The $50 billion race to save America’s renters from eviction [feedly]

The $50 billion race to save America's renters from eviction
https://www.washingtonpost.com/business/2021/04/08/biden-renters-cdc-eviction-moratorium/?utm_source=feedly&utm_medium=referral&utm_campaign=wp_business

The Biden administration again extended a federal moratorium on evictions last week, but conflicting court rulings on whether the ban is legal, plus the difficulty of rolling out nearly $50 billion in federal aid, means the country's reckoning with its eviction crisis may come sooner than expected.

The year-old federal moratorium — which has now been extended through June 30 — has probably kept hundreds of thousands or millions of people from being evicted from their apartments and homes. More than 10 million Americans are behind on rent, according to Moody's, easily topping the 7 million who lost their homes to foreclosure in the 2008 housing bust.

Despite the unprecedented federal effort to protect tenants, landlords have been chipping away at the moratorium in court. Six lawsuits have made their way before federal judges — with three ruling in support of the ban and three calling it illegal.

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The opposition started when landlords in Texas sued in the fall, arguing that the Centers for Disease Control and Prevention had overstepped its bounds in implementing the ban. Apartment owners argued in their complaint that they built and maintained apartment buildings "with the reasonable expectation that they would be legally permitted to realize the benefit of their bargain by collecting monthly rent from their tenants."

District Judge J. Campbell Barker agreed. "Although the COVID-19 pandemic persists, so does the Constitution," he wrote.

The National Association of Home Builders joined Ohio landlords in another suit. The judge in that case, J. Philip Calabrese, also ruled against the ban, writing March 10 that "the CDC's orders exceeded the statutory authority Congress gave the agency."

Treasury Department officials have been armed with nearly $50 billion in emergency aid for renters who have fallen behind, and are racing to distribute it through hundreds of state, local and tribal housing agencies, some of which have not created programs yet.

The idea is to get the money to renters before courts nationwide begin processing evictions again.

"We are running the Emergency Rental Assistance Program every day like we're going to lose the moratorium tomorrow," said a Treasury Department official, who spoke on the condition of anonymity to discuss the program before any formal announcements.

The moratorium was not overly controversial at first and it has received bipartisan support from lawmakers. It was formed when President Donald Trump and Congress directed the CDC to create a form tenants can use to declare that they cannot pay rent because of the pandemic and that they have been unable to secure other housing. Filing the form generally halts eviction proceedings.

But that was a year ago, which is a long time to go without collecting rent, especially for landlords who own smaller properties and are increasingly facing debts they cannot pay.

This isn't a concern for the vast majority of owners of high-end apartments catering to professionals, because their tenants can work from home and are far less likely to be unemployed. But it can amount to a financial catastrophe for companies housing low- and moderate-income workers, many of whom were laid off from service and tourism industries and have not been required to pay rent for a year.

"Those who have fallen behind in their rent are among the most vulnerable members of society: more likely to be unemployed, with less income and less education," experts from Moody's wrote in January.

Evictions continue in Virginia despite CDC order extension

As months of unpaid rent dragged on, landlords began filing suits nationwide asking judges to strike down the ban. Three have now ruled against it.

The rulings in Texas and Ohio did not include injunctions removing the CDC's ban, and the Justice Department is appealing. Dozens of state and local bans remain in place as well.

But days after the Ohio judge's order came a more concrete ruling against the moratorium, when District Judge Mark Norris in Tennessee ruled that extending the ban had been illegal. He issued an order saying the moratorium was "unenforceable in the Western District of Tennessee."

Advocates say this is the first ruling that may carry severe consequences for thousands of people. More than 19 percent of renters in Tennessee are behind on rent, according to Moody's. Norris's district includes Memphis, where landlords have filed more than 13,000 eviction notices in the past year, according to Princeton University's Eviction Lab.

Memphis may be a test case for what the impact will be when the moratorium expires nationwide with eviction filings piled up in courts.

"Tenants in Western Tennessee are at immediate risk," said Diane Yentel, president and chief executive of the National Low Income Housing Coalition.

Although the CDC ban remains in place, and other judges have upheld it, for Justice Department lawyers, it looks like an increasingly difficult game of whack-a-mole, with each adverse ruling chipping away at the moratorium's protections. The National Association of Home Builders now argues that the CDC ban should not apply to any of its 1,700 or so members, some of whom own thousands of units.

Tenants are already increasingly subject to the rules of their local jurisdictions, as some have halted eviction proceedings altogether while others allow landlords to file eviction papers or to complete evictions for reasons unrelated to the coronavirus pandemic.

Landlords also are instituting very different policies from one another, as some are aggressively filing eviction notices against tenants even where local courts are not processing cases, said Jim Baker, an advocate. His group, the Private Equity Stakeholder Project, has reviewed thousands of eviction filings nationwide.

"We have seen dramatically different polices from different landlords," Baker said. He said some appear to be targeting apartment communities predominantly populated by racial minorities, a disparity the Eviction Lab documented.

Baker also found a motion filed as part of an eviction case in Florida in which a landlord's attorney cited a decision in West Texas, arguing that the CDC ban had been deemed "an unconstitutional overreach into the general police power retained by the states," even though it did not include an injunction.

Banning evictions is not the only strategy for preventing them. Some states and municipalities have provided subsidies to renters who have fallen behind, to prevent them from being evicted.

These policies carry an additional benefit by putting money in landlords' pockets, keeping smaller companies solvent and ideally making all landlords less eager to evict tenants. Bankruptcy filings among real estate companies have significantly increased over previous years.

So tenants' advocates and apartment company lobbyists alike celebrated when the federal government approved about $46.5 billion in emergency rental aid to be distributed to renters and landlords through hundreds of state, local and tribal housing agencies and organizations.

But quickly and efficiently disbursing so much money is no straightforward task. Yentel said recently that only about half the states have created a program to do so. Some landlords have begun saying they won't accept the money out of concern that too many strings are attached.

The Treasury Department has not yet released data on the emergency rental aid program, one of a number of stimulus initiatives deploying unprecedented sums of money.

The U.S. government approved trillions in aid. Many hard-hit families have yet to receive it.

"I see progress and that is heartening, but that doesn't get us to take our feet off the gas," said the treasury official.

Part of the effort is to assure landlords that they should participate in the program, regardless of how they feel about the moratorium, so they can collect unpaid rent. Landlords should also benefit from payments renters make after receiving money from Congress's $1.9 trillion stimulus package.

"Are there landlords that don't want to take the money? I am sure there are. But we are really working hard to build that confidence among landlords so that they confidently come in and participate in this program," the official added.

If the money gets to the tenants and landlords who need it before the ban ends, the onslaught of evictions may be avoided. But given the legal rulings so far, no one can say when the ban will end.

 -- via my feedly newsfeed

Yellen's Global Tax Plan Is a China Trade War-Level Fight [feedly]

A much more interesting globalization reform than trade wars. The h eadline is a bit misleading. I have no reason to believe

that China growth would be affected at all by that reform.

Yellen's Global Tax Plan Is a China Trade War-Level Fight
https://www.bloomberg.com/opinion/articles/2021-04-06/yellen-s-global-tax-plan-is-on-the-level-of-trump-s-trade-war-with-china

If you expected the administration of President Joe Biden to be a return to normalcy on trade issues after the drama of Trump-era tariff battles and tweet diplomacy, Treasury Secretary Janet Yellen has other ideas.

That's because her plans announced Monday to introduce a global minimum corporate tax rate represent quite as much of a shock to the international economic order as Trump's decision to wage trade war on China.

The two phenomena are connected as fundamental aspects of the modern global economy. Corporations have cut operating expenses at the top of their income statements by sending manufacturing offshore to China and other emerging economies where labor costs are lower. At the bottom of their income statements they've done the same with tax expenses, by offshoring their profits to low-tax jurisdictions such as Bermuda, the British Virgin Islands, the Cayman Islands, Ireland, the Netherlands, Luxembourg, Singapore, and Switzerland. 

A significant slice of the profitability of the modern multinational corporation depends on those two moves. As we've written, about a third of foreign direct investment in the decade through 2018 went through just seven offshore centers used for tax minimization. Ireland's four biggest companies, according to an annual ranking by the Irish Times, are the local units of Apple Inc., Alphabet Inc., Facebook Inc. and Microsoft Corp. Over the decade through 2019, the British Virgin Islands and the Cayman Islands alone — with a combined population of about 100,000 people — received about 76 cents of foreign investment inflows for every dollar that went to China.

Follow the Money

More foreign investment flows into the world's offshore centers than into any other country

Source: UNCTAD

Note: Offshore centers are Cyprus, Luxembourg, Netherlands, Switzerland, Mauritius, Hong Kong, Singapore, Panama, British Virgin Islands, Cayman Islands.

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Such "investment" came more in the form of corporate inversions and the vesting of intellectual property rights rather than the establishment of genuine new businesses. Even so, it's made a substantial difference to corporate profits, as well as to the revenue that governments have been able to collect from taxing that income.

States would gain about $100 billion a year if reforms were introduced to reduce such activities, according to a study last year by the Organization for Economic Co-operation and Development, a grouping of rich nations. Other estimates are substantially higher: One influential 2018 study calculated the losses at about 10% of the $2.15 trillion in corporate taxes paid globally, rising as high as 20% in the European Union.

Yellen isn't the first to suggest cracking down on this behavior. Indeed, tackling the activity has been a major subject for international groupings such as the Group of 20 and OECD since the early years after the 2008 financial collapse, when it was seen as a significant contributor to the post-crisis deterioration of government budgets.

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To say those efforts have come to nothing would be a drastic understatement. Indeed, while ideas have been fruitlessly batted around international talking shops, the real action over the past decade has been in the way governments have given up on attempts to prevent profit leakage and turned to cutting their own tax rates instead. Of 37 OECD members, 24 have cut their corporate tax rates since 2008. Just seven have raised them.

Reversal of Fortune

In a decade when the world planned to tackle profit leakage to low-tax countries, most developed nations instead cut their own corporate tax rates

Source: Tax Foundation

Note: For reasons of space, only the 25 largest OECD economies are shown.

In one sense, that provides a partial solution to the problem. If you can reduce your own tax rates below that of, say, Switzerland (as, for instance, the U.K. has done) you remove most of the incentive for multinationals to shift their profits there. The trouble is, with Ireland running a 12.5% rate and the likes of the Cayman Islands and British Virgin Islands not taxing corporate profits at all, it's a race to the bottom that rich-country governments can only win by either drastically cutting spending or by shifting more and more of the fiscal burden onto the shoulders of middle- and working-class voters.

Yellen is right to attempt to tackle this, but the challenges to getting anything done remain substantial. Major companies and corporate lobbies have a far harder time dealing with China than they do with Bermuda, the Netherlands and Singapore — but even there, Trump's trade war with Beijing provoked substantial pushback. The richest corporate donors in every developed economy gain enormously from the world's failure to act collectively on this issue. It will be hard bringing low-tax jurisdictions on board, too, given how fundamental tax minimization strategies are to their economies.

America has substantial muscle to get its way in international financial affairs. Every country in the world must observe U.S. sanctions, regardless of the rules in their own country, thanks to the way the dollar has been weaponized by successive administrations over the past decade. Hong Kong's sanctioned Chief Executive Carrie Lam receives her salary in cash because even Chinese-owned banks in Hong Kong won't risk getting on the wrong side of the U.S. Department of Justice.

If there's a genuine will to crack down on tax minimization, that suggests the Biden administration should be able to find a way. The failed reform attempts of the past decade, however, give reason to doubt that change is on its way. For all the rhetoric out of Washington, corporate tax rates in 2030 are more likely to be lower than higher.

If you expected the administration of President Joe Biden to be a return to normalcy on trade issues after the drama of Trump-era tariff battles and tweet diplomacy, Treasury Secretary Janet Yellen has other ideas.

That's because her plans announced Monday to introduce a global minimum corporate tax rate represent quite as much of a shock to the international economic order as Trump's decision to wage trade war on China.

The two phenomena are connected as fundamental aspects of the modern global economy. Corporations have cut operating expenses at the top of their income statements by sending manufacturing offshore to China and other emerging economies where labor costs are lower. At the bottom of their income statements they've done the same with tax expenses, by offshoring their profits to low-tax jurisdictions such as Bermuda, the British Virgin Islands, the Cayman Islands, Ireland, the Netherlands, Luxembourg, Singapore, and Switzerland. 

A significant slice of the profitability of the modern multinational corporation depends on those two moves. As we've written, about a third of foreign direct investment in the decade through 2018 went through just seven offshore centers used for tax minimization. Ireland's four biggest companies, according to an annual ranking by the Irish Times, are the local units of Apple Inc., Alphabet Inc., Facebook Inc. and Microsoft Corp. Over the decade through 2019, the British Virgin Islands and the Cayman Islands alone — with a combined population of about 100,000 people — received about 76 cents of foreign investment inflows for every dollar that went to China.

Follow the Money

More foreign investment flows into the world's offshore centers than into any other country

Source: UNCTAD

Note: Offshore centers are Cyprus, Luxembourg, Netherlands, Switzerland, Mauritius, Hong Kong, Singapore, Panama, British Virgin Islands, Cayman Islands.

More from

Shoppers Want Revenge. Is Kanye the Answer?

Tax Cuts Versus Big Spending Is the Debate of the Decade

Financial Cooperation Can Help Fight the Pandemic

Biden's Inattention to the Fed Is a Mistake

Such "investment" came more in the form of corporate inversions and the vesting of intellectual property rights rather than the establishment of genuine new businesses. Even so, it's made a substantial difference to corporate profits, as well as to the revenue that governments have been able to collect from taxing that income.

States would gain about $100 billion a year if reforms were introduced to reduce such activities, according to a study last year by the Organization for Economic Co-operation and Development, a grouping of rich nations. Other estimates are substantially higher: One influential 2018 study calculated the losses at about 10% of the $2.15 trillion in corporate taxes paid globally, rising as high as 20% in the European Union.

Yellen isn't the first to suggest cracking down on this behavior. Indeed, tackling the activity has been a major subject for international groupings such as the Group of 20 and OECD since the early years after the 2008 financial collapse, when it was seen as a significant contributor to the post-crisis deterioration of government budgets.

Opinion. Data. More Data.

Get the most important Bloomberg Opinion pieces in one email.

Email

By submitting my information, I agree to the Privacy Policy and Terms of Service and to receive offers and promotions from Bloomberg.

To say those efforts have come to nothing would be a drastic understatement. Indeed, while ideas have been fruitlessly batted around international talking shops, the real action over the past decade has been in the way governments have given up on attempts to prevent profit leakage and turned to cutting their own tax rates instead. Of 37 OECD members, 24 have cut their corporate tax rates since 2008. Just seven have raised them.

Reversal of Fortune

In a decade when the world planned to tackle profit leakage to low-tax countries, most developed nations instead cut their own corporate tax rates

Source: Tax Foundation

Note: For reasons of space, only the 25 largest OECD economies are shown.

In one sense, that provides a partial solution to the problem. If you can reduce your own tax rates below that of, say, Switzerland (as, for instance, the U.K. has done) you remove most of the incentive for multinationals to shift their profits there. The trouble is, with Ireland running a 12.5% rate and the likes of the Cayman Islands and British Virgin Islands not taxing corporate profits at all, it's a race to the bottom that rich-country governments can only win by either drastically cutting spending or by shifting more and more of the fiscal burden onto the shoulders of middle- and working-class voters.

Yellen is right to attempt to tackle this, but the challenges to getting anything done remain substantial. Major companies and corporate lobbies have a far harder time dealing with China than they do with Bermuda, the Netherlands and Singapore — but even there, Trump's trade war with Beijing provoked substantial pushback. The richest corporate donors in every developed economy gain enormously from the world's failure to act collectively on this issue. It will be hard bringing low-tax jurisdictions on board, too, given how fundamental tax minimization strategies are to their economies.

America has substantial muscle to get its way in international financial affairs. Every country in the world must observe U.S. sanctions, regardless of the rules in their own country, thanks to the way the dollar has been weaponized by successive administrations over the past decade. Hong Kong's sanctioned Chief Executive Carrie Lam receives her salary in cash because even Chinese-owned banks in Hong Kong won't risk getting on the wrong side of the U.S. Department of Justice.

If there's a genuine will to crack down on tax minimization, that suggests the Biden administration should be able to find a way. The failed reform attempts of the past decade, however, give reason to doubt that change is on its way. For all the rhetoric out of Washington, corporate tax rates in 2030 are more likely to be lower than higher.

 -- via my feedly newsfeed