Higher Capital-Gains Taxes Could Snare Biden's Wealthy Cabinet Members

By Gabriel T. Rubin

TOP BIDEN OFFICIALS COULD BE HIT with hefty capital-gains tax bills if President Biden's tax proposals become law, though they could defer the consequences until death under laws exempting people who sell assets to take on government jobs. According to financial filings, cabinet officials have unloaded millions in assets that would trigger capital-gains taxes of up to 23.8% under current law, and would be taxed up to 43.4% if Biden's plan passed unchanged.

Government ethics policies direct officials to convert assets that could pose conflicts of interest into diversified or low-risk assets, like mutual funds or treasuries. For this sacrifice, they are rewarded with certificates of divestiture that allow them to avoid paying capital-gains taxes. But that just defers the tax bill, and meanwhile they could miss out on market appreciation and watch their potential taxes go up.

Top Biden officials have divested significant portfolios, or are in the process of doing so: Secretary of State Antony Blinken sold hundreds of shares each of Apple, Berkshire Hathaway, Facebook and Oracle, and 3,700 shares of Ally Financial Inc., along with his 33% share of the consulting firm WestExec Advisers LLC. Defense Secretary Lloyd Austin unloaded around 30,000 shares of Tenet Healthcare Corp., where he was a board member, valued between $1 million and $5 million; disclosure documents use a range for investment estimates. A State Dept. spokesperson said Blinken had completed the divestitures but wouldn't comment on personal financial plans. The Defense Department didn't respond to requests for comment.

Republicans have zeroed in on Energy Secretary Jennifer Granholm's investments in electric-vehicle maker Proterra. Wyoming Sen. John Barrasso requested an inspector general probe into a possible conflict of interest, after Biden conducted a virtual tour of Proterra's facilities last month. The Energy Department says Granholm is obeying her ethics agreement. Granholm was granted a divestiture certificate for around 240,000 shares on May 7, allowing her to complete her sales before August. The divestiture could hit Granholm hard, especially if Proterra excels in the fast-growing EV sector.

Divestitures are a perennial headache for administrations that have wealthy officials. President George W. Bush's Treasury Secretary, Hank Paulson, sold roughly $500 million of his Goldman Sachs Group stock when he took office, putting him on the eventual hook for tens of millions in taxes.

NAACP PRESIDENT Derrick Johnson told the Journal's Eliza Collins that he was "absolutely open to" a proposal being pushed by GOP Sen. Tim Scott during policing legislation negotiations, even as Democrats haven't committed to it. Democrats and activists want to change the doctrine known as qualified immunity, which shields police officers from lawsuits and limits civilians' ability to claim damages for constitutional rights violations. But Scott, the key GOP negotiator, says that's a nonstarter. He instead proposed making it easier to sue police departments, but not individual officers, for rights violations.

Johnson said the NAACP wants to change police departments' culture. If they become vulnerable to legal action, it could force leadership to focus more on officers' conduct. "What can come out of here is creating a new federal floor and with that floor it could determine how agencies train, recruit and retain and oversee the culture," Johnson said about Scott's proposal, before cautioning that he wanted to see a final draft before making a final decision.

FOREIGN GIFTS to American universities could get more scrutiny if Congress successfully passes bipartisan China competition legislation. The legislation, known as the Endless Frontier Act, requires universities to disclose large gifts and contracts from foreign sources, with the goal of blunting "China's malign political influence and predatory economic practices." Beijing has denied attempting any systematic effort to steal U.S. research. The Senate moved the bill closer to passage with an 86-11 procedural vote Tuesday.

The provision inches toward codifying a crackdown pursued by President Trump's Education Department. Last October, the department said its investigations found that universities failed to disclose $6.5 billion from foreign sources. The legislation covers gifts that have a minimum value of $1 million -- up from $250,000 -- and relate to the production or development of critical technologies, or grant the donor decision-making power at the institution.

CHILD-CARE CHALLENGES aren't holding back supply in the labor market, according to a Peterson Institute for International Economics paper. Economists Jason Furman and Melissa Kearney found that the employment rates of parents of young children have declined by 4.5%, compared with 5.2% for people who aren't parents of young children. Mothers saw their employment decline only slightly more than non-mothers, and the authors find it unlikely that their decline is responsible for more than 2% of the decline in overall employment; they instead point to other factors, like fear of contracting Covid-19 or workers preferring to receive enhanced unemployment benefits.

Other researchers reached opposite conclusions, pointing to U.S. Census Bureau surveys throughout the pandemic showing that around one-fifth of working-age adults said they weren't working because their child-care arrangements had been disrupted, with women three times as impacted as men.

MINOR MEMOS: Former Missouri Sen. Claire McCaskill finds cause of her spotty internet: a bee colony and 70 pounds of honey blocking cables..."My teenage son's room gives your facility a run for its money, " Rep. Raja Krishnamoorthi told the CEO of Emergent Biosolutions, which ruined 15 million vaccine doses...Biden shows off "car guy" bona fides in Michigan: "I've been in my bathing suit in my driveway and not only washed my 1967 Corvette but also Simonized it."

Write to Gabriel T. Rubin at [e-mail]

(END) Dow Jones Newswires

05-21-21 0544ET