Malaysian Growth Unexpectedly Accelerates Despite Trade Risks
Gross domestic product rose 4.5% in the April-June period from a year earlier, according to advance estimates from the Department of Statistics Malaysia. That's higher than the 4.2% median estimate in a Bloomberg survey, and faster than the 4.4% expansion in the first three months of the year.
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Forbes
19 minutes ago
- Forbes
No Tax On Tips Explained
TOPSHOT - US President Donald Trump (C) shows his signature on the "Big Beautiful Bill Act" at the ... More White House in Washington, DC, on July 4, 2025. US President Donald Trump signed his flagship tax and spending bill on July 4 in a pomp-laden Independence Day ceremony featuring fireworks and a flypast by the type of stealth bomber that bombed Iran. Trump pushed Republican lawmakers to get his unpopular "One Big Beautiful Bill" through a reluctant Congress in time for him to sign it into law on the US national holiday — and they did so with a day to spare Thursday. (Photo by Brendan SMIALOWSKI / POOL / AFP) (Photo by BRENDAN SMIALOWSKI/POOL/AFP via Getty Images) Should gratuities be tax-free? That's the premise behind the 'No Tax on Tips' provision of the One Big Beautiful Bill Act (OBBBA). Starting in 2025, tipped workers will be able to deduct up to $25,000 from their taxable income—though not from payroll taxes. It is an applause line with broad political appeal, especially among workers in tip-heavy industries like hospitality. But, just like the overtime deduction, this isn't strictly speaking a pure tax cut—it's a narrowly tailored deduction that chooses winners and losers and comes with a host of administrative headaches. While it may seem like relief for low-wage workers, under the hood it is quite a bit more complicated. What No Tax on Tips Does To start, the 'no tax on tips' provision of the OBBBA, Section 70201, isn't a tax exemption—it's a deduction. Specifically, it is an above the line deduction of up to $25,000 for tips received in the course of ordinary employment, as long as they are voluntary and properly reported. Like the overtime deduction, this one is also temporary: it applies through tax year 2028. It is also gated. Tips must be reported on a W-2 or other IRS-recognized form, and the job must be one that customarily receives tips—the Treasury Department will be issuing guidance fleshing out that latter bit. If you work in hospitality, you will probably qualify. If you're a flyfishing instructor collecting Venmo payments and occasional cash thank-yous, maybe not. The deduction doesn't apply to automatic service charges, like those mandatory 20% gratuity tack-ons for large parties. The deduction is also completely unavailable to anyone working in Specified Service Trades or Businesses (SSTB), which is an exclusion category that includes lawyers, financial advisors, and any job where the key asset is skill. Whether employees of SSTBs are also excluded remains an open question. As with the overtime deduction, this one phases out for higher earners—specifically those with modified adjusted gross income over $150,000 for a single filer or $300,000 for joint filers. The tips also remain subject to payroll taxes, so this isn't a full tax holiday but is instead a narrow, federally blessed deduction for some earnings stemming from very specific kinds of labor. Who Benefits From No Tax on Tips? The political pitch is pretty simple: this is for the hardworking bartender, waiter, or barista trying to make their paycheck stretch over an ever-increasing cost of living. But, as with the overtime deduction, the real story lies in the actual tax math—and who has enough income to fully benefit. More than 4 million Americans work in tipped occupations, but many of them earn too little to owe federal income tax in the first place. Between the standard deduction and other credits, a huge share of tipped workers—many single parents and part-time employees that could most benefit—already have zero income tax liability. For them, the deduction is a mirage. As a deduction, it does not generate a refundable credit if it brings an employee's taxable income below $0. Thus, the real winners are middle-income workers in full-time, tip-heavy jobs who report all their tips by the book. A bartender earning $35,000 in wages and $15,000 in tips might save $2,000 or more per year on their tax bill, assuming proper reporting. But that is a narrow slice of the labor market: not too poor to owe tax, not too rich to phase out, and perfectly tax-compliant. There is another catch in that, to claim the deduction, both the worker and, if applicable, their spouse must have valid Social Security numbers. That rules out many immigrant workers, particularly those in mixed-status households. Equity and Distortions At first glance, 'no tax on tips' reads like a gesture of economic respect to service workers. In practice, it is a policy that distorts how compensation is structured and who gets rewarded for what kind of work. In short, it picks winners and losers. Two workers earning $50,000 a year could face very different tax bills depending on whether some of that income came as tips. And yet, tip income and wage income each spend equally. This violates basic horizontal equity—the principle that similar taxpayers should shoulder similar tax burdens. As with the overtime deduction, the tips deduction doesn't say 'work matters;' it says how you get paid matters more than what you get paid. Employers now have a new incentive to lean into tip-based compensation, and lower base wages. This disincentivizes employers from providing stability for their workers and could put more workers at the mercy of customer generosity. Some employers may even reclassify service charges or performance bonuses as 'tips'—pushing compliance boundaries in the hope of creating deductible income for workers. At the same time, workers will face the opposite pressure. The more they can convert income into voluntary tips, the more tax they avoid. That's not just an incentive for dishonesty; it's an invitation to creative classification and perhaps a shift in employment. In a gig economy already rife with precarity and underreporting, this could widen the gulf between what workers earn and what they disclose. While the policy may feel like a reward for hustle, much like its overtime cousin, it quietly erodes the wage floor, complicates enforcement, and pushes a compensation model that depends on customer generosity rather than employer obligation. Policy Tradeoffs and the Politics That Drive Them The 'no tax on tips' provision may cost less than the overtime deduction—early estimates suggest perhaps as little as just tens of billions of dollars—but it still represents a diversion of public funds. Every dollar spent subsidizing voluntarily-reported tip income is a dollar not spent in service of raising the minimum wage or providing a refundable benefit that can assist the broader service economy. Instead of lifting wages systemically, Congress is opting to privilege a narrow slice of income for a narrow subset of workers, conditioned on proper paperwork. Politically, however, it is bulletproof. You don't lose elections by giving tax breaks to waiters. It polls well, headlines even better, and offers lawmakers an easy applause line to show support for the working class. Most importantly, it asks nothing of employers. And yet, no one wants to admit what 'no tax on tips' really is: a tax code preference for irregular, customer-subsidized income over salary; a subsidy for volatility over stability; and an incentive for gratuities at the expense of guarantees.
Yahoo
31 minutes ago
- Yahoo
Analyst updates S&P 500 forecast in mid-year outlook
Analyst updates S&P 500 forecast in mid-year outlook originally appeared on TheStreet. There weren't many beating the bullish drum on the stock market in early April. The S&P 500 and tech-laden Nasdaq Composite were mired in a brutal downturn following harsher-than-hoped tariff announcements and growing economic concerns on jobs and inflation. The S&P 500 retreated 19% from its mid-February highs before finding its footing on April 9. That near-bear market had everyone a bit antsy, particularly given President Donald Trump's mounting trade war. Nevertheless, stocks' decline was fast and steep enough to cause most sentiment measures to signal oversold, suggesting that those willing to step into the fray could be rewarded for buying the dip. And boy, have they been rewarded. 💵💰💰💵 The S&P 500 has marched 25% higher, and the Nasdaq has surged over 30%. President Trump's pause on most reciprocal tariffs fueled the gains on April 9. Hope that tariffs would settle at more manageable levels and significant new stimulus associated with trillions of dollars in tax cuts from the One Big Beautiful Bill Act kept the rally humming along to new all-time highs. The big question on most minds now is whether this record-setting run can continue. Those in the bearish camp point toward weaker GDP, cracks in the jobs market, and inflation risks. Bullish investors think most of those risks were priced in during the spring sell-off, and the bar has been set low enough that anything less than disaster would be good enough to push forward revenue, earnings, and economic outlooks higher, rather than lower. The debate has prompted many popular Wall Street analysts, including Carson Group's Chief Strategist Ryan Detrick, to update their outlook. The stock market climbs a very high wall of worry Stocks are forward-looking and are considered a leading, rather than lagging, indicator. The ability of stock prices to predict what may happen to the economy can be messy, with short-term fits and starts. However, stocks' ability to aggregate market participants' collective wisdom is generally considered a valuable tool for economists and predictive nature of markets is one reason behind the old Wall Street adage, "stocks climb a wall of worry." Often, stocks bottom when everyone thinks the worst has yet to happen, and they top when everyone sees roses and daisies. Over the past three months, the stock market has climbed a big wall of concern. U.S. employers have announced over 696,000 layoffs through May, up 80% year over year, according to Challenger, Gray & Christmas. The unemployment rate has inched up to 4.1% in June from 3.4% in 2023. And inflation, while much lower than in 2022, when the Federal Reserve declared war on it by significantly raising interest rates, is still above the 2% level targeted by many, including the Fed. The backdrop still suggests that stagflation or, worse, recession is a possibility. But so far, stocks indicate the economy will sidestep most damage. While we don't know when the Fed may support the economy with interest rate cuts, most are modeling lower rates over the coming year, helping fuel economic activity. Also, the recently passed One Big Beautiful Bill Act contains significant tax cuts, including new Social Security income tax breaks and a higher State and Local Tax deduction, which provide additional money to support spending and GDP. If so, analysts who cut revenue and growth outlooks this spring will shift gears, increasing forecasts and potentially fueling additional upside. Those upward revisions would go a long way toward appeasing those concerned about the S&P 500's valuation, given that the recent rally has inflated its price-to-earnings (P/E) ratio. The S&P 500 topped out in February when its forward price-to-earnings ratio eclipsed 22. It bottomed out when the P/E ratio reached about 19. The recent rally has again pushed the S&P 500's P/E over 22, which historically doesn't correspond with favorable one-year returns. Analysts' mid-year 2025 stock market outlook is largely bullish Ryan Detrick has been correctly banging the bullish drum for a while, and his team's midyear outlook also tells a bullish tale. Detrick's optimism is partially rooted in history. He often shares data highlighting how the stock market has historically behaved after catalysts, and this time is no exception. Fortunately, for bulls, history is on the side of more gains. The strategist points out that since the early 1970s, there have been five instances when the S&P 500 rose by 19% in 27 trading days like this year. Each time, the market was higher one year later, returning a median of 32.6%. Since 1950, the S&P 500 has been up one year later 74% of the time, returning a median of 10.4%.We've already made a big chunk of returns, but Detrick's team writes, "This is still a young bull market." The average bull market lasts 67 months, and this one has only lasted a little over 30 months so far. "Like a cruise ship that is very hard to turn once it gets moving, bull markets tend to carry their momentum forward, another reason this one could last much longer than many think," wrote the analysts. As for valuation, they believe there's a bull case that a "low tariffs, big tax bill" environment will provide a catalyst for earnings, helping keep the P/E ratio in check. "It's hard to imagine that the tariffs will go back to where they were, but perhaps we're left with about 15% additional new tariffs on average— not at all trivial, but far from worst case," wrote the analysts. "Companies should be able to navigate the additional tariffs and maintain profit margins, especially larger companies with less fragile supply chains." Carson Group thinks the S&P 500 could reach 6,550, a 10% to 12% gain for 2025. Add in dividends, and the index's total return could be 12% to 15%. Currently, the S&P 500 is up about 7% in 2025. "Stocks came soaring back in one of the largest reversals ever, suggesting the lows for 2025 are likely behind us and better times could be coming for investors,' said Detrick. 'While 2025 has already been a wild ride — and we should still prepare for more ups and downs — we see reasons to expect this bull market to continue.'Analyst updates S&P 500 forecast in mid-year outlook first appeared on TheStreet on Jul 20, 2025 This story was originally reported by TheStreet on Jul 20, 2025, where it first appeared. 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Wall Street Journal
an hour ago
- Wall Street Journal
Japan Election Throws a Wrench in Trade Talks
TOKYO—Japan's ruling coalition suffered a significant loss in a parliamentary election Sunday, a setback that risks derailing delicate trade negotiations with the U.S. just weeks before punishing tariffs are set to take effect. Prime Minister Shigeru Ishiba had gambled that his tough stance on trade with President Trump would help cement his shaky grip on power after less than a year in the job and an electoral snub last fall.
