The Financial Landscape: American Dreams, Tax Loopholes, and Swipe Fees
Still Dreaming of White Picket Fences: A New York Times/CBS News poll shows that "nearly nine in 10 Americans say homeownership is an important part of the American dream," even after all that has happened in the housing market since the financial meltdown, the bursting of the housing bubble and the recession that followed. More ominously, the poll also shows that 39% of adults now believe the United States has entered a period of "permanent" economic decline.
Obama Takes Aim at Tax Loopholes for the Rich: In his first press conference since March, President Obama insisted on the need to end tax benefits for wealthy Americans and corporations as part of a deal that would cut spending and lift the debt ceiling. Among the targets the president mentioned: owners of private jets. "Under Democratic proposals," The New York Times explains, "owners of corporate jets would have to write off the aircrafts' cost in fewer years, which would generate an estimated $3 billion for the Treasury over a decade." Taxes would also rise for hedge funds and private-equity investors, and oil and gas companies would see deductions and credits phased out to the tune of $40 billion in additional revenue for the federal government. The Wall Street Journal reports, "Democrats and Republicans have agreed on about $1 trillion in spending cuts over at least 10 years. The final sticking point is whether to include some tax changes, as Democrats insist, or none, as Republicans want."
Fed Relents on Debit Card Fee Cap: In a partial victory for big banks, the Federal Reserve made a smaller than expected cut in debit card swipe fees. The new variable fees will be in the 21 cent to 24 cent range, instead of the initially proposed 12 cent per transaction cap. Banks will still lose billions of dollars in revenue -- they currently charge an average fee of 44 cents per transaction -- but had furiously lobbied against the more stringent cap championed by Sen. Dick Durbin (D-Ill.). The Fed also delayed implementation of the new rule until October. It was previously to take effect on July 21.
Durbin pronounced himself disappointed. "The inflated cap and extended delay that the Fed announced today will unnecessarily take money out of the pockets of consumers and small businesses and give it to big banks," he said.
But according to The New York Times, "Consumers are unlikely to see any immediate change at the register because they do not pay the fees directly." Merchants, who fought for a lower cap, "have complained that as the cost of debit fees -- a charge for processing payments -- has risen in recent years, they have had to add it to the prices they charge. The new lower fees may eventually be reflected in lower retail prices for consumers or, most likely, in a slight slowing of price increases. But banks said the reduced fees would not pay for the cost of operating their electronic debit card networks, and have warned that their customers can expect higher fees for other banking services as a result." Either way, it seems, consumers lose.
Shares of credit card companies Visa (V) and MasterCard (MA) rose in the wake of the announcement of the softer cut, The Wall Street Journal reports.