We break down how the revelations about former President Trump’s tax strategy reflect a debate over taxes in the U.S. We’ll also look at Sam Bankman-Fried’s latest court appearance and what you need to do to prepare for the 2023 economy.
But first, wondering how long the Speaker battle could last? 1856 offers a stark example.
Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom.
Trump tax returns raise alarms about US tax code
A preliminary review of the thousands of pages of Donald Trump’s tax returns released by a key congressional committee on Friday confirms that the former president was using business losses in the tens of millions of dollars to reduce his annual tax liability, in some cases all the way down to zero.
- While one of Trump’s main businesses was found guilty of criminal tax fraud earlier this month, Trump himself has so far not been accused of doing anything illegal with his taxes and personal accounting.
- But that’s raising more urgent questions about the fairness of the U.S. tax code and tax regulations, which number in the millions of words and in the case of Trump proved effectively unenforceable.
Advocates for tax reform say that a shift in mindset is needed, that a flawed conception of taxation as punitive and economically destructive is what allows for the sort of serial tax avoidance on display in the Trump tax returns.
“With the release of Donald Trump’s tax returns we have learned that he did not pay any federal income taxes [in some years],” Frank Clemente, director of tax advocacy group Americans for Tax Fairness, said in a statement to The Hill.
The Hill’s Tobias Burns and Sylvan have more here.
❗LEADING THE DAY
FTX founder Sam Bankman-Fried pleads not guilty to fraud, other crimes
Disgraced FTX founder Sam Bankman-Fried pleaded not guilty on Tuesday to charges of wire fraud, securities fraud and other counts related to the collapse of his cryptocurrency trading platform.
Prosecutors have alleged that Bankman-Fried, 30, illegally used his customers’ money to make real estate purchases, political donations and investments at his hedge fund, Alameda Research.
- He was arrested in the Bahamas last month after FTX filed for bankruptcy in November as a result of being unable to provide billions of dollars in withdrawal requests from its customers.
- Bankman-Fried agreed to be extradited from the Bahamas, where he lived and ran the company, to face charges in Manhattan a week after he was arrested.
Mark Cohen, Bankman-Fried’s attorney, said in court on Tuesday that his client was pleading not guilty to all eight charges against him.
The Hill’s Jared Gans has the latest here.
💰 BRACE FOR IMPACT
Four ways to prepare for an uncertain 2023 economy
For the U.S. economy, 2022 was a wild and somewhat painful year. And 2023 could be even more intense.
- A year of stubbornly high inflation, rapid interest rate hikes and war-driven energy shock have weakened the U.S. economy.
- While the job market remains remarkably strong, many economists say the U.S. is likely to slip into a recession at some point next year.
- And even if the nation avoids a recession, Americans will still contend with higher prices, high interest rates and the unknown impacts of the Fed’s fight against inflation. Political standoffs over government funding, entitlement programs and the federal debt limit also risk tipping the economy into more pain.
Sylvan has more here.
✈️ SOUTHWEST WOES
Southwest faces lingering questions after winter storm meltdown
Southwest Airlines restored its flight schedule on Friday, Dec. 30, ending a weeklong stretch of mass cancellations that disrupted millions of travelers’ holiday plans.
After canceling roughly two-thirds of its flights since the start of the long holiday weekend, Southwest canceled just 1 percent of its trips on Friday, according to flight tracking website FlightAware.
But questions remain about how quickly Southwest can make customers whole, whether it can prevent this kind of meltdown from happening again and how lawmakers and regulators in the nation’s capital will respond to the fiasco.
Karl breaks down the tough road ahead for Southwest and its customers.
Good to Know
Two-thirds of economists surveyed by The Wall Street Journal predict a recession will occur this year as the Federal Reserve raises interest rates to try to get inflation under control.
The Journal surveyed economists at 23 large financial institutions that do business with the Fed and found that most believe a recession will happen this year. Economists at two firms expect a recession will take place next year.
Other items we’re keeping an eye on:
- The Biden administration on Tuesday proposed a new fee structure for visas and naturalizations, raising costs on business-related applications while maintaining or reducing costs for humanitarian visas.
- A federal watchdog has found that Medicare lost out on millions of potential savings due to spotty oversight of the average sales price of medications, impacting how much Medicare Part B beneficiaries pay for coverage.
- The Federal Reserve has become more aggressive in its pursuit to curb inflation, and former Federal Reserve Bank of New York President William Dudley said the central bank’s actions mean a recession is likely.
That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.