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House Democrats’ Plan to Tax the Rich Leaves Vast Fortunes Unscathed

The proposal includes substantial measures to raise taxes on the rich. Taxable income over $450,000 — or $400,000 for unmarried individuals — would be taxed at 39.6 percent, the top rate before President Donald J. Trump’s 2017 tax cut brought it to 37 percent. The top capital gains rate would rise to 25 percent from 20 percent, considerably less than a White House proposal that would have taxed investment gains as income for the richest, at 39.6 percent.

Under the committee’s plan, a 3 percent surtax would be applied to incomes over $5 million. The value of estates shielded from estate taxation, which doubled to $24 million for married couples under the Republican tax cuts of 2017, would go back to $12 million at the end of this year, four years earlier than the scheduled expiration.

The proposal would also raise taxes in a variety of ways on businesses called pass-through entities — like many law firms and financial companies — that distribute profits to their owners, who then pay individual income taxes on them. Those changes, including the extension of an existing 3.8 percent surtax to include pass-through income, would raise taxes primarily on high earners, generating several hundred billion dollars in revenues, by Democratic estimates.

The joint committee estimated on Monday that the changes would raise about $1 trillion from high-income individuals.

Republicans balked at the proposal. Business lobbying groups rejected the package, with the U.S. Chamber of Commerce slamming it as “an existential threat to America’s fragile economic recovery and future prosperity.”

“President Biden, Speaker Nancy Pelosi and House Democrats are ramming through trillions of wasteful spending and crippling tax hikes that will drive prices up even higher, kill millions of American jobs and drive them overseas, and usher in a new era of government dependency with the greatest expansion of the welfare state in our lifetimes,” Representative Kevin Brady of Texas, the committee’s ranking Republican, said of the plan.

But what is not included is notable. The richest of the rich earn little from actual paychecks (Mr. Bezos’s salary as the founder of Amazon was $81,840 in 2020), so a surtax on income would have little impact. Their vast fortunes in stocks, bonds, real estate and other assets grow largely untaxed each year.

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Why Washington Worries About Stablecoins

That makes them the type of financial product “macroeconomic disasters usually come from,” said Morgan Ricks, a professor at Vanderbilt University Law School and former policy adviser at the Treasury Department. “The stakes are really, really high here.”

That said, some people — including George Selgin, director of the Center for Monetary and Financial Alternatives at the Cato Institute — argue that because stablecoins are used as a niche currency and not as an investment, they may be less prone to runs in which investors try to withdraw their funds all at once. Even if their backing comes into question, people will not want the potential taxes and paperwork that comes with changing stablecoins into actual dollars.

Given that the technology is so nascent, it is hard to know who is correct. But regulators are worried that they may find out the hard way.

Stablecoins are not all created equal. The largest stablecoin, Tether, says it is roughly half invested in a type of short-term corporate debt called commercial paper, based on its recent disclosures. The commercial paper market melted down in March 2020, forcing the Fed to step in to fix things. If those types of vulnerabilities strike again, it could make it difficult for Tether to quickly convert its holdings into cash to meet withdrawals.

Other stablecoins claim different backing, giving them different risks. But there are big questions about whether stablecoins actually hold the reserves that they claim.

The company Circle had said that its U.S.D. coin, or U.S.D.C., was backed 1:1 by cash-like holdings — but then it disclosed in July that 40 percent of its holdings were actually in U.S. Treasuries, certificates of deposit, commercial paper, corporate bonds and municipal debt. A Circle representative said that U.S.D.C. will, as of this month, hold all reserves in cash and short-term U.S. government treasuries.

The New York attorney general investigated Tether and Bitfinex, a cryptocurrency exchange, charging in part that Tether had at one point obscured what the stablecoins actually had in reserve. The companies’ settlement with the state included a fine and transparency improvements.

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Retailers Rethink Pandemic-Battered Manhattan

In the heart of Manhattan’s garment district, a once-busy Starbucks on a corner of Eighth Avenue and 39th Street sits empty. Just down the block, a Dos Toros Taqueria that opened just three years ago is now closed. And Wok to Walk, which once served steaming containers of noodles mixed with chicken and vegetables to a bustling lunch crowd, is also shuttered.

While the Delta variant of the coronavirus has again delayed plans by many companies to bring employees back to offices en masse, workers who have been trickling into Midtown are discovering that many of their favorite haunts for a quick cup of coffee and a muffin in the morning or sandwich or salad at lunchtime have disappeared. A number of those that are open are operating at reduced hours or with limited menus.

With the pandemic keeping millions of New York City office employees home for the past year, restaurants, coffee shops, apparel retailers and others struggled to stay afloat.

By the end of 2020, the number of chain stores in Manhattan — everything from drugstores to clothing retailers to restaurants — had fallen by more than 17 percent from 2019, according to the Center for an Urban Future, a nonprofit research and policy organization.

Across Manhattan, the number of available ground-floor stores, normally the domain of busy restaurants and clothing stores, has soared. A quarter of the ground-floor storefronts in Lower Manhattan are available for rent, while about a third are available in Herald Square, according to a report by the real estate firm Cushman & Wakefield.

Starbucks has permanently closed 44 outlets in Manhattan since March of last year. Pret a Manger has reopened only half of the 60 locations it had in New York City before the pandemic. Numerous delicatessens, independent restaurants and smaller local chains have gone dark.

“Midtown clearly has been the hardest hit of any of the areas of Manhattan,” said Jeffrey Roseman, a veteran retail real estate broker with Newmark. “If you think of other office-centric areas, whether all the way downtown or Flatiron or Hudson Yards, there is a lot of residential surrounding those areas that helped sustain those markets. Midtown, for the most part, is a one-trick pony.

“It’s mostly offices and hotels, which also took a hit from the downturn in tourism.”

The turmoil has reached farther downtown, though. Last week, the luxury furniture retailer ABC Carpet & Home — whose flagship store has been a fixture of the Union Square area — filed for bankruptcy protection, in part because of “a mass exodus of current and prospective customers leaving the city.”

But in a city where one person’s downturn is someone else’s opportunity, some restaurant chains are taking advantage of the record-low retail rents to set up shop or expand their presence.

In the second quarter, food and beverage companies signed 23 new leases in Manhattan, leading apparel retailers, which signed 10, according to the commercial real estate services firm CBRE.

Shake Shack and Popeyes Louisiana Kitchen were among those signing new rental agreements this year. So was the burger chain Sonic, which signed a lease for its first Manhattan outpost, replacing a Pax Wholesome Foods location in Midtown. The Philippines-based chicken joint Jollibee, which enjoys a committed following, plans to open a massive flagship restaurant in Times Square.

Still, with so much uncertainty about when employees may fully return to Midtown offices, some companies are proceeding carefully. The coffee shop Bluestone Lane had plans to expand aggressively into Manhattan before the pandemic and is still considering locations in Midtown. But it has now turned its focus to opening in more residential neighborhoods like Battery Park City, Hudson Yards and TriBeCa.

“We intentionally selected urban residential areas for our new cafes so we are not dependent on our locals returning to a physical office space, and are well positioned for the future of hybrid work,” Nick Stone, the founder and chief executive of Bluestone Lane, said in an emailed statement.

And some chain restaurants that already have reopened in Midtown are altering their strategies to address what they believe are the changing needs of customers in a post-Covid world.

On a recent weekday, a handful of customers were nibbling on salads and sandwiches at the Bryant Park location of Le Pain Quotidien. The long, communal tables that once dominated the front of the restaurant are gone for now, while refrigerated cases for a selection of grab-and-go drinks, salads and sandwiches will be expanded next year as part of a remodeling. A new app to preorder and pick up food became available in May.

While the new technologies work for some customers, others long for the past.

“We used QR codes for guests to look at the menu as we tried to limit the contact of surfaces, but the majority of our guests want to hold a real menu,” said Stephen Smittle, the senior vice president of operations for Le Pain Quotidien. “They very much want to feel normal. They want a server. They want to hold a cup of coffee, not a paper cup.”

Struggling before the pandemic, Le Pain Quotidien filed for bankruptcy in May 2020. It was acquired by Aurify Brands, which has since reopened many of the Le Pain Quotidien locations around the city, including several in Midtown.

“Our thinking is that Midtown New York will come back to a level that might not be 100 percent prepandemic, but based upon information we have gathered, I do believe that Midtown is going to come back to a prominent level,” Mr. Smittle said.

For Starbucks, one of the big lessons from the pandemic was that customers liked ordering their drinks online and then quickly picking them up at stores or drive-throughs. Starbucks had started to offer that even before the pandemic, opening a pickup location in Midtown’s Pennsylvania Plaza in late 2019.

Since early 2020, Starbucks has permanently closed 44 of its 235 locations in Manhattan. But it is adding mobile pickup areas in many stores and adding more pickup-only locations. The company says it expects to have net new store growth in Manhattan in the next few years.

Before the pandemic, Starbucks operated three stores around the Columbus Circle area. It closed them and this year opened one large restaurant. Now runners from Central Park pick up their preordered drinks from a mobile counter and head out again, while other customers stand in line to place their orders and can sit at nearby tables.

“We were going to build the concept out and evolve over time,” said John Culver, the president of North America and chief operating officer for Starbucks. “What we’ve done is taken the opportunity that the pandemic has presented and accelerated the transformation of our portfolio of stores. Consumer behaviors during the pandemic have accelerated at levels that no one expected.”

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The Fed will re-examine ethics rules after trades by two officials drew scrutiny.

The Federal Reserve is poised to overhaul the rules regarding what its officials are allowed to invest in and trade after disclosures last week showed that two of the central bank’s officials were active in markets in 2020, drawing an outcry.

Robert S. Kaplan, the president of the Federal Reserve Bank of Dallas, and Eric Rosengren, the president of the Boston Fed, bought and sold stocks and real estate-tied assets last year.

Those transactions complied with Fed guidelines, but they involved securities that could have been affected by Fed decisions and communications during a year in which it was actively supporting a broad swathe of financial markets amid the pandemic. Policy researchers and even some former Fed employees were upset by the disclosures.

In response to the scrutiny, both regional presidents announced that they would sell their holdings and move them to cash and broad-based funds. Still, the episode highlighted that the Fed’s rules governing its officials’ financial activity — although in line with what much of the government uses, and in some cases stricter — allow for considerable individual discretion. The central bank said on Thursday that it would re-examine those policies at the direction of Jerome H. Powell, the Fed chair.

“Because the trust of the American people is essential for the Federal Reserve to effectively carry out our important mission, Chair Powell late last week directed board staff to take a fresh and comprehensive look at the ethics rules around permissible financial holdings and activities by senior Fed officials,” a Fed representative said in a statement.

“This review will assist in identifying ways to further tighten those rules and standards,” the representative added. “The board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct.”

The statement came about an hour after Senator Elizabeth Warren, a Massachusetts Democrat, announced that she had sent letters to the Fed’s 12 regional banks urging them to adopt tougher restrictions.

“The controversy over asset trading by high-level Fed personnel highlights why it is necessary to ban ownership and trading of individual stocks by senior officials who are supposed to serve the public interest,” Ms. Warren wrote in the letters.

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