Harris’s Shift on Tax Cheers Her Corporate Backers

Harris’s big business move

After weeks of largely sticking to President Biden’s economic agenda, Vice President Kamala Harris has made her first break in policy: scaling back a proposed increase of the capital gains tax.

The move’s actual economic effect may be minimal, experts say, but it shows how Harris is seeking to keep a wave of corporate backers on board without alienating her more progressive supporters.

Harris made an explicit pitch to the business community. At a speech in New Hampshire on Wednesday, she proposed raising the capital gains rate for Americans who make more than $1 million a year to 28 percent, far lower than the 39.6 percent that Biden has proposed. “We know when the government encourages investment, it leads to broad-based economic growth and it creates jobs,” Harris said.

She also introduced a plan to allow new companies to deduct up to $50,000 in start-up expenses, a tenfold increase over an existing tax break.

Those plans aren’t as transformative as they first seem. That taxpayer group would face an all-in cap gains rate of 33 percent under Harris’s plan, when factoring in a 5 percent investment income surtax on the wealthiest Americans. That compares with 44.6 percent under Biden’s, including the surtax. (The current total rate is 23.8 percent.)

And one expert told The Times that the start-up tax break would mostly benefit new companies that end up failing, since they wouldn’t have to wait 15 years to deduct all of their founding expenses.

But messaging matters. While many deep-pocketed donors have flocked to the Democratic cause — to the point that Republicans are now worried about falling behind in the money race — they have been concerned that Harris would tack too far to the left.

Corporate supporters, who have already been pushing for moves like scrapping Biden’s proposed tax on the ultrawealthy, celebrated the latest announcements:

• “Kamala Harris is listening to business people and getting their feedback on what’s fair and what will lead to more investment in business,” Mark Cuban, the billionaire investor, wrote on X.

• “Great to see Harris moving to the center,” Aaron Levie, a founder of the software company Box, wrote.

Keeping the Democratic coalition together remains tricky. Harris is still largely committed to the existing Biden agenda, including a focus on price gouging that has irked some business leaders.

Separately, Morris Pearl, a former BlackRock executive who is chair of the advocacy group Patriotic Millionaires, said that Harris was “making a catastrophic mistake by capitulating to the petulant whining of the billionaire class.”

• In other election news: Donald Trump will talk about the economy at the Economic Club of New York on Thursday, and the Trump and Harris campaigns agreed to mute their microphones during their debate next week.

HERE’S WHAT’S HAPPENING

Verizon agrees to buy Frontier Communications to expand its fiber internet business. The deal, valued at $20 billion (including Frontier’s debt), is meant to bolster the telecom giant’s high-speed broadband division as it competes against AT&T. The transaction’s high price tag appeared to dismay Verizon shareholders — the company’s shares fell on Wednesday when news of the transaction leaked — and antitrust regulators may scrutinize it closely.

SpaceX scales back its presence in Brazil. Elon Musk’s rocket company has told workers in the country to leave and warned others to avoid traveling there, according to The Wall Street Journal. The warning comes as Musk battles the Brazilian Supreme Court over an order to block accounts on X, his social network, that are accused of spreading misinformation and hate speech.

Meta’s Oversight Board protects some uses of “From the River to the Sea.” The group of experts, which has a say over the social media giant’s policies, said that the phrase — which has been adopted by pro-Palestinian supporters, but has been accused of being antisemitic — was acceptable in three user posts that didn’t call for violence or exclusion. It’s another prominent example of companies being ensnared in the contentious debate over the war in Gaza.

U.S. Steel’s political problem

Shares in U.S. Steel plunged after reports that President Biden was set to block Nippon Steel’s $15 billion bid to buy the company on national security grounds, despite recent efforts by both businesses to allay policymakers’ fears.

But the acquisition has become ensnared by politics, with Democrats and Republicans alike opposing foreign ownership of a bastion of American industry that employs thousands of blue-collar workers.

The Biden administration told U.S. Steel that it had national security concerns. The Committee on Foreign Investment in the United States, or CFIUS, the Treasury-led panel that vets proposed takeovers of American companies by foreign buyers, has been scrutinizing the proposed deal for months. It recently sent a letter to U.S. Steel to warn that it had identified national security issues, The Times reports.

A decision could be announced soon. A White House official told The Times that CFIUS hadn’t yet sent its recommendation to Biden, but companies often abandon deals before the president officially moves to block them.

U.S. Steel said that it hadn’t received any updates related to the CFIUS process, adding that it would pursue all legal options to complete the transaction.

The deal became a political punching bag on both sides of the aisle. Biden said in the spring that he was against the deal, and on Monday, Vice President Kamala Harris said the company should remain American-owned. Donald Trump promised to block the sale.

But Biden’s decision underscores the fight for blue-collar voters. The United Steelworkers union opposed the deal, which had become a lightning rod in the battleground state of Pennsylvania, where U.S. Steel employs about 4,000 workers.

“What this deal shows is that the administration is about being the champion of the labor unions and their understanding that their political vulnerability is the working class,” Ivan Schlager, a lawyer specializing in CFIUS matters at the firm Kirkland & Ellis, told DealBook.

The wider ramifications are not yet clear. Some deal makers said blocking the transaction could make it harder to assess regulatory scrutiny. Others suggested that the decision underscored the importance of getting unions on board early.

The expected decision could also complicate American relations with Japan, a close ally and economic partner that has toed the line on U.S.-led moves to counter China. A leading candidate to become Japan’s next prime minister warned that blocking the deal to court voters would be inappropriate.

What next for the economy?

Companies have been warning for months that consumers are pulling back, scrambling the soft-landing narrative.

That’s put investors on edge ahead of tomorrow’s high-stakes jobs report.

The lackluster economic data keeps coming. On Wednesday, the JOLTS labor report showed that job openings fell to a 42-month low in July. And the Fed’s Beige Book survey of regional economic activity warned: “Employers were more selective with their hires and less likely to expand their workforces, citing concerns about demand and an uncertain economic outlook.”

The downbeat outlook may force the Fed to make a big move. The likelihood of a 0.5 percentage point cut by the central bank at its next meeting was almost 50-50 on Thursday. Weak employment numbers tomorrow would probably raise those calls.

Investors should be wary of a big cut, market pros warn. The S&P 500 rallied at the start of the summer on hopes of retreating inflation, presumably giving the Fed the cover to lower borrowing costs. But the markets have become volatile recently amid growing concerns that a cooling labor market could slow the economy.

“A market correction may start to get traction if payrolls are weak on Friday,” Scott Rubner, a Goldman Sachs strategist, wrote in an investor note on Wednesday.

What to watch for in tomorrow’s report:

• Economists expect the report to show that employers added about 160,000 jobs last month, up from 114,000 in July. The unemployment rate is expected to fall to 4.2 percent, from 4.3 percent.

• A big focus will be on the labor participation rate for the latest indication of the labor market’s health.

Is the labor market in protracted decline or merely normalizing? The normalization argument seems to be winning out. The unemployment rate is “nowhere close to a recession territory,” Mohit Kumar, an economist at Jefferies, wrote in a note on Thursday.

“I am not sure why Ryan included me. He did not have my permission and I do not support this financing.”

— Philip Krim of Montauk Ventures, on being listed as a backer of Bolt, a start-up founded by Ryan Breslow. Several investors protested being named as participating in Bolt’s latest fund-raising round and some, including BlackRock, have moved in court to halt the financing.

An A.I. star raises big money

The stock market may be on alert about the high costs of artificial intelligence, but the money continues to flow for the sector’s buzziest start-ups and founders.

The latest: Safe SuperIntelligence, the three-month-old company started by Ilya Sutskever, an OpenAI co-founder, has raised a whopping $1 billion from investors including Sequoia and Andreessen Horowitz.

The funding round would value the 10-person company at roughly $5 billion.

There has been big speculation about Sutskever’s next move. The top A.I. scientist left OpenAI over concerns that the company wasn’t paying enough attention to safety. He clashed with Sam Altman, OpenAI’s C.E.O. and another co-founder, over the matter, and backed Altman’s brief ouster before supporting his return.

Sutskever told Bloomberg in June that his company would be an A.I. research organization that didn’t plan to sell A.I. products and services, allowing it to build a safe system without the commercial pressure facing some of its peers. Still, the company competes against well-capitalized rivals backed by tech giants like Microsoft, Amazon and Nvidia.

Nvidia is boosting its investing, too. The dominant maker of A.I. chips joined the venture capital firms New Enterprise Associates, Khosla Ventures and Lux Capital in a $100 million-plus funding round for Sakana AI, a Japanese start-up founded by former Google engineers.

That comes as regulatory questions around Nvidia intensify. The company’s stock fell on Wednesday on a Bloomberg report that the Justice Department had subpoenaed the chip maker and other companies over antitrust concerns. But Nvidia denied the report, saying that it had not received a subpoena.

• In other A.I. news: The U.S., the European Union and Britain are close to signing a treaty that would seek to harmonize a patchwork of national laws and guidelines that govern the technology; and British antitrust officials ruled that Microsoft did not violate competition rules in hiring away former employees of Inflection AI.

THE SPEED READ

Deals

• The Nordstrom family has offered $3.8 billion to buy the namesake department store chain and take it private. (NYT)

• Topgolf Callaway plans to split itself into a golf-clubs maker and a driving range operator. (WSJ)

Elections, politics and policy

• Edelman hired Nikki Haley, the former Republican presidential candidate, as vice chair of the communications firm’s public affairs practice. (PR Week)

• The S.E.C. ended its legal fight to revive a proposed fee disclosure rule for hedge funds and private equity firms. (Bloomberg)

Best of the rest

• Andreessen Horowitz has closed its Miami office two years after opening up shop there. (Bloomberg)

• “Fyre Festival II Is Happening. The Only Question Is Where. And When. And How. (WSJ)

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