WSJ What’s News - How Blue States Plan to Get More Taxes From Wealthy Residents

Episode Date: August 14, 2025

P.M. Edition for Aug. 14. Faced with budget shortfalls and preexisting deficits, state and local legislators are looking for ways to get more in taxes from their richest residents. WSJ economics reporter Juliet Chung describes how they’re approaching it. Plus, U.S. mortgage rates fall to their lowest level this year, offering hope to prospective buyers. And more of Americans’ retirement funds are tied to stocks than ever. Anne Tergesen, who covers retirement for the Journal, joins the podcast to discuss the risks involved. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Relief ahead for U.S. buyers and sellers as mortgage rates hit their lowest level this year. Plus, how some blue states are planning to get more in taxes from their wealthiest residents. A lot of states are in a situation where they could be facing budget deficits going forward. And then once you add into the picture, the potential impact of the new federal tax law, the picture can start to get more bleak. And after riding the AI boom, can Corweave keep its investors enthused? It's Thursday, August 14th. I'm Alex O'Soula for the Wall Street Journal.

This is the PM edition of What's News, the top headlines and business stories that move the world today. We begin this evening show with a lead-up to President Trump's plan meeting with Russian President Vladimir Putin tomorrow in Alaska. White House Press Secretary Caroline Levitt said, today that Trump and Putin will hold a joint press conference after their one-on-one meeting in Anchorage. Ahead of his trip to Alaska, Trump said in an interview with Fox News Radio aired today that he thinks Putin is, quote, going to make a deal. But he said there was a 25% chance

talks would fail, describing the summit as a chess game. If the meeting goes well, Trump raised the possibility of inviting Ukrainian President Volodymyr Zelensky for further negotiations. During a meeting with senior ministers and security officials today, Putin said that the Trump administration had been making, quote, what I consider to be fairly vigorous and sincere efforts to halt hostilities, resolve the crisis, and reach agreements that serve the interests of all parties involved in this conflict. Mortgage rates edged down to their lowest level of the year, offering a dash of hope to prospective buyers who have been forced to the sidelines by elevated rates and home. prices. According to a survey of lenders by mortgage finance firm Freddie Mac, the average rate on the standard 30-year fixed mortgage declined to 6.58%. That was a low not seen since October 24, and down from 6.63% a week earlier. Mortgage rates tend to move loosely with government bond yields, which

helps set some borrowing costs across the economy. Bond yields have edged lower after a report this month showed hiring slowed sharply over the summer, putting downward pressure on mortgage rates. Americans' nest eggs are increasingly tied to the fate of the stock market. According to Vanguard Group, workers in their late 30s had 88% of their 401Ks in stocks last year versus 82% a decade earlier. 401K investors in their early 60s had allocations to stocks of 60% up from 57% a decade ago. Ann Turgason covers retirement for the journal and joins me now. Anne, how are investors behaving with their 401Ks versus, say, a retail investment?

So 401K investors tend to really buy and hold, and there have been many more days in which trading activity in 401Ks has spiked. However, we're talking only like about 1.3% of assets in 401ks have been traded this year. That's a high level relative to what you normally see. that just shows you how infrequently people trade. What kinds of risks does that come with? The risk of having more in stocks means that if the stock market really hits like a bad time, then it sets you up for higher losses than you would have had if you were more conservatively invested. That said, historically, one of the biggest risks that investors had run is that they had insufficient exposure to the stock market.

at younger ages. And so target date funds, which are these all-in-one investments that are professionally managed and that 401k investors are put into if they're automatically enrolled, that's been a really good development for people who are younger. That was WSJ reporter, Ann Turgesson. Thank you, Anne. Thanks for having me. Major U.S. indexes remain mostly unchanged today as stocks retrace some earlier declines fueled by a pickup in factory gate inflation. This morning, the Bureau of Labor Statistics said that wholesale prices increased by 0.9% last

month. That's higher than the 0.2% that economists expected. It was the largest monthly rise in more than three years. That prompted traders to slightly pair bets on the September rate cut from the Fed. In the end, the Dow and the NASDAQ lost about a tenth of a percent, while the SNP 500 was up around three-tenths of a percent. Since going public in March, AI Cloud Services company Corweave has soared. The company just posted $1.2 billion in revenue for the second quarter, more than triple what it generated in the same period a year earlier. And its stock has nearly tripled from its IPO price. But soon it may face a test to see if investors can maintain that enthusiasm.

For more, I'm joined now by WSJ Hurd on the street columnist Dan Gallagher. Dan, why is Corweave doing so well? A lot of it has to do with essentially hype over AI and over that market. What Corbeve does is specialized data center networks that are specifically tailored to AI computing, the training, the inference that goes on. They're a relatively small company compared to the huge companies that are big players in this game, but Corbeve is a pretty sizable player itself in this specific type of market. We've seen a bunch of tech IPOs recently, including a number of crypto exchanges and software company Figma, but we haven't actually seen. seen that many AI companies. And back in March, when Corrieve went public, you wrote that Corrieve's IPO is a test to see whether AI demand can stick. What is your kind of answer to that

question now? So far, it's proven to work well for them because if you think about it, they really trade on where the spending goes for AI from these bigger companies. And since March, we've seen these huge companies, Microsoft, Meta, Google, Amazon. They were spending a huge amount already, and they've taken that up even further and signal that they're going to spend even more next year. So in that sense, that's been great for Corrieve. Corweave's market cap is in the neighborhood of $50 billion, quite a high valuation like that of many tech companies, particularly for those involved in AI. Can these companies sustain this? Well, the stock will probably do well as long as these AI demand signals are there. If you look at them relative to these other

companies where they're in a way competing a little bit with Microsoft's and MetaS of the world, those companies have huge cash flow. Corrieve is actually burning cash. The bottom fell out of the AI market. Microsoft still has a lot of businesses that are going to make a lot of money. Corrieve, this is what they do. So in that sense, they're probably the most levered bet on this AI demand curve continuing to ramp. That was W.S.J. Heard on the street columnist, Dan Gallagher. Thank you, Dan. Thank you. Coming up, are states raising taxes on rich residents risking, scaring them off? That's after the break.

A growing number of blue cities and states across the country are looking at ways to wring more revenue from their richest taxpayers. They're looking to make up for projected shortfalls in federal funding related to President Trump's new tax law, or address existing state budget deficits. WSJ economics reporter Juliette Chung is here to discuss. Juliet, what are the kinds of rules that some of these legislators are proposing? There's a variety of things, but in general they're looking to get more revenue from some of their richest taxpayers. So things like higher tax rates on their highest earning residents, folks making, say, a million or more a year, increasing the amount of tax that they pay on capital gains, or increasing the property tax rate

for vacation homes assessed over a certain value. What are some of the states considering new legislation? You know, they range across the country. They tend to be blue states, and there are states that have already signed some of that legislation into law, and there are states that are considering provisions like this. So you've got Washington State where the Democratic governor earlier this year signed a new budget that includes a hike to the existing capital gains tax. In New York City, the frontrunner in the New York City, the mayoral race, Soron Mamadani has proposed a millionaire's tax. Massachusetts has come up as providing inspiration for legislators in other states who are thinking about ways to increase revenue.

Massachusetts passed its version of a millionaire's tax a few years ago, and the revenue brought in by that income surtax has pretty consistently beaten the forecast of revenue that surtax is expected to bring in. This is occurring against a general backdrop where a lot of states were sort of flush with money in the years right after the pandemic. A lot of states are in a situation where they could be facing budget deficits going forward. And then once you add into the picture, the potential impact of the new federal tax law, the picture can start to get more bleak. You know, Juliet, I have to wonder that, you know, having a balanced budget is all well and good. But is there a risk that some of these states are running and potentially driving away some of their wealthiest residents just to go elsewhere with the lower tax rate? There is an element of tax gamesmanship that can occur. the academic data on this is sort of mixed. On the one hand, there's a lot of data and research

out there showing that millionaires are actually pretty sticky when it comes to their geographic residents, even when their taxes go up a significant amount. That can change depending on the specifics of wealth. So if you're looking at a group like older billionaires, they tend to have a higher sensitivity to taxes. But there's some academic data out there that suggests that efforts to bring in more revenue through increasing taxes can still be worth it even with some level of rich residents leaving an area. That was WSJ reporter, Juliette Chung. Thank you, Juliette.

Thank you. In other news, Florida is planning to open a second state-run immigration detention center as legal challenges continue over the facility known as Alligator Alcatraz. Governor Ron DeSantis said in a press conference today that the new facility, dubbed Deportation Depot, will be run out of Baker Correctional Institution in northern Florida. He said that the site will be able to hold more than 1,300 people, and that costs will be reimbursed by federal partners. DeSantis added that the facility will be operational soon. The state-run facilities are an early test in the Trump administration's effort to open up more detention space across the country. officials have ramped up arrests and limited bail for detained immigrants, which has created

an urgent demand for additional beds. And Air Canada says it has started to cancel flights and expects to wind down operations by early Saturday morning as the carrier braces for a strike by its 10,000 flight attendants. Air Canada executives said that about 500 flights would be grounded by midnight Friday. In a best-case scenario, it would take about a week to restore full operations if and when a labor agreement is reached with the flight attendants union. And that's what's news for this Thursday afternoon. Today's show was produced by Pierre Bienname,

with supervising producer Michael Cosmides. I'm Alex O'Sullough for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.