company name, Clover Health, up more than 100% on Tuesday.

It's the latest target for retail traders on Reddit forums. “Apes who missed on $GME! Listen up, $CLOV is ready to lift off!” wrote one Redditor. Ape is a nickname for buyers of AMC shares, which have been among the most actively traded meme stocks in recent weeks.

Unlike shares of AMC and GameStop, which are up nearly 2,500% and 1,500% this year, Clover is now up around 39% for the year, reports the Wall Street Journal.

But DataTrek's Nicholas Colas says the frenzy around meme stocks is distracting from other smarter and likely more valuable bets in the market. Of course, that's not all that shocking, is it?

↦ FYI: Wendy's just became the first fast-food meme stock … but there's a catch.

The Fastly Outage

A company you’ve probably never heard of caused half the internet to go dark

Swaths of websites went down on Tuesday morning after an outage at the cloud computing services provider Fastly. Internet users were unable to access major news outlets, e-commerce platforms, and even government websites. Everyone from Amazon to the New York Times to the White House was affected.

According to Recode, Fastly applied a “fix” to the issue, and many of the websites were working again an hour later. But the multiple 503 errors and countless complaints demonstrated just how much of the internet relies on this largely unheard-of cloud computing service.

The outage was caused by a service configuration, reports Cnet but that's all we really know right now. Until Fastly investigates fully, it'll be hard to declare the root cause of the catastrophic failure. It's important to note that it's not necessarily a cybersecurity attack (as many people have speculated on Twitter).

The scale of Tuesday's outage—not to mention the frequency of similar outages—is what's really worrisome. Last July, connection issues between two data centers took many sites, including League of Legends and Discord, briefly offline. Then, a data-processing problem for Amazon Web Services caused problems for sites like the Chicago Tribune, the security camera company Ring and Glassdoor. The Fastly outage shows the trend continuing, especially as most of the web remains increasingly dependent on cloud providers.

↦ FYI: Major U.S. futures markets dipped during the outage, under the suspicion that it was due to a cyberattack.

In Other News

↦ Police Say a Cicada Is Responsible for a Car Crash in Ohio

↦ The Ford Maverick Is a Whole New Kind of Pickup Truck

↦ ‘The Bachelor’ Host Chris Harrison Exits the Franchise After a Race-Related Controversy

Other Things We’re Talking About Today

A car-casting fail

Orange wine

This inflatable sail boat

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