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When Idalia Bisbal moved to this Pennsylvania city synonymous with America’s working class, she hoped for a cheaper, easier life than the one she was leaving behind in her hometown of New York City.

About three years later, she is deeply disappointed.

“It’s worse than ever,” the 67-year-old retiree, who relies on Social Security, said when asked about the economy. “The prices are high. Everything is going up. You can’t afford food because you can’t afford rent. Utilities are too high. Gas is too expensive. Everything is too expensive.”

Bisbal was sipping an afternoon coffee at the Hamilton Family Restaurant not long after Vice President JD Vance rallied Republicans in a nearby suburb. In the Trump administration’s second high-profile trip to Pennsylvania in a week, Vance acknowledged the affordability crisis, blamed it on the Biden administration and insisted better times were ahead. He later served food to men experiencing homelessness in Allentown.

The visit, on top of several recent speeches from President Donald Trump, reflects an increasingly urgent White House effort to respond to the economic anxiety that is gripping both parties. Those worries are a vulnerability for Republicans in competitive congressional districts like the one that includes Allentown, which could decide control of the U.S. House in next year’s midterms.

But in confronting the challenge, there are risks of appearing out of touch.

Only 31% of U.S. adults now approve of how Trump is handling the economy, down from 40% in March, according to a poll from The Associated Press-NORC Center for Public Affairs Research. Yet Trump has called affordability concerns a “ hoax ” and gave the economy under his administration a grade of “A+++++.” Vance reiterated that assessment during his rally, prompting Bisbal to scoff.

“In his world,” Bisbal, a self-described “straight-up Democrat,” responded. “In the rich man’s world. In our world, trust me, it’s not an ‘A.’ To me, it’s an ‘F,’ ‘F,’ ‘F,’ ‘F,’ ‘F,’ ‘F.’”

Agreement that prices are too high

With a population of roughly 125,000 people, Allentown anchors the Lehigh Valley, which is Pennsylvania’s third-largest metro area. In a dozen interviews this week with local officials, business leaders and residents of both parties, there was agreement on one thing: Prices are too high. Some pointed to gas prices while others said they felt the shock more at the grocery store or in their cost of health care or housing.

Few shared Trump’s unbridled boosterism about the economy.

Tony Iannelli, the president and CEO of the Greater Lehigh Valley Chamber of Commerce, called Trump’s grade a “stretch,” saying “we have a strong economy but I think it’s not yet gone to the next stage of what I would call robust.”

Tom Groves, who started a health and benefits consulting firm more than two decades ago, said the economy was at a “B+” as he blamed the Affordable Care Act, widely known as “Obamacare,” for contributing to higher health costs and he noted stock and labor market volatility. Joe Vichot, the chairman of the Lehigh County Republican Committee, referred to Trump’s grade as a “colloquialism.”

Far removed from Washington’s political theater, there was little consensus on who was responsible for the high prices or what should be done about it. There was, however, an acute sense of exhaustion at the seemingly endless political combat.

Pat Gallagher was finishing lunch a few booths down from Bisbal as she recalled meeting her late husband when they both worked at Bethlehem Steel, the manufacturing giant that closed in 2003. Now retired, she, too, relies on Social Security benefits and lives with her daughter, which helps keep costs down. She said she noticed the rising price of groceries and was becoming exasperated with the political climate.

“I get so frustrated with hearing about the politics,” she said.

Allentown has a front-row seat to politics

That feeling is understandable in a place that often gets a front-row seat to the national debate, whether it wants the view or not. Singer Billy Joel’s 1982 song “Allentown” helped elevate the city into the national consciousness, articulating simultaneous feelings of disillusionment and hope as factories shuttered.

In the decades since, Pennsylvania has become a must-win state in presidential politics and the backdrop for innumerable visits from candidates and the media. Trump and his Democratic rival in 2024, Kamala Harris, made several campaign swings through Allentown, with the then-vice president visiting the city on the eve of the election.

“Every race here, all the time,” Allentown’s mayor, Democrat Matt Tuerk, recalled of the frenzied race last year.

The pace of those visits — and the attention they garnered — has not faded from many minds. Some businesses and residents declined to talk this week when approached with questions about the economy or politics, recalling blowback from speaking in the past.

But as attention shifts to next year’s midterms, Allentown cannot escape its place as a political battleground.

Trump’s win last year helped lift other Republicans, like U.S. Rep. Ryan Mackenzie, to victory. Mackenzie, who unseated a three-term Democrat, is now one of the most vulnerable Republicans in Congress. To win again, he must turn out the Republicans who voted in 2024 — many of whom were likely more energized by Trump’s candidacy — while appealing to independents.

Mackenzie’s balancing act was on display when he spoke to the party faithful on Tuesday, bemoaning the “failures of Bidenomics” before Vance took the stage at the rally. A day later, the congressman was back in Washington, where he joined three other House Republicans to rebel against the party’s leadership and force a vote on extending health care subsidies that expire at the end of the year.

Vichot, the local GOP chairman, called Mackenzie an “underdog” in his reelection bid and said the health care move was a signal to voters that he is “compassionate for the people who need those services.”

A swing to Trump in 2024

Lehigh County, home to Allentown and the most populous county in the congressional district, swung toward Trump last year. Harris’ nearly 2.7 percentage point win in the county was the tightest margin for a Democratic presidential candidate since 2004. But Democrats are feeling confident after a strong performance in this fall’s elections when they handily won a race for county executive.

Retaking the congressional seat is now a top priority for Democrats. Gov. Josh Shapiro, who faces reelection next year and is a potential presidential contender in 2028, endorsed firefighter union head Bob Brooks this week for the May primary.

Democrats are just a few seats shy of regaining the House majority and the first midterm after a presidential election historically favors the party that’s out of power. If the focus remains on the economy, Democrats are happy.

The Uline supplies distribution factory where Vance spoke, owned by a family that has made large donations to GOP causes, is a few miles from the Mack Trucks facility where staff was cut by about 200 employees this year. The company said that decision was driven in part by tariffs imposed by Trump. Shapiro eagerly pointed that out in responding to Vance’s visit.

But the image of Allentown as a purely manufacturing town is outdated. The downtown core is dotted by row homes, trendy hotels and a modern arena that is home to the Lehigh Valley Phantoms hockey team and hosts concerts by major artists. In recent years, Latinos have become a majority of the city’s population, driven by gains in the Puerto Rican, Mexican and Dominican communities.

“This is a place of rapid change,” said Tuerk, the city’s first Latino mayor. “It’s constantly changing and I think over the next three years until that next presidential election, we’re going to see a lot more change. It’s going to be an interesting ride.”



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Trump cut income taxes on tips and overtime, but many states—even some led by Republicans—haven’t done the same yet

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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 Trump’s 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 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 people’s 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 Assistance 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 we’re announcing today,” Pritzker told reporters at a December event publicizing a grant to address homelessness in central Illinois.

This story was originally featured on Fortune.com



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A photo with Trump in it appears to have been removed from the partial Epstein files the Justice Department released

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A photo featuring President Donald Trump that was included in one of the Justice Department files on the late sex trafficker Jeffrey Epstein appears to have been removed online.

Late Friday, the department published a trove of documents to meet a deadline mandated by an overwhelmingly bipartisan vote in Congress, though not all the Epstein files were released, and many that were made public have been heavily redacted.

There was little mention of Trump in the text that was available, and White House officials highlighted photos of former President Bill Clinton.

But an image of a desk with several pictures on it included one showing Trump’s face. It was originally listed as EFTA00000468, but it no longer appears on the list of “data set 1” files and is not accessible online anymore.

“This photo, file 468, from the Epstein files that includes Donald Trump has apparently now been removed from the DOJ release,” Democrats on the House Oversight Committee pointed out in a post on X on Saturday. “@AGPamBondi is this true? What else is being covered up? We need transparency for the American public.”

The Justice Department didn’t immediately respond to a request for comment. It said on X that it hasn’t redacted any names of politicians, pointing to comments from Deputy Attorney General Todd Blanche.

“The only redactions being applied to the documents are those required by law — full stop,” he said. “Consistent with the statute and applicable laws, we are not redacting the names of individuals or politicians unless they are a victim.”

The administration’s failure to release all the files and the massive blackouts of many documents have already stirred outrage among congressional leaders of the effort to make them public.

Rep. Ro Khanna, D-Calif., said Friday that the document dump doesn’t comply with the spirit or the letter of the law, and singled out one file from a New York grand jury where all 119 pages were blacked out.

Later, he said he and Rep. Thomas Massie, R-Ky., have already started working on drafting articles of impeachment and inherent contempt against Attorney General Pam Bondi, though they haven’t decided yet whether to move forward.

“Impeachment is a political decision and is there the support in the House of Representatives? I mean Massie and I aren’t going to just do something for the show of it,” Khanna told CNN.

This story was originally featured on Fortune.com





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OpenAI vs. Apple? Sam Altman is setting his sights on an even higher-stakes AI battle

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All eyes are on the Big Tech LLM race and, at least in the eyes of investors, it seems like Google (owned by Alphabet, No. 7) could run away with the win.

Google’s Gemini has been steadily stealing buzz and AI traffic share over the last few months from OpenAI. And if there was any moat to be had in LLMs, it would seem like it would belong to the company with the biggest treasure chest of personal data on users. That almost indisputably would be Google, thanks to Android, YouTube, Search history, Maps, and Gmail. On top of that, the company has one of the top AI minds, Demis Hassabis, and Google cofounder Sergey Brin leading its troops toward dominance.

Perhaps that’s why Sam Altman is setting his sights on winning what could be an even higher-stakes AI battle: creating the future mass AI consumer device. Altman feels that in the long term, his greatest foe will be Apple (No. 4), not Google, Meta (No. 22), or Amazon (No. 2). He recruited iPhone designer Jony Ive to OpenAI this May, and Ive has said the company’s secret device could be ready in the next two years.

What will that device be like? If you ask Altman, he describes limitations with the mobile phone. First of all, it can be turned off. It also can’t scan the room around you and give you real-time context and know exactly when to deliver relevant information to you. He sounds more bullish about audio than visual as the primary means of communication. And he sees no reason why a device and an operating system should be sold separately, like Google and Android—a future device should come with the trademark LLM baked in, like iOS in an iPhone.

Thanks largely to that iPhone, Apple is generating tens of billions of dollars a year in cash flow that it can plow into new devices and armies of engineers to design them—two areas where OpenAI lags far behind. Then again, Apple seems ripe to be disrupted: As Meta founder Mark Zuckerberg said on Joe Rogan’s podcast earlier this year, “They haven’t invented anything great in a while. It’s like Steve Jobs invented the iPhone, and now they’re just kind of sitting on it 20 years later.”

But for now, OpenAI and its team are all about perfecting ChatGPT. For more on how Altman is planning to position OpenAI as a long-term hardware play, and how he’s combating fast-rising competition like Anthropic and Google in the short term, check out Fortune’s reporting on what’s happening inside OpenAI as it battles its way through an eight-week code red.

Also, we’re taking a break for the holidays, so Fortune 500 Digest will be back in inboxes Jan. 10. In the meantime, you can read the latest online.



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