The US President, Joe Biden, blamed Amazon this week for not paying federal taxes, and he referred to an increase of corporate tax rates for multinational companies. The plan of the Biden's administration is to increase corporate tax rate by 7%, up to 28% and make changes to the tax code, with central point the legal loopholes that allowed corporations to transfer profits outside USA.
Amazon was a target of the previous US administration too, mostly for the same reason, however the tax policies of Trump administration did not target Amazon. This commerce giant that has the top market capitulitation of 1.60 trillion dollars, had it's stock price rise once again today by another 2%. Usually news on taxation have a negative effect on the markets, but this bullish sentiment that brought the whole stock market decoupling from the real economy, is once again proven as nothing changed for Amazon.
The rise of corporal taxation is the first step that follows an increased government spending and a quantitative easing. The economy to sustain the fresh M1 money increase will require a system to pay the money back. Increased taxation of corporal gains may be the answer during economic recovery, but the fact is that it also hinders further R&D and creates pressure in unemployment levels.
The US economy statistics are terrible for the time being because of the mess created by the pandemic. The dollar and most fiat currencies have lost a lot of their purchasing power and the economic outlook is not great for most parts of the world.
This statement by Biden accompanied by more statements coming from the White House and the administration, is opening Pandoras Box, with tax rise being the main objective to cover for the extreme government spending and aid provided. It has been a long run for the stock market, and the decoupling from the real economy means that the troubles will be far more with increased taxation and the bottom of any correction will not be known.
Bloomberg, CNN and all media have analysts being excited and overconfident about the stock rally and this reminds some traders the previous crash of 2008. It was all euphoria back then for investment funds and nobody except just a few was aware of the dangers. It is right now again the same, as the so called decoupling of the stock markets, will be just a temporary one.
