The top 1 percent are evading $163 billion a year in taxes, the Treasury finds.

A new report makes the case that narrowing the tax gap is part of the Biden administration’s ambition to create a more equitable economy.

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A new tax analysis comes as the Biden administration is pushing lawmakers to embrace its ambitious proposal to invest in beefing up the Internal Revenue Service to narrow the “tax gap.”Credit…Stefani Reynolds for The New York Times

WASHINGTON — The wealthiest 1 percent of Americans are the nation’s most egregious tax evaders, failing to pay as much as $163 billion in owed taxes per year, according to a new Treasury Department report released on Wednesday.

The analysis comes as the Biden administration is pushing lawmakers to embrace its ambitious proposal to invest in beefing up the Internal Revenue Service to narrow the “tax gap,” which it estimates amounts to $7 trillion in unpaid taxes over a decade. The White House has proposed investing $80 billion in the tax collection agency over the next 10 years to hire more enforcement staff, overhaul its technology and usher in new information-reporting requirements that would give the government greater insight into tax evasion schemes.

The proposals have been met with deep skepticism from Republicans and business lobbyists who argue that the I.R.S. cannot be trusted with more power and that the proposals are an invasion of privacy. Democrats are counting on raising money by collecting more unpaid taxes to help pay for the $3.5 trillion spending package they are in the process of drafting. The Treasury Department estimates that its tax gap proposals could raise $700 billion over a decade.

The Treasury Department report, which was written by Natasha Sarin, deputy assistant secretary for microeconomics, makes the case that narrowing the tax gap is part of the Biden administration’s ambition to create a more equitable economy, as audits and enforcement actions will be aimed at the rich.

“For the I.R.S. to appropriately enforce the tax laws against high earners and large corporations, it needs funding to hire and train revenue agents who can decipher their thousands of pages of sophisticated tax filings,” Ms. Sarin wrote. “It also needs access to information about opaque income streams — like proprietorship and partnership income — that accrue disproportionately to high-earners.”

The report combines academic research on how the tax gap has historically been distributed across the income scale with 2019 tax data.

Tax compliance rates are high for low- and middle-income workers who have their taxes deducted automatically from their paychecks. The rich, however, are able to use accounting loopholes to shield their tax liabilities.

The Biden administration has pledged that individuals with “actual income” less than $400,000 per year will not see their audit rates go up.

A Congressional Budget Office report last week found that expanding the enforcement capacity of the I.R.S. would not raise as much money as the Treasury Department projects.

Elizabeth Holmes, the founder of Theranos, has been charged with 12 counts of wire fraud and conspiracy to commit wire fraud in connection to money she raised for the blood testing start-up.Credit…Jim Wilson/The New York Times

Opening statements in the case of Elizabeth Holmes, the founder of the blood testing start-up Theranos, are set to begin in San Jose, Calif., on Wednesday morning, kicking off one of Silicon Valley’s most anticipated trials.

Ms. Holmes, 37, has been charged with 12 counts of wire fraud and conspiracy to commit wire fraud in connection with money she raised for Theranos, which dissolved in 2018 after its blood tests were revealed to have problems.

A jury will decide whether Ms. Holmes, who founded Theranos in 2003 and hawked a mission of revolutionizing health care, lied to investors about her company’s technology.

Ms. Holmes claimed Theranos’s machines, called Edison, could quickly conduct a wide range of blood tests using just a drop of blood. The United States has accused Ms. Holmes of knowing that the tests were limited and unreliable, harming patients who used them. Prosecutors also said she overstated Theranos’s business deals and performance.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Carlos Chavarria for The New York Times

Elizabeth Holmes, the disgraced founder of the blood testing start-up Theranos, stands trial for two counts of conspiracy to commit wire fraud and 10 counts of wire fraud.

Here are some of the key figures in the case ->

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Stephen Lam/Reuters

Holmes founded Theranos in 2003 as a 19-year-old Stanford dropout. She raised $700 million from investors and was crowned the world’s youngest billionaire, but has been accused of lying about how well Theranos’s technology worked. She has pleaded not guilty.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Justin Sullivan/Getty Images

Ramesh Balwani, known as Sunny, was Theranos’s president and chief operating officer from 2009 through 2016 and was in a romantic relationship with Holmes. He has also been accused of fraud and may stand trial next year. He has pleaded not guilty.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Jefferson Siegel for The New York Times

David Boies, a prominent litigator, represented Theranos as its lawyer and served on its board.

He tried to shut down whistle-blowers and reporters who questioned the company’s business practices.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Getty Images

The journalist John Carreyrou wrote stories exposing fraudulent practices at Theranos.

His coverage for The Wall Street Journal helped lead to the implosion of Theranos.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Jeff Kravitz/FilmMagic, via Getty Images

Tyler Shultz and Erika Cheung are former Theranos employees and were whistle-blowers. They worked at the start-up in 2013 and 2014.

Shultz is a grandson of George Shultz, a former secretary of state who was on the Theranos board.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Eric Thayer for The New York Times

James Mattis, a retired four-star general, was a member of Theranos’s board.

He went on to serve as President Donald J. Trump’s secretary of defense.

Who’s Who in the Elizabeth Holmes Trial

Erin Woo?Reporting from San Jose, Calif.

Edward Davila, a federal judge for the Northern District of California, will oversee the case.

Kevin Downey, a partner at the Washington law firm Williams & Connolly, is the lead lawyer for Holmes.

Robert Leach, an assistant United States attorney for the Northern District of California, will lead the prosecution for the government, along with other prosecutors from the U.S. attorney’s office.

Read more about Elizabeth Holmes:

Aug. 30, 2021

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Theranos’s former president, Ramesh Balwani, known as Sunny, is being tried in a separate case set to begin next year. Both Ms. Holmes and Mr. Balwani have pleaded not guilty. Judge Edward Davila of the U.S. District Court for the Northern District of California is presiding over the cases.

If convicted, Ms. Holmes could face up to 20 years in jail, which would make her one of the few Silicon Valley executives accused of wrongdoing to go to jail.

The trial caps years of delays and legal squabbles over things like which emails and arguments can be used and whether Ms. Holmes should be required to wear a mask while sitting in the courtroom.

Last week, a jury of seven men and five women was sworn in after the elimination of many potential jurors who had either heard of Ms. Holmes, had direct experience with domestic abuse or had schedules that could not accommodate the three-month trial.

Ms. Holmes’s lawyers have indicated that they may use a mental health defense, arguing that Mr. Balwani, whom she dated, was emotionally and physically abusive. Mr. Balwani has denied the accusations. Ms. Holmes’s lawyers have also indicated in court filings that she is likely to take the stand.

In court documents filed over the weekend, prosecutors listed more than 200 potential witnesses including David Boies, Theranos’s former lawyer; Henry Kissinger, the former secretary of state who sat on Theranos’s board; James Mattis, the former defense secretary and a Theranos director; and Rupert Murdoch, the media mogul, who backed Theranos and was part of a lawsuit over its demise. Some names were displayed as initials.

Ms. Holmes’s lawyers listed more than 60 witnesses, including several of the U.S. attorneys on the case; John Carreyrou, a reporter and the author of a book about Theranos; William Frist, the former U.S. Senator who sat on the Theranos board; and Ms. Holmes.

In a separate filing, lawyers for Ms. Holmes also asked that testimony from three former Theranos employees be excluded. One of the witnesses, Erika Cheung, worked in Theranos’s lab and reported problems with its blood testing to federal regulators. Ms. Holmes’s lawyers argued that various parts of Ms. Cheung’s testimony would be irrelevant, based on hearsay or not directly connected to Ms. Holmes.

Ms. Holmes’s lawyers also asked to exclude testimony from Daniel Edlin, a former project manager at the company, and Danise Yam, Theranos’s corporate controller for 11 years.

Prosecutors responded with exhibits backing up Ms. Cheung’s claims. On Tuesday, Judge Davila ordered that such an exclusion would be “premature” ahead of hearing the government’s questions or argument.

Canadian National has challenged a smaller rival, Canadian Pacific, to buy Kansas City Southern. Credit…Andrew Vaughan/The Canadian Press, via Associated Press

Canadian National’s bid to buy Kansas City Southern and create a rail network that stretches across North America is facing a new challenge, the DealBook newsletter reports.

TCI Fund Management, a longtime railroad investor, has started a proxy battle to oust Canadian National’s chief executive, Jean-Jacques Ruest. TCI wants Canadian National to stop pursuing the acquisition and overhaul its board.

“We believe CN’s best days are ahead of it, provided the company immediately withdraws from its reckless, irresponsible, and value destructive pursuit of KCS,” the fund’s founder, Chris Hohn, said.

Canadian National has been duking it out with a smaller rival, Canadian Pacific, to buy Kansas City Southern. Canadian National has offered more money; Canadian Pacific, more deal certainty.

In May, Kansas City Southern went with Canadian National and its higher bid. But last week, the regulator that oversees rail deals, the Surface Transportation Board, ruled against the companies’ use of a voting trust, a common but controversial structure in such deals. Now, Kansas City Southern is back in talks with Canadian Pacific.

Canadian National’s bid “exposed a basic misunderstanding of the industry and the regulatory environment,” TCI argues.

The fight for Kansas City Southern is the first real test of guidelines put in place in 2001 to tighten scrutiny in deals that involve the largest railroads. The vote wasn’t even close: The Surface Transportation Board went against the trust 5 to 0.

Canadian Pacific, which has a proposed voting trust that regulators have not blocked, successfully argued for its deal with Kansas City Southern to be evaluated outside those guidelines, given its smaller size.

It’s been clear from the Biden administration’s early days it would be tough on deals. Still, the railroad industry earned a surprising spotlight in a sweeping executive order issued in July that focused on competition. And key voices, like Representative Peter DeFazio, the Democratic chairman of the House Transportation Committee, have come out against a voting trust for the Canadian National deal.

TCI, though, has a hand in both pots. Along with its stake in Canadian National, TCI also owns nearly 42 percent of Canadian Pacific, making the hedge fund the company’s largest shareholder, according to the market data firm Sentieo.

The size of TCI’s investment in Canadian National is slightly bigger than its Canadian Pacific stake — about $4.1 billion compared with roughly $4 billion, a person familiar with the investments said. Still, TCI’s dual investments raise questions about whether its efforts to stop the Canadian National deal also serve to strengthen its investment in Canadian Pacific.

A representative for Canadian National said the company “values input” from all of its shareholders and would continue to “make carefully considered decisions” in line with its priorities.

U.S. stocks fell in early trading Wednesday, with the S&P 500 stretching its losses for the shortened week. The index ticked down 0.2 percent, while the Nasdaq composite was 0.4 percent lower.

The Labor Department is set to publish data on job openings in July. The figures come after data on Friday showed August made one of the weakest months for hiring since the recovery began more than a year ago.

Cryptocurrencies fell, with Bitcoin dropping 8.9 percent, according to Coinbase. El Salvador adopted Bitcoin as legal tender on Tuesday, and the country faced a rocky start after its storage app was marred by technical glitches.

The yield on the benchmark 10-year Treasury note fell to 1.36 percent from 1.37 percent.

European stocks fell on Wednesday, with the Stoxx Europe 600 down 0.7 percent.

Reed Hastings, Netflix’s chairman and co-chief executive, has donated $3 million to oppose Gov. Gavin Newsom’s recall.Credit…Christophe Archambault/Agence France-Presse — Getty Images

LOS ANGELES — In a June 2019 interview with Axios, Gov. Gavin Newsom of California, a Democrat who has long been seen as a friendly face to the technology industry, made a prediction: The state’s largest businesses were about to get “steamrolled” by federal regulators.

Back then, hammering Big Tech was in vogue among politicians from both parties, and Democrats had become particularly worried by the spread of misinformation on social media and the repeated mishandling of user data.

But those were simpler times, before a pandemic and a recall election that now threatens Mr. Newsom’s political career. Two years after those comments, the governor has backed away from his tech criticism and is instead focused on saving his job.

Mr. Newsom and the anti-recall effort have raised almost $70 million, about six times the pro-recall side, by courting some of the wealthiest individuals in California’s largest industry. Some in tech have even opened their pocketbooks while acknowledging that Mr. Newsom is not their ideal candidate.

Reed Hastings, Netflix’s chairman and co-chief executive, backed former Mayor Antonio Villaraigosa of Los Angeles, not Mr. Newsom, during the Democratic primary for governor in 2018. But Mr. Hastings has donated $3 million to oppose Mr. Newsom’s recall, saying he at least provides “stability in leadership.”

“I have been impressed with his centrist thoughtful leadership, particularly on Covid,” Mr. Hastings said, adding, “I’m not saying he hasn’t had missteps, but mostly symbolic ones, as opposed to substance.”

While it remains unclear what a Republican governor would mean for the industry — a successful recall would likely mean that Larry Elder, the conservative radio host, would take office — many within the tech elite are hoping not to find out.

The San Francisco venture capitalist Ron Conway, who organized a March anti-recall letter that was signed by 75 tech luminaries, has more recently turned his efforts toward fund-raising for Mr. Newsom because of the “dire threat” he says a Republican governor could pose to California’s economic recovery and fight against Covid-19.

“I don’t know Larry Elder, but I know his positions — repealing mask and vaccine mandates, peddling conspiracy theories — he is in no way ready to be governor,” Mr. Conway said in an email interview. “The last thing the tech and business sectors want right now is more instability, chaos and uncertainty in California.”

Though some big names have spent money defending Mr. Newsom — Priscilla Chan, a doctor and the wife of Facebook’s chief executive, Mark Zuckerberg, gave $750,000, and Laurene Powell Jobs, the billionaire founder of the Emerson Collective and widow of Steve Jobs, has given $400,000 — others have been more reluctant. Yelp’s chief executive, Jeremy Stoppelman, who signed Mr. Conway’s anti-recall letter, has not given money to oppose the referendum, noting that “I haven’t been super involved, but I’ve been willing to say publicly recall is a bad idea.”

Although most tech leaders have sought stability during the pandemic, others have used their dissatisfaction with the governor’s crisis leadership as a jumping-off point. The venture capitalists David Sacks and Chamath Palihapitiya have previously been outspoken in their support of the recall, donating more than $100,000 each to the effort.

As it became clearer that Mr. Elder would most likely replace Mr. Newsom if the recall vote succeeds, Mr. Palihapitiya has cut back on public statements about the recall, while Mr. Sacks has continued his drumbeat of criticism. Representatives for Mr. Sacks and Mr. Palihapitiya declined requests for comment.

“Newsom is scaremongering about what happens if he gets recalled, but in truth, Democrats have a veto-proof majority in the Assembly and a new election is held in 14 months,” Mr. Sacks tweeted late last month. “So the only thing that happens is we send a strong message to the political class: do better.”

Others are hoping to avert Mr. Elder and what they see as potential chaos.

“It’s like Trump, it’s wild and unpredictable and who knows what he stands for,” said Kim-Mai Cutler, a partner at Initialized Capital.

— Ryan Mac

Credit…Jose Cabezas/Reuters

El Salvador faced a rocky transition in its adoption of Bitcoin as legal tender on Tuesday. The government’s app for facilitating transactions — its “digital wallet” — went offline temporarily, protesters took to the streets of the capital to denounce the move, and the price of Bitcoin dropped sharply, demonstrating the volatility of the cryptocurrency market.

President Nayib Bukele wrote on Twitter on Tuesday morning that the digital wallet, which is called Chivo after a slang word for “cool,” would be available to Salvadorans in the United States and almost anywhere in the world. But even as large companies such as McDonald’s began accepting Bitcoin payments in El Salvador, for a time the wallet was not available to anyone, and the country slowed its rollout.

Ford Motor said on Tuesday that it had hired the senior executive who was leading Apple’s secretive car project to help the automaker push further into electric vehicles.

The executive, Doug Field, will be responsible for turning Ford vehicles into software-driven products that can interact with customers and provide new types of services, something Ford and other car companies say will become more important.

At Apple, Mr. Field, 56, held the title of vice president of special projects and played an important role in a yearslong effort to develop an electric vehicle. His departure could be a blow to Apple’s auto ambitions, which have been a subject of intense speculation.

Price gains have become a source of annoyance among consumers and worry among policymakers who are concerned that rapid price gains might last. It is one of the main factors central bankers are looking at as they decide when — and how quickly — to return monetary policy to normal.

Prices Are Going Up. Will It Last?

Jeanna SmialekBreaking down the numbers

Prices Are Going Up. Will It Last?

Jeanna SmialekBreaking down the numbers

You may have noticed that you’re paying more for lots of things. Inflation has become a hot topic, but the question is whether it will last.

The items with the biggest increases may hold the answer ->

Prices Are Going Up. Will It Last?

Jeanna SmialekBreaking down the numbers

Scott McIntyre for The New York Times

One area where costs have jumped: Products whose prices plunged at the onset of the pandemic.

Airfares and hotel prices, which dropped as demand evaporated in 2020, are rebounding. Airline tickets cost 19 percent more in July than a year earlier.

Prices Are Going Up. Will It Last?

Jeanna SmialekBreaking down the numbers

Scott McIntyre for The New York Times

Bikes, used cars and televisions are also costlier.

They include parts that are made overseas, like computer chips. With factories and shipping routes upended by the pandemic, these components are more expensive.

Prices Are Going Up. Will It Last?

Jeanna SmialekBreaking down the numbers

Tim Gruber for The New York Times

Food is also more expensive. Prices at limited-service restaurants — places like Chipotle — were up 6.6 percent in the year through July.

Some of that might be tied to labor costs, as companies raise wages to attract workers.

Prices Are Going Up. Will It Last?

Jeanna SmialekBreaking down the numbers

So what does this mean for the future?

Categories showing big price gains are typically experiencing pandemic-related weirdness in one way or another. That’s why economists are pretty sure the current price pop will fade.

But as with all things pandemic-related, it could be a crazy ride in the meantime.

Read more stories on the economy:

44m ago

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Most policymakers believe that today’s rapid inflation will fade. But there is a danger that the global price surge could last longer — and become more country-specific — if workers in nations experiencing high inflation today bargain for wage increases and are more accepting of steadily higher prices. Bringing entrenched inflation back under control could require painful monetary policy responses, ones that would probably plunge national economies back into recession.

If inflation does fade as policymakers expect, the current burst could actually offer benefits. READ THE ARTICLE ->

The Biden administration said it would provide $700 million in grants to help with the financial hardships that some essential employees have faced during the pandemic.Credit…Dane Rhys/Reuters

The Biden administration said on Tuesday that it would provide $700 million in grants to meatpacking, farm and grocery-store workers to help defray some of the financial hardships the essential employees have faced during the pandemic.

The grants will be distributed to state agencies, tribal entities and nonprofit groups that typically support these workers, who were required to go in to work even amid the most deadly outbreaks of the coronavirus. The groups will be eligible to receive grants of up to $50 million, which they can distribute to workers, particularly “hard to reach” communities of immigrants who often work in the meatpacking plants and on commercial farms.

The Agriculture Department said the money could be used to help workers cover the cost of pandemic-related expenses such as personal protective equipment and dependent care and expenses associated with quarantines and testing for the virus. Eligible workers can receive up to $600. At least $20 million in grants will be set aside for grocery workers.

“We recognize that our farmworkers, meatpacking workers and grocery workers overcame unprecedented challenges and took on significant personal risk to ensure Americans could feed and sustain their families throughout the pandemic,” the secretary of agriculture, Tom Vilsack, said in a statement.

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