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    Trump tariffs derailed by law firm that received money from his richest backers

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    Donald Trump’s tariff policy was derailed by a libertarian public interest law firm that has received money from some of his richest backers.The Liberty Justice Center filed a lawsuit against the US president’s “reciprocal” tariffs on behalf of five small businesses, which it said were harmed by the policy.The center, based in Austin, Texas, describes itself as a libertarian non-profit litigation firm “that seeks to protect economic liberty, private property rights, free speech, and other fundamental rights”.Previous backers of the firm include billionaires Robert Mercer and Richard Uihlein, who were also financial backers of Trump’s presidential campaigns.Mercer, a hedge fund manager, was a key backer of Breitbart News and Cambridge Analytica, pouring millions into both companies. He personally directed Cambridge Analytica to focus on the Leave campaign during the UK’s Brexit referendum in 2016 that led to the UK leaving the European Union.For its lawsuit against Trump’s tariffs, the Liberty Justice Center gathered five small businesses, including a wine company and a fish gear and apparel retailer, and argued that Trump overreached his executive authority and needed Congress’s approval to pass such broad tariffs.The other group who sued the Trump administration over its tariffs was a coalition of 12 Democratic state attorney generals who argued that Trump improperly used a trade law, the International Emergency Economic Powers Act (IEEPA), when enacting his tariffs.In such a polarized time in US history, it may feel odd to see a decision celebrated by liberal and conservatives. But Trump’s tariffs have proven controversial to members of both parties, particularly after Wall Street seemed to be put on edge by the president’s trade war.The US stock market dipped down at least 5% after Trump announced the harshest of his tariff policies. Recovery was quick after Trump paused many of his harshest tariffs until the end of the summer.Stocks started to rally on Thursday morning after the panel’s ruling. The judges said that the law Trump cited when enacting his tariffs, the IEEPA does not “delegate an unbounded tariff authority onto the president”. The decision is on a temporary hold after the Trump administration appealed.skip past newsletter promotionafter newsletter promotionWhile the ruling does not impact specific tariffs on industries such as aluminum and steel, it prevents the White House from carrying out broad retaliatory tariffs and its 10% baseline “reciprocal” tariff. The White House is appealing the ruling, which means the case could go up to the US supreme court, should the high court decide to take on the case.Members of both groups who sued the Trump administration celebrated the ruling. Jeffrey Schwab, senior counsel for the Liberty Justice Center, said in a statement that it “affirms that the president must act within the bounds of the law, and it protects American businesses and consumers from the destabilizing effects of volatile, unilaterally imposed tariffs”. Oregon’s Democratic attorney general, Dan Rayfield, who helped the states’ lawsuit, said that it “reaffirms that our laws matter”.In a statement, Victor Schwartz, the founder of VOS Selections, a wine company that was represented by the Liberty Justice Center in the suit, said that the ruling is a “win” for his business.“This is a win for my small business along with small businesses across America – and the world for that matter,” he said. “We are aware of the appeal already filed and we firmly believe in our lawsuit and will see it all the way through the United States Supreme Court.” More

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      This pause in the trade war will be brief. Small businesses, plan accordingly

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      Donald Trump’s massive Chinese tariffs are on pause. The media debated. Wall Street rejoiced. Many of my clients breathed a sigh of relief. Big retailers jumped for joy. But for how long?For starters, the tariffs that weren’t paused – a 10% levy on all Chinese goods, plus a bonus 20% tax that somehow relates to fentanyl, are still in place. When you take into consideration existing tariffs on steel from previous Trump and Biden administrations, the effective tariff rate on Chinese goods is actually closer to 40%, according to an analysis done by the Wall Street Journal.That’s a big number. Maybe that won’t deter people from buying underwear at Target. But for companies that rely on steel and aluminum, semiconductors, synthetic fabrics, plastics, minerals, coatings and solvents as well as certain bearings, motors, pumps and parts, a 30-40% hike is a major impact on their margins, which will affect their spending and investments. Ultimately, the costs of the end products that use these materials will also rise as companies simply pass them down.Just as important, Trump’s animosity towards China – unfounded or not – isn’t going to just magically disappear. He’s called the Chinese cheaters, polluters and thieves. And his past actions – particularly in his first administration – do not bode well for a quick resolution to this issue.In 2018, the Trump administration not only imposed onerous tariffs on China but also issued some very harsh requirements to address trading issues with its closest economic rival.There were specific quotas set to limit our trade deficit. There were demands made to reduce the Chinese requirement forcing American companies to share or transfer technology with their Chinese counterparts. There were rules aimed at stopping the alleged (ha, ha) stealing of data and intellectual property by the Chinese.The problem is that none of this happened. What happened – shortly after the negotiations started – was Covid. And then 2020 and a new administration. But don’t think that Trump won’t raise these issues again. He will, and when this happens we’ll be back to the same place we started: excessive tariffs and a trade war with China.That doesn’t mean that businesses are completely stuck. Many – those that have the funds – are using the tariff suspension to buy up products from China like it’s a fire sale at Costco on Black Friday. Others are contracting with bonded warehouses and storage facilities in free-trade zones to accept products that are temporarily tariff-free, hoping that when they pull materials from these storage units those rates will have come down.I have clients who are aggressively searching for alternative suppliers. I have others who are bringing their assembly and manufacturing back to the US. Those that aren’t able to make these kinds of investments are trying to work out how and how much they can change pricing and what the market will take. A few have already created special line items on their invoices to separate out the tariff charge in an effort to say: “Hey, don’t blame me for this stuff!”My smartest clients started doing this stuff the day after Trump was elected. They listened to what he’d said during the previous couple of years. They read the writing on the wall. Now they’re ahead of the game. Good for them.Companies that didn’t do this – especially small businesses that have fewer resources and are more reliant on just a supplier or two – are in trouble, particularly if they buy from China. For any business still reliant on Chinese suppliers and markets, this pause isn’t going to last as long as you think. There will be a lot more coming in this trade war – and let’s hope it doesn’t turn into an actual war. The outlook is precarious and risky. Trump is volatile and emotional and has a history of knocking China. Plan accordingly. More

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      Worried about your stock market savings as Trump tariffs wreak havoc? Don’t panic

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      This week was enough to make anyone worried about their stock market savings. As a certified public accountant, I don’t give investment advice. But I’m comfortable leaving my money in the stock market. Why? Let’s put things into perspective.Markets are still way upMany younger millennials and gen Z-ers may be panicking about recent falls in the market. But we’ve been here before – and worse. In March 2009, the Dow Jones Industrial Average lost more than half its value from the levels it reached less than two years before. In the past 15 years it has increased sixfold.Today’s economic problems are not as severe as 2009. Corrections happen, and rumors move markets. Which is why the Dow Jones average is down about 15% from its high back in November. However, it’s still at the highest level it’s ever been from before late 2022.Despite losses – and there will always be more losses – overall, people who invested in the markets over the past decade are still in very good shape.The economy is OKLast month the economy added more than 228,000 jobs, despite shedding hundreds of thousands of government workers. Meanwhile, other indices remain strong. True, manufacturing slipped into contraction last month – but that’s not really news, considering that – other than a few blips – it has been in contraction for years. Service industries are in their ninth consecutive month of expansion. Unlike 2009, capital is available and our banking system is strong. Consumers continue to spend. Wages are outpacing inflation.It’s too early to judge Trump’s tariff movesYes, Donald Trump’s trade war is disruptive. Maybe in the next few months – or a little longer – the smoke clears. We’ll see how this plays out. Maybe Trump’s decision to force the US economy to “take the medicine” so early in his administration aims to time this upside towards the end of his term. I wouldn’t be surprised to see more market volatility based on rumors, guesses and people trying to get attention for themselves. But I wouldn’t expect them to tank like they did in 2008.Growth policies under wayThere are also some very pro-growth policies under way and more coming.Like it or not, regulatory oversight from the federal government has already been scaled back thanks to a bunch of executive orders and the dismantling of agencies. This will help business owners keep their eye on their businesses, rather than the federal government. More importantly, both the House and Senate are moving to debate and then finalize a number of tax decreases which will include extending or making permanent many of the tax benefits from the 2017 Tax Cuts and Jobs Act as well potentially eliminating taxes on capital gains, overtime, social security and tips.All of this won’t happen, but some of it will and when it does consumers may have more in their pockets and businesses will enjoy a further long-term boost that should encourage more investment and growth.A cooling of inflation?The bond market thinks that inflation will cool down. That’s because bond yields have significantly decreased over the past few weeks. When inflation is expected to fall, so do yields. These traders think that – despite tariffs – there will be enough of a slowdown to dampen price increases and encourage the Federal Reserve to lower interest rates. Will the slowdown cause a recession? Maybe. But lower interest rates mean a lower cost of borrowing. It also helps reduce the government’s spending towards paying down debt.One big beneficiary of lower interest rates would be the residential real estate industry – which represents up to 18% of the US economy. Many homebuyers (and sellers) have been holding back due to higher interest rates. But now that bond yields are falling, so too are mortgage rates (which are also based on future inflation). In late 2023 the average mortgage rate was about 8%. Now it’s close to 6.5%. We’re getting close to a tipping point that could ignite this market. As we head into the spring and summer I would expect to see more buyers and sellers come out of hiding.I’m sure plenty of economists, academics and pundits will argue with these takes. The bottom line: don’t sell your stocks. Hold firm. History shows that, unless you speculate or get lucky with an isolated home run, investing in the broad stock market via mutual and index funds generally outpaces all other investments. If you have excess cash, consider putting more into these funds. Of course, consult a competent wealth adviser and evaluate your specific risks. But relax. You’ll be fine. More

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      US small business owner says China tariffs endanger her company: ‘I could lose my home’

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      Beth Benike knew the tariffs were coming.The Minnesota veteran invented a placemat with bungee cords that hold toys or utensils, keeping them off the floor when babies toss them. It’s one of several products she created for Busy Baby, a company she runs with her brother. They are manufactured in China.She expected and budgeted for about 20-30% tariffs this year. When the first round of tariffs came in at 10%, it was manageable. Then the rate on China crept up, then up again, to 54%. That was her “oh, shit moment”, but she thought she could weather it, she told the Guardian.It didn’t stop there, though. It climbed up to 104%. She filmed a video of herself “mid-meltdown” over the extreme tariff, posting it on her social media.Busy Baby is one of many US small businesses having to reckon with monumental tariffs that could shutter their livelihoods. Donald Trump’s escalating trade war with China now includes a 125% tariff on Chinese products coming into the US. These businesses were given little more than a week to confront a budget-busting tax on their goods.View image in fullscreen“After today’s announcement, and the impending 104% tariff, I am abandoning my products in China. I am leaving them there because I simply cannot afford to ship them here,” Benike told her followers on Monday, before Trump hiked the tariff on Chinese goods up even further on Wednesday.“At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable,” Trump wrote on Truth Social Wednesday as he paused tariffs on other countries.Benike already paid about $160,000 to manufacture her products in China, and would have to pay more than that to bring them to the US. So for now, she’s trying to figure out other options: she could try to sell them overseas, or send them to another country to repackage them.“I’m terrified for my business, and I’m terrified for all the other small businesses in the United States right now, because we don’t know what to do, and we’re invested in our businesses. I could lose my home, and I don’t understand it, and I don’t know what to do,” she said in the video.After Trump’s latest increase, Benike said she was looking into sending the paid-for products to Australia, where she has friends, to have them repackaged, then importing them from there during the 90-day pause because it is at least a way to get the products she already paid for to the US.Her business has grown since she founded it in 2017, and accolades have come with it. She was named Minnesota’s small businessperson of the year by the US Small Business Administration this year. She finally got into big retailers – Target and Walmart – with small test runs. Those contracts, though, were signed before the tariffs. Walmart told her it wanted to keep and expand its offerings from Busy Baby, she said, but she had a “hard conversation” with the buyer this week to let them know she cannot add a third product to their roster because of the high tariffs.View image in fullscreen“It has completely stifled my growth in big box retail, which has been our main goal for three years– to grow into that space,” she said. “Because as a teeny, tiny business, that’s a huge achievement, huge for our brand. And now it’s halted.”The other option, the one Trump wants, is a pipe dream: manufacturing her products in the US. Benike would prefer to manufacture here, too. But a mountain of logistics, near impossibilities, stand in her way.Food-grade silicone, which she uses for her products, is not available domestically. When she looked into the cost of importing the material when she first started, it was more expensive than importing a finished product, and the prices have gone up since then. Manufacturing facilities in the US with the compression mold machines she needed require much larger runs than she can commit to. The minimum requirements for factories here was 20,000 – in China, she could do a couple thousand at a time.Making the molds for her products takes about two months. They also are made in China – many American manufacturers send American steel to China to makemolds because they’re better at it there, she said. The molds alone would cost up to $75,000 in the US. If she found a factory and the capital needed to get it all going, it would still take a minimum of four months until she had products ready to sell, she estimated.“It’s financially impossible for me to manufacture here. But even if I had an angel that just dropped a million dollars in my lap, it doesn’t make sense as a business model for how much we would have to charge for the product and charge the consumer,” she said. “It doesn’t make any sense. So I wish I understood the big picture, or how they expect us to pivot in this tiny window of time. I don’t understand, I just don’t understand this.”She said she has about two or three months’ worth of product on hand now, giving her a few months until she could theoretically go out of business if she doesn’t figure something else out. If people buy up what she has left, that at least gives her some cashflow to buy her some time to make new plans.On Tuesday, she got a call from the Small Business Administration, she said. Someone there saw her video, so she’s sending them information on her products and the machines at the factory she uses now. The agency is going to try to find a factory in the US that could make her products, but she’s not holding her breath.View image in fullscreenShe decided to post her video and speak out about the way the tariffs are affecting small businesses because she has a community of supporters and other entrepreneurs who can help and commiserate, including some who know her from her appearance on Shark Tank.Two years ago, during a different tough spot for her business, she had suicidal thoughts. The weight of being a CEO was heavy. She thought, if she was gone, at least her family would have life insurance to live on. She got help then and learned coping strategies.The thought of life insurance surfaced again this week. She caught it quickly, reminding herself that “this is a trick my brain is playing on me right now, because it doesn’t see a way out”. She wants other entrepreneurs to know they aren’t alone as they face these tariffs. She’s heard from some, who have messaged her privately to say they are feeling the same pain, but can’t speak out because it’s a business risk.Some of the comments on her video and on local news websites that have written about her predicament have not been kind. Some have said, you voted for this, or you deserve this if you voted for Trump. She did not vote for Trump, she said, but she does not know why her political beliefs matter.“No one deserves this. No one. Regardless of who they voted for,” she said. “Trump said he was going to do tariffs. We knew that. Yes, we knew tariffs were coming. I would have never in a million years guessed it would be like this.”She has more than 15 patents for the products she’s created for the “accidental business” she came up with after her son was born. She learned how to start a business, develop products, set up an e-commerce store. Now, digging her way out from huge tariffs is one more thing to learn.“We’ve got a great product, and it is a great product for babies. Babies exist all over our world, all over the planet, babies everywhere. I can’t fail,” she said. “This is my children’s livelihood. It’s my home.” More

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      Read the signs of Trump’s federal firings: AI is coming for private sector jobs too

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      The Trump administration recently announced that it would be laying off approximately 6,700 workers at the Internal Revenue Service, about 8% of the people employed by the agency. Tens of thousands of federal employees at other agencies are also losing their jobs.The timing could not be worse. We’re in the middle of the tax season with corporations and individuals facing filing deadlines in March and April. Millions of returns will need to be processed. Refunds will be due. Questions will need to be answered. But that’s not all.In just a few short months, Congress will be debating – and probably passing – new rules that will significantly change our tax laws. Republicans are pushing to either extend or make permanent many of the provisions of the 2017 Tax Cuts and Jobs Act, most of which expire at the end of this year. There are proposals to eliminate taxes on tips, social security income and overtime wages. The Democrats will be fighting some of these provisions, arguing their effect on future deficits. Regardless, there will be an enormous amount of change to rules, forms and guidance that will need to be made by the IRS.The remaining employees at the agency, already demoralized and now seriously short-staffed, will now be asked to handle this looming workload. Taxpayers and their accountants will need to be patient. I can already foresee my profession’s future frustration as they wait for guidance on a myriad of tax changes that will affect their clients. After barely recovering from all the disruptions caused by the pandemic, these layoffs are sure to set things back.But let’s not pretend this isn’t part of a wider trend.We all know the technology already exists to do much of the work that many IRS employees do now. My clients already use tech platforms to automate their accounts payment and payments. These systems – which leverage AI and optical character recognition – can very accurately (and affordably) scan, read and extract data from any document and ensure that the information is integrated into their accounting systems, where payments are automatically scheduled for review and disbursement. Considering that most of the tax returns filed are done in a similar fashion – and are mostly routine – it seems obvious that similar systems could be doing the same functions, which would probably eliminate a much greater percentage of workers who have already been chopped by the current administration.Look what technology is doing elsewhere. The financing platform Klarna announced last summer it was laying off about 2,000 workers – half of its workforce – as a result of its new AI customer service system that did their work instead. Morgan Stanley, JP Morgan Chase, UBS and other Wall Street firms are building AI-based systems that are eliminating the need for investment analysts, wealth managers and other human workers. Google, Ikea, Salesforce and a number of other firms are rapidly replacing their workers with AI systems. Mark Zuckerberg has publicly said that AI applications will be doing the work of mid-level engineers at Meta this year.About $80bn was allocated to the IRS under Joe Biden’s Inflation Reduction Act to “modernize” tax collection. Government being the government, I’m sure that progress has so far been slower than it should be. But if you’re working at the IRS, or any federal agency, do you not see the writing on the wall? And if you’re working in customer service, marketing, accounting or any of these jobs in the private sector do you also not see what’s happening?The firing of federal workers is a preview of what’s about to happen in the corporate world. CEOs at numerous companies have already demonstrated that technology can do the work of people and replace them. And they’re just getting started. The tech companies like to say that AI will “work alongside” humans or “increase employees’ productivity” but that’s nonsense. Like the federal workers, many in the private sector are about to be replaced too. More

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      Why is Trump behaving like a bully over tariffs? Because he can | Gene Marks

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      Why is Donald Trump so obsessed with tariffs? If you ask me, it’s because America is so freaking huge. California’s economy is bigger than the entire UK’s. Texas’s is larger than all of Canada’s. Florida’s is larger than all of Mexico’s. In its entirety the US economy is about eight times larger than both the Canadian and Mexican economies … combined!Trump is a bully sitting on top of the world’s biggest bully – the American economy. Bullies tend to use their fists to overcome others. Sometimes they can be outwitted. But we all know that strength and size means everything.As a bully, Trump uses tariffs as a weapon and he can get away with it. This is what bullies do. He can threaten smaller countries such as Canada and Mexico because he’s bigger and stronger. He can increase tariffs, cut off funding and limit aid to foreign countries because he knows that, without the US, those organizations and governments would be unable to sustain themselves.And sure, using tariffs as a tool will have collateral damage at home. I recently spoke to an association of building materials distributors and they aren’t exactly thrilled with the potential that their costs of Canadian lumber could rise by 25%. Neither are e-commerce businesses that buy products from China, food service companies that sell Mexican produce or energy companies that rely on oil supplies from up north.But then again there are others that love tariffs. Have a conversation – as I’ve done – with business owners that make steel and have been undercut by Chinese imports or those in the kitchen cabinet manufacturing industry who have faced the same unfair trading practices that has cost them customers and caused them to contract their investing and hiring. Or talk to auto manufacturers whose cars are being tariffed almost five times higher when trying to sell their vehicles in Europe versus the other way around. Or the American companies that have been historically unable to sell their milk, cheese, butter and chicken in Canada because they face existing tariffs exceeding 200%.It’s true that tariffs will benefit some businesses and hurt others. And it’s true that the rising costs of some products will ultimately trickle down to the consumer. But many businesses I know are determined not to let that happen.For example, I have clients in many industries who have been quietly building inventory over the past few months to cushion their supply. I know others who have been aggressively finding alternative suppliers both in the US and in countries that are less exposed to higher tariffs. Others are simply finding ways to cut costs by doing things like reducing their property footprint or investing in technology and AI to offset the increase in the prices of materials. These strategies are easier said than done. But I’ve seen them being implemented by smart, forward-thinking leaders.Regardless, let’s agree that for both businesses and consumers Trump’s tariff adventures are not great, particularly in the short term. They’re disruptive. They’re causing significant uncertainty. They affect margins. They could potentially hit shoppers right in the pocketbook at a time when prices are already high and incomes are barely keeping up.But Trump doesn’t care. He enjoys being a bully and he knows that – given the size of our economy and our influence around the world – he can be. Will his bullying result in a more level playing field for American companies? Will it drive more investment and jobs at home? Will it result in limiting illegal immigration or the importing of fentanyl? Is he doing this for the right reason, which is to make America stronger?Is his bullying justified? Is any bullying justified?Maybe, maybe not. Most of the times bullying isn’t justified, so history is not in his corner. Unfortunately, the rest of us running businesses and going to the grocery store have no way of knowing. We may bask in his success. Or we may suffer if he fails. But one thing’s for sure: he told us he was going to do this and this is what the country asked for when he was elected. More

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      Fellow Republicans, it’s time to admit that the US economy isn’t bad

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      The Republican primaries are under way and – not surprisingly – the candidates have been ganging up on Bidenomics. Spoiler alert: they don’t like it. Fact check: they are wrong.To a man – and one woman – the Republican candidates all say that the US economy is bad and that Americans are struggling financially. They’re warning about sky-high deficits, over-the-top government spending and a potentially catastrophic level of national debt. They point out that interest rates are at a 20-year high and the costs of core things like food, gas and housing are significantly more than they were just a few years ago. They point to a downturn in manufacturing and falling small business confidence.“Bidenomics is crushing American families,” said the Republican candidate Nikki Haley. “We’re paying more for gas, groceries and other basic necessities.”“I’ll rip up Bidenomics on day one of my presidency,” the Florida governor and presidential challenger Ron DeSantis warned.Yes, prices and rates are up. But really? Is the economy so bad? I’m a Republican and a small business owner with hundreds of clients in many industries and honestly the economy isn’t that bad. In fact, it’s been really, really good.Just ask Donald Trump, who implicitly admitted this when he recently said he hoped for a “crash” and that it would “be in the next 12 months because I don’t want to be Herbert Hoover”.If you don’t believe me, just look at the numbers.Last quarter’s gross domestic product showed growth of 5.2%. That’s a number that dwarfs all other pre-Covid recovery numbers in recent memory. Unemployment is at a record low. Each month the economy is adding hundreds of thousands of new jobs. There are millions of more open jobs available today compared with 2019.Yes, prices are higher, but inflation is down from a 9% annual rate to about 3%, so whatever the Federal Reserve did to offset the treasury’s spending on fiscal programs seems to be working. The stock market is near all-time highs, as is household wealth. Credit card delinquency rates are lower than they’ve been for the past 30 years as are delinquencies on all loans across the banking system. Holiday retail sales were strong and online sales boomed. Plenty of capital is available for businesses that need it and corporations have more cash on hand than in any year before the pandemic.skip past newsletter promotionafter newsletter promotionI speak to dozens of industry associations each year and here’s what I’m hearing: just about everyone had a good 2023. The CEOs of our major banks reported strong earnings, after taking into consideration special assessments and one-time charges. Retailers and restaurants have recovered from the pandemic. Convention traffic in Vegas is back to normal. There are almost as many travelers through the airports as there were before Covid. Businesses in the service industries recorded their 12th consecutive month of growth.Sure, there are struggles. Businesses in the real estate industry are challenged by high housing prices and a 13-year low in home sales. Manufacturing has been in contraction for the past 14 months. Media companies are flailing. Technology firms are struggling to find financing. The cost of capital is slowing down financing for small businesses. However, we live in a giant country. California’s economy is as large as that of the entire United Kingdom. North Carolina’s economy is bigger than Sweden’s. Texas’s is bigger than Canada’s. Not every business is going to be doing well in an economy this size. There will always be those that are struggling, be it because of their location, their industry, or the makeup of their customer and supplier base.There are plenty of things that could knock things off course in 2024. Wars. Oil prices. A terrorist attack. Another pandemic. If you want to find the bad in the economy you can do it. And that’s what all the Republican candidates are doing and fair enough, it’s an election year. It’s also true that Bidenomics may not be the reason behind our strong economy. But saying the US economy is bad just isn’t true no matter who you vote for. More

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      Cannabis firms are cut off from the US financial system, but relief is in sight

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      Imagine that you run a perfectly legal business but are unable to open a simple checking account at a national bank. Believe it or not, that’s the case right now for anyone licensed to sell cannabis in the US. Given the size of the cannabis industry, it’s pretty shocking. But it may be about to change.In the US, 38 states have legalized marijuana for medical use and 23 of them have legalized it for recreational purposes, including three territories and the District of Columbia. An additional eight states have decriminalized its use. Both red and blue states with legalized marijuana laws have collected $15bn in tax revenue between 2014 and 2022, with $3.77bn in tax revenue attributed to 2022 alone.Meanwhile, if you run a cannabis business – one that sells, distributes, manufactures or in some cases serves the industry, you’re not allowed to be a normal business.Meta, Facebook’s parent, only allows “limited” CBD and hemp advertising. Cannabis companies can’t run TV or radio commercials for their products. They are not allowed to conduct any campaigns outside their state as interstate commerce is forbidden. In Ohio – like other states – they can’t run a billboard campaign without prior approval of the state’s board of pharmacy. Many localities have zoning laws that prohibit them from operating. Many insurance carriers are reluctant to serve the industry as do a number of the country’s largest payroll service providers.Cannabis businesses are not allowed to deduct rent, payroll or other expenses that other businesses can write off. They regularly face expanded business licensing requirements. They can’t take advantage of the federal bankruptcy rules. They can’t trademark their products.And then there’s banking. Cannabis businesses can only choose from about 200 independent and community banks. I don’t mean to throw shade on these organizations, because many of them are excellent. But they oftentimes don’t offer online banking, international access, wire transfer, investment options, financial stability and other capabilities of a larger institution. When it comes to the cannabis industry, federally chartered banks like Wells Fargo, PNC Bank, JP Morgan Chase, TD Bank and Key Bank are not playing ball. Because of this, many cannabis businesses receive fewer financial services and have been forced to retain an uncomfortable level of cash, making themselves exposed to theft and crime. The banking industry realizes this but resists.Why is this? Because cannabis is still considered to be an illegal controlled substance, subject to very strict federal laws and, because it’s illegal at the federal level, many large corporations, such as banks, insurance companies and payroll services, remain spooked.It’s no surprise that, despite all the growth, many in the cannabis industry are struggling to make profits. But there’s potentially good news on the horizon. Finally, the federal government may allow banks with federal charters to do business with those in the cannabis industry.At the end of last month the Senate committee on banking, housing and urban affairs moved forward with the Secure and Fair Enforcement Regulation (Safer) Banking Act, which allows banks to conduct business with cannabis companies. The House already passed a similar act, so the Senate committee’s approval is a big deal.“This legislation will help make our communities and small businesses safer by giving legal cannabis businesses access to traditional financial institutions, including bank accounts and small business loans,” the bill’s sponsors said in a joint statement. “It also prevents federal bank regulators from ordering a bank or credit union to close an account based on reputational risk.”skip past newsletter promotionafter newsletter promotionStill, significant hurdles exist. There remain a number of representatives in both the House and Senate who oppose the bill.“This legislation also compromises the integrity of the United States banking system by giving banks government approval to participate in illegal activity, setting a dangerous new precedent,” some Republican senators said recently in a joint statement. “Allowing banking access to a Schedule I drug sets a dangerous legal precedent and will help facilitate money laundering for drug cartels.” This opposition, combined with a leadership void in the House, could derail progress of the bill for the foreseeable future.But I’m more optimistic. The bill is not going so far as to legalize marijuana, so that should appease some of its opponents. And given the strong bipartisan support received in both the Senate and House for the Safer Banking Act, I don’t believe it’s an overreach to expect passage … eventually. When? Who knows.In the meantime, those in the industry must wait. And fight. And deal with restrictions that few other legitimate companies have to face. It’s tough enough running any business. But for those in this game, it’s a whole new level altogether. More

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      $80bn for the IRS? Fund the US taxman, but not like this | Gene Marks

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      Ask any accountant and we’ll tell you that the Internal Revenue Service is woefully underfunded. Our clients complain about the long delays for refunds, the interminable waits for getting answers and the frustrations waiting for guidance on issues that affect their businesses.But it’s not just accountants that are clamoring for more IRS funding. Most taxpayers I know will admit that the IRS needs a serious upgrade. So why the big brouhaha over the $80bn approved last year to hire more auditors and upgrade the agency’s pathetically outdated systems? The answer lies not in why it’s so badly needed. It’s in how badly it was sold to the American public.We all pay for things we don’t like. We need to have insurance but we don’t like the premiums. We don’t really want to give a wedding gift to that fifth cousin or tip the waiter even though the service wasn’t that great. And of course, we pay taxes – and no one likes that either.The same goes for the IRS. We know that everyone should be paying their fair share and we get that there has to be a government agency to oversee this. Making sure the IRS has adequate funding is a no-brainer. And yet here we are arguing over its need. For this, I blame President Biden and the Democrats.The bipartisan Tax Foundation found that the costs to collect $100 (in 2021 dollars) has decreased 41% since 1991 and that during this same period, the amount collected per taxpayer has increased 45% and that the agency did this despite its much lower staff. These are impressive accomplishments when you consider that most of the agency’s systems are decades old.Even so, Republicans and the media pounced on the $80bn allocated under the Inflation Reduction Act to be used for hiring more auditors and technology upgrades which could potentially save more than $1tn per year. And during recent talks to raise the US borrowing limit, Republicans somehow managed to claw a quarter of that amount back with plans to pursue more.Most people in both parties understand the necessity to fund an agency whose sole objective is to ensure that everyone pays their fair share of taxes. But you can’t really blame Republicans for crying foul. This is what politicians do when there’s a slam-dunk issue like this. Big government: bad. Small guy taxpayer: good.But there was a better way for the Democrats to achieve this funding, which, according to the Cato Institute, will increase the IRS’s budget from $5.2bn to $19.5bn by 2033 – about $1.4bn per year, which is just one-half of one percentage point of our country’s overall spending.Why not bury some of this amount in the overall treasury department’s annual budget of $3.24tn? Over a 10-year period that funding could have been absorbed by the numerous subdivisions of the agency and then re-allocated back to the IRS in that bureaucratic way that bureaucrats do where no one really knows where or how the money was spent.Or how about trying what any business owner would do when appropriating money to a project: assign quantifiable metrics and holds its recipients accountable? Make it such that the spending could be paused or even pulled unless these numerical goals are achieved each year. That way the Republicans could insist they’re holding their opponents’ feet to the fire, while the Democrats still get to spend the money.Or you could take a pure tech angle and take people out of the equation. Remove and prohibit the “hiring” of new auditors and instead mandate that the funds only be used for technology. Better yet, AI technology because that’s what’s hot! Emphasize that the IRS is going to be the federal government’s leader in tech, reducing its headcount and increasing its output and responsiveness by leveraging the latest AI tools as it upgrades its systems. Of course, some may be scared by the prospect of out-of-control robots but it’s obvious to most of us who regularly deal with the IRS that – probably more than any other agency – most of what it does can be automated.But no. Instead, Biden and the Democrats allowed an inordinate amount of attention to be drawn directly to the $80bn for the evil IRS, which in turn invited a tidal wave of backlash. This didn’t have to happen. With a little bit of thought, some maneuvering, finessing and manipulation, that money – which is sorely needed – could have been spent under the radar and much of this controversy could have been avoided. More