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The government took stakes in a number of private companies during 2025, and it’s likely to continue making equity investments while Donald Trump remains in office. Whether or not this is a wise long-term strategy is an ongoing debate, with strong opinions on both sides. The practice represents a new industrial policy thats meant to tie the executive branch of government closer to companies it considers essential to national security and economic prowess. The Trump administration hopes its a more robust approach than subsidy grants in rebuilding critical supply chains domestically, reducing reliance on China, and ensuring key industries remain under U.S. control. But it also puts the government in the venture capital businesswhich may not be a good fit for politicians and bureaucrats. The government now perceives itself as a source of capital and the markets perceive them as a source of capitalits not going to stop, said former acting White House chief of staff Mick Mulvaney on a recent episode of The Informed Board, a podcast from Skadden Arps. And it may not be easy for a private company to say no. Any business that either sells a lot of stuff to the federal government or gets a lot of subsidies from the federal government is going to be a target, he added. I think its extraordinarily dangerous. And the reason I think its not going to go away is that regardless of the outcome, I think this is where the Republican Party is, Mulvaney said. “And its where the Democrat Party has wanted to be for a long time. The U.S. government has taken equity shares in private companies before, but only in times of war or economic crisis, and never as a normal feature of industrial policy, as the Trump administration views it. The government took a minority stake in Chrysler in the early 1980s when the company faced bankruptcy. During the 2008 financial crisis, the government took equity stakes in AIG, General Motors, Citigroup, Bank of America, and others. During the COVID-19 pandemic, the Treasury received equity warrants in airlines, including Delta, United, and American, in exchange for payroll support.Commerce Secretary Howard Lutnick has suggested that the administration is considering expanding the practice of buying equity to include defense contractors. The U.S. and Intel The governments biggest equity investment is the troubled chipmaker Intel. The Trump administration said in August that it would take a 9.9% stake, using $8.9 billion of CHIPs and Science Act grant money that had already been earmarked for the company. Intel finance chief David Zinsner said the governments investment was meant to incentivize Intel to keep majority control over its contract chip-fabrication business. The bigger picture is that the U.S. economy, including the defense industry, is increasingly reliant on the powerful chips used to train and run AI models, and the vast majority of those are made in Taiwan by TSMC. The U.S. could benefit greatly if Intel could fabricate equally advanced chips in the U.S. Taiwan is a potential geopolitical flash point because its a mere 85 miles away from China, and while the island has its own government, the Chinese government denies its sovereignty and claims it as its own. Other bets In July, the Defense Department paid $400 million for a 15% stake in the rare earth minerals company MP Materials (MP), making the Pentagon the companys largest shareholder. The deal includes a $150 million loan to help MP build a heavy rare earth separation plant in California. The government received a golden share in Nippon Steel in exchange for approving the Japanese companys proposed merger of Pittsburgh-based U.S. Steel Corp. The golden share doesnt represent equity in Nippon, but it does give the U.S. veto power in certain kinds of business decisions, as well as a right to appoint a board member. In October, the Department of Energy loaned the Canadian mining company Lithium Americas Corp. (LAC) and its Thacker Pass lithium mine project $2.26 billion in exchange for a 5% stake in both LAC and the mining venture. In October, the Department of Defense paid $35.6 million for a 10% stake in the Canadian company Trilogy Metals, which is developing the Ambler Access Road infrastructure project in Alaska to access metals like copper, cobalt, and zinc. In November, the Commerce Department said it intended to use $50 million in CHIPs Act money to buy a significant stake in the private rare-earth magnet producer Vulcan Elements. The Pentagon also intends to loan Vulcan another $620 million to help it build a large facility for neodymium iron boron magnets. Risky business There is a real purpose behind the stakes. The government isnt putting tax dollars into golf courses or TV networks (not yet, anyway). The investments are targeted at weak spots in the supply chains that the government and its suppliers need to support U.S. economic interests and national security. That was the core idea behind the CHIPs Act, too. After the government dispenses grants to private sector companies, equity investments allow the government to have something to show for them. And the equity ownership often affords the government some direct influence over the operations and plans of the company.Prominent progressives have championed this sort of thing. In 2022, Bernie Sanders and Elizabeth Warren proposed that CHIPS Act beneficiaries give Uncle Sam an equity stake for that reason, but the measure failed. Sanders and Warren also wanted to attach prohibitions against CHIPs grant recipients from using the funds to buy back stock, to offshore U.S. jobs, or to discourage unionization. Under Trump 2.0, the government is making bets on private-sector companies using tax money without the consent of Congress or the voters. What could go wrong? If the company falls on hard times, the governments equity could shrivel, and the tax dollars that bought it could vanish. In a broader sense, Republicans, especially small-government conservatives, have historically been hesitant to back private companies, out of fear of appearing as if the government is picking winners in the marketplace. The U.S. Chamber of Commerce warned that the government’s buying into private companies could turn innovative manufacturers into state-owned enterprises and hrm U.S. competitiveness. Still, the governments investment has been met with criticism. The Cato Institutes Scott Lincicome writes in a Washington Post op-ed that government equity stakes represent a dangerous turn in American industrial policy, adding that it abandons decades of market-oriented principles and risks politicizing Intels decision-making. With the U.S. government as its largest shareholder, Intel will face constant pressure to align corporate decisions with the goals of whatever political party is in power, he cautions. All of these companies saw their stock prices rise, in some cases dramatically, after their government investments were announced. And most of the companies are still doing well. Intel stock has gained about 53% (calculated from the preannouncement opening price to the closing price on December 18). MP Materials shares have risen 8%. Trilogy Metals is up 113%. Lithium Americas is down 35%.
Category:
E-Commerce
To tax tips or not? That is a question that will confront lawmakers in states across the U.S. as they convene for work next year. President Donald Trumps administration is urging states to follow its lead by enacting a slew of new tax breaks for individuals and businesses, including deductions for tips and overtime wages, automobile loans, and business equipment. In some states, the new federal tax breaks will automatically apply to state income taxes unless legislatures opt out. But in many other states, where tax laws are written differently, the new tax breaks won’t appear on state tax forms unless legislatures opt in. In states that don’t conform to the federal tax changes, workers who receive tips or overtime for example will pay no federal tax on those earnings but could still owe state taxes on them. States that embrace all of Trump’s tax cuts could provide hundreds of millions of dollars of annual savings to certain residents and businesses. But that could financially strain states, which are being hit with higher costs because of new Medicaid and SNAP food aid requirements that also are included in the big bill Trump signed. Most states begin their annual legislative sessions in January. To retroactively change tax breaks for 2025, lawmakers would need to act quickly so tax forms could be updated before people begin filing them. States also could apply the changes to their 2026 taxes, a decision requiring less haste. So far, only a few states have taken votes on whether to adopt the tax breaks. States in general are approaching this skeptically,” said Carl Davis, research director at the nonprofit Institute on Taxation and Economic Policy. Trump’s treasury presses states to ‘immediately conform’ A bill Trump signed on July 4 contains about $4.5 trillion of federal tax cuts over 10 years. It creates temporary tax deductions for tips, overtime, and loan interest on new vehicles assembled in the U.S. It boosts a tax deduction for older adults. And it temporarily raises cap on state and local tax deductions from $10,000 to $40,000, among other things. The law also provides numerous tax breaks to businesses, including the ability to immediately write off 100% of the cost of equipment and research. Forty-one states levy individual income taxes on wages and salaries. Forty-four states charge corporate income taxes. Treasury Secretary Scott Bessent this month called on those states to immediately conform to the federal tax cuts and accused some Democratic-led states that haven’t done so of engaging in “political obstructionism. Though Bessent didn’t mention it, many Republican-led states also have not decided whether to implement the tax deductions. By denying their residents access to these important tax cuts, these governors and legislators are forcing hardworking Americans to shoulder higher state tax burdens, robbing them of the relief they deserve and exacerbating the financial squeeze on low- and middle-income households, Bessent said. But some tax analysts contend there’s more for states to consider. The tax break on tips, for example, could apply to nearly 70 occupation fields under a proposed rule from the Internal Revenue Service. But that would still exclude numerous low-wage workers, said Jared Walczak, vice president of state projects at the nonprofit Tax Foundation. Lawmakers need to consider whether these are worth the cost, Walczak said. Only a few states offer tax breaks for tips and overtime Because of the way state tax laws are written, the federal tax breaks for tips and overtime wages would have carried over to just seven states Colorado, Idaho, Iowa, Montana, North Dakota, Oregon, and South Carolina. But Colorado opted out of the state tax break for overtime shortly before the federal law was enacted. Michigan this fall became first and, so far, only state to opt into the tax breaks for tips and overtime wages, effective in 2026. The overtime tax exemption is projected to cost the state nearly $113 million and the tips tax break about $45 million during its current budget year, according to the state treasury department. Michigan lawmakers offset that by decoupling from five federal corporate tax changes the state’s treasury estimated would have reduced Michigan tax revenues by $540 million this budget year. Republican state Rep. Ann Bollin, chair of the Michigan House Appropriations Committee, said the state could not afford to embrace all the tax cuts while still investing in better roads, public safety, and education. The best path forward is to have more money in peoples pockets and have less regulation and this kind of moved in that direction, she said. Arizona could be among the next states to act. Democratic Gov. Katie Hobbs has called upon lawmakers to adopt the tax breaks for tips, overtime, seniors, and vehicle loans, and follow the federal government by also increasing the state’s standard deduction for individual income taxpayers. Republican state House leaders said they stand ready to pass the tax cuts when their session begins Jan. 12. Several states have rejected corporate tax breaks In addition to Michigan, lawmakers in Delaware, Illinois, Pennsylvania, and Rhode Island have passed measures to block some or all of the corporate tax cuts from taking effect in their states. A new Illinois law decoupling from a portion of the corporate tax changes could save the state nearly $250 million, said Democratic state Sen. Elgie Sims, chair of the Senate Appropriations Committee. He said that could help ensure continued funding for schools, health care and vital services. Illinois Gov. JB Pritzker, an outspoken Democratic opponent of Trump, also cited budget concerns for rejecting the corporate tax cut provision. He said states already stand to lose money because of other provisions in Trump’s big bill, such as a requirement to cover more of the costs of running the Supplemental Nutrition Assistanc Program. The decoupling is an effort to try to hold back the onslaught from the federal government to make sure that we can support programs like the one were announcing today, Pritzker told reporters at a December event publicizing a grant to address homelessness in central Illinois. David A. Lieb, Associated Press Associated Press writer John O’Connor contributed to this report.
Category:
E-Commerce
Visa and Mastercard have agreed to pay $167.5 million to settle a long-running class action lawsuit. The suit, which was first filed back in October 2011, accused the two major credit card companies of conspiring to keep ATM fees artificially high. If approved, the proposed settlement filed on Thursday in Washington will bring an end to “almost fourteen years of vigorously contested litigation.” The lawsuit alleged that both Visa and Mastercard “participated in an unlawful conspiracy” to block independent ATM operators from offering lower prices. The settlement, if approved, will have Visa and Mastercard pay millions to ATM users who say they were charged an unreimbursed access fee to withdraw cash from independent non-bank ATMs. Per a Guardian report, Visa is set to pay 53% of the settlement ($88.8 million) while Mastercard will contribute 47% ($78.7 million). Attorneys for the plaintiffs called the settlement an excellent result in light of the risks of continued prosecution. Attorneys for the defendants did not immediately reply to a Fast Company request for comment. Last year, Visa and Mastercard also agreed to pay $197.5 million to ATM users who claimed they were overcharged at bank-operated ATMs. At the time, the plaintiffs’ attorneys said the settlement will “deliver immediate and assured relief.” That settlement followed a 2021 settlement in which major bankssuch as JPMorgan Chase, Bank of America, and Wells Fargoagreed to pay $66 million to settle similar claims. Still, the lawsuits against the two major credit card companies are not over, as a third lawsuit, launched by independent ATM owners and operators, is pending against the companies. “The rules prevent ATM operators from passing on the savings to cardholders when their ATM transactions are handled by an ATM network other than Visa or Mastercard,” Jonathan Rubin, an attorney for the plaintiffs, said in 2023 when announcing that the lawsuit would continue to move forward. At the time, he added that the suit will ask the court to eliminate rules that all but eliminate competition. Despite Thursday’s settlement, the companies have denied any wrongdoing.
Category:
E-Commerce
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