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U.S. markets are mixed to start the day with the S&P 500 and DJIA in the green, while the Nasdaq is slightly lower. Inflation is on everybody's mind. Fed Chair Jerome Powell said low interest rates are here to stay for a long time and that inflation is still "soft," but it's clear we're in the middle of an early cycle sector rotation and that higher inflation will be a reality in the coming months. 1/ QUICK HITS Editor's Picks More News 2/ CHART OF THE DAY Breaking it Down Some state governors are proposing tax increases now that the coronavirus pandemic has punched a hole in their budgets, The Wall Street Journal reported. After accounting for federal aid, states might need to come up with approximately $56 billion in spending cuts or revenue increases to balance their budgets through the fiscal year, according to Moody’s Analytics.
Now that tax season is upon us, it's interesting to consider how much taxes we each will pay over the course of our lifetime. Based on expenditure numbers from the Bureau of Labor Statistics, the average American will pay $525,037 in taxes, or 34% of their income, over the course of a lifetime, according to a study from fintech firm Self Financial.
Of course, this figure varies greatly by state. Those in New Jersey will pay the most in lifetime taxes ($931,000), while those is West Virginia will pay the least ($321,000). In addition, the average American will spend close to $427,000 on personal spending (food, clothing, personal care, and entertainment), with 6.5% of that, or $27,761, going toward sales taxes.
Broken down on a yearly basis, Americans paid an average income tax payment of $15,322 in 2018 based on the most recent IRS data. Interestingly, in 2017, the top 50% of all taxpayers paid 97% of all individual income taxes, while the bottom 50% paid the remaining 3%.
So where do our taxes go? The U.S. government collects over $5.3 trillion in taxes each year, which are used to fund public services, pay government obligations, and provide goods for citizens. To learn more about taxes, check out these stories: 3/ STOCK OF THE DAY Square (SQ) Chart courtesy YCharts Shares in Square (SQ) tumbled nearly 9% at 10 a.m. after the company reported mixed earnings and revealed a new Bitcoin investment.
The mobile payment company disclosed adjusted earnings per share of $0.32 for the fourth quarter, ahead of the $0.25 analysts expected. However, Square narrowly missed forecasts for net revenue and gross payment volume (GPV), reporting revenue of $3.16 billion versus the $3.17 billion expected, and GPV of $32 billion instead of the $32.1 billion anticipated. Nonetheless, all three financial metrics were higher compared to the same period last year as more Cash App users bought and sold Bitcoin, the company said.
In its report, Square also disclosed a new $170 million investment in Bitcoin on top of its $50 million purchase in October. Square said Bitcoin represents about 5% of the company’s total assets as of the end of 2020. Bitcoin traded around $48,500 at 10:25 a.m., up about 65% so far this year.
[Editor's Note: Our stock of the day is by no means a recommendation to buy, sell, or hold a particular security or asset. We will never do that. It's simply a vehicle for us to present a security with interesting price movement and try to analyze what's driving it.] 4/ TODAY IN HISTORY Feb. 24, 1784 Image courtesy Library of Congress Meeting at the Merchant's Coffee House in downtown New York City, several prominent businessmen led by a young attorney named Alexander Hamilton found the Bank of New York "on liberal principles."
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5/ WORD OF THE DAY The phrase "taper tantrum" describes the 2013 surge in U.S. Treasury yields, resulting from the Federal Reserve's announcement of future tapering of its policy of quantitative easing. The Fed announced that it would be reducing the pace of its purchases of Treasury bonds to reduce the amount of money it was feeding into the economy. Stocks sank on the news, falling 5% in May 2013, before recovering by the end of the summer. But the rise in bond yields in reaction to the Fed’s tapering announcement was referred to as a taper tantrum in financial media forever after.
U.S. Fed Chair Jerome Powell is in the midst of the Fed’s semi-annual Humphrey Hawkins testimony to House and Senate committees about the economic health of the country and the Fed's plans to continue to support its recovery. Powell is being asked by lawmakers how long the Fed will continue its purchases of $120 billion worth of government and mortgage bonds every month, and when it plans to "taper" them.
Investors want to know the answer to that as well, because the Fed’s actions have helped provide liquidity to financial markets and a metaphorical safety net under government bonds. That has kept interest rates historically low and allowed equity investors to pursue more risk in stocks and other asset classes, which is one of the reasons markets are at or near record highs. PODCAST This Week on The Investopedia Express How to keep your hands on the wheel when asset bubbles are everywhere. Paul Hickey of the Bespoke Investment Group joins the show to help us steer through the froth. Plus, SPACs are so hot, rapper/producer Cassius Cuvée burned down the Internet with his rap video on those blank-check companies. He joins the Express to talk about the inspiration behind 'SPAC Dream' and what he's working on next. And, why Payment for Order Flow is this week's term of the week. How can we improve the Investopedia Daily? Tell us at daily@investopedia.com Were you sent this by a friend? Click here to subscribe. You are receiving this newsletter because you subscribed to the Investopedia Daily newsletter. If you wish to unsubscribe, please click here.
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