An op-ed by Mihir A. Desai: At a guest lecture at a military academy when the price of a single Bitcoin neared $60,000, I was…
After George Floyd’s killing last year, Harvard Business School Professor Mihir Desai says he channeled his thoughts and emotions the best way he knew how—by writing a case study. His aim was to design a classroom exercise that would give M.B.A. students a deeper understanding of the country’s racial scars and what role businesses might have in processing them, he says. He soon seized on a historical event he felt deserved more attention: the Tulsa Race Massacre of 1921, in which armed white mobs attacked Greenwood, a prosperous, albeit segregated Black neighborhood in the Oklahoma city that later came to be known as Black Wall Street. Over 24 hours, as many as 300 people were killed and more than 190 of the community’s businesses burned to the ground. Prof. Desai’s case study, “The Tulsa Massacre and the Call for Reparations,” asks students to explore ways to reckon with the attack’s financial fallout for its victims and their descendants. He uses the Tulsa case as a launchpad to discuss the use of reparations to respond to the effects of slavery in the U.S. and its aftermath. Students are also asked to consider the role of business in addressing racial-justice issues more broadly.
President Biden is seeking about $2 trillion in higher taxes on companies over 15 years to pay for his infrastructure plan. But corporations are just entities composed of people, so if corporate taxes go up, who ultimately pays? The Biden administration says the greater tax burden would fall largely on high-income shareholders of profitable companies that wouldn’t reduce investments even if taxes rose. That view makes the corporate tax a useful tool for redistributing income and taxing people the U.S. individual-income tax can’t always reach...Economists have long puzzled over the question of who pays the corporate tax. “This is one of the great mysteries in public finance, and so empirical estimates are people feeling around to try to figure it out,” said Mihir Desai, a finance professor at Harvard Business School...Mr. Desai said lawmakers concerned about income distribution should focus more on assisting poorer households and less on raising corporate taxes that could slow investment. “The puzzle to me about the entire debate is just how quickly the corporate tax got mired in this issue of fairness when we know the [effect] is so unclear,” he said.
Virtual Hearing. Member Statements: Ron Wyden (D - OR); Mike Crapo (R - ID). Witnesses: Dorothy Brown, Asa Griggs Candler Professor Of Law, Emory University School of Law, Atlanta, GA; Dr. Mihir A. Desai, Mizuho Financial Group, Professor Of Finance and Professor Of Law, Harvard University, Cambridge, MA; Himalaya Rao-Potlapally, Managing Director, Black Founders Matter Fund, Salem, OR; Shay Hawkins, President And CEO, Opportunity Funds Association, Washington, DC.
Faculty Books in Brief: Summer 2019
August 5, 2019
Books by Cass Sunstein, Mihir Desai, Roberto Mangabeira Unger, and Richard Fallon.
Faculty Books in Brief: Summer 2019
June 19, 2019
A single person cannot change a social norm; it requires a movement from people who disapprove of the norm, writes Sunstein. He explores how those movements, ranging from the fight for LGBTQ rights to white nationalism, take shape and effect change.
Why You Should Root for the Uber I.P.O. to Fail
May 10, 2019
An op-ed by Mihir A. Desai: Uber’s initial public offering — the biggest in a year of blockbusters — is yet another chance for Uber and its detractors to sell their competing ideas of what this company represents. As it heads toward a valuation of about $90 billion — nearly the combined value of General Motors and FedEx — Uber is packaging its new image as a socially oriented company led by a contrite chief executive facing an enormous potential market that it has only begun to explore. Skeptics see a company with significant legal exposure, a corrupt culture, declining profitability and slowing growth that has forced it to make an awkward pivot to less attractive businesses such as Uber Eats and Uber Freight.
“Investing is not what you know but how you behave; it is all about having a view of the future,” say Industry experts
January 16, 2019
CFA Society India, in collaboration with CFA Institute, the global association of investment professionals, hosted its 9th India Investment Conference in Mumbai with the theme being Investing Insights for Uncertain Times. ... Speaking in his session on 'The Wisdom of Finance', Mihir Desai, Mizuho Financial Group Professor of Finance, Harvard Business School; Professor of Law, Harvard Law School said, "The gulf between finance and the humanities is a real loss. Finance can use the humanisation provided by humanities. Investors are fearful of uncertainties around capitalism. However, they forget how capitalism has benefitted economies around the world. Let's improve practice of finance by reconnecting practitioners with elements of humanity."
Why Apple Is the Future of Capitalism
August 7, 2018
An op-ed by Mihir Desai. With Apple Inc. now exceeding $1 trillion in market capitalization, it’s tempting to understand this moment in terms of the dominance of all-too-large companies and technology in our lives. Those interpretations obscure Apple’s other accomplishment — pioneering a financial model that is the envy of corporate America. Sure, Apple produces innovative phones and laptops, but look inside its sleek exterior and you’ll find an elegant financial machine that has become the ideal for corporate America. Without investing significantly in hard assets, Apple spins cash and returns it to shareholders at a stunning rate. It’s difficult not to admire.
Finance isn’t evil but incentives can be
May 14, 2018
Remuneration incentive schemes are at the heart of problems in finance, and need to be overhauled to reflect long-term effort, Mihir Desai, professor of finance at Harvard Business School and professor of law at Harvard Law School told delegates at the CFA Institute annual conference in Hong Kong. Corporate governance is the most important problem in modern capitalism, Desai said, pointing to the fact that 150 years ago ownership and control were not separate, so the corporate governance issues that exist today were not present. “Why do investors trust managers with their money? All of finance is one big daisy chain of principal agent problems,” he said. At the heart of the issue, he said, is remuneration incentive programs
Tax Reform, Round One
April 17, 2018
An essay by Mihir Desai. The Trump Administration's successful efforts at tax legislation stand out as the primary achievement of its first year. But the hurried, largely furtive drafting, and rush to passage at the end of 2017, have helped obscure the new tax regime’s real impact. Much of the reporting and debate has focused on the politicking that went into passing the bill, and the purported effect on the federal budget deficit. That has diverted attention from the true significance of the Tax Cuts and Jobs Act (TCJA). Instead of simply changing rates and addressing loopholes, the TCJA represents a structural change to the income tax and, consequently, will lead to major changes in behavior.
Multinationals pay lower taxes than a decade ago
March 12, 2018
Big multinationals are paying significantly lower tax rates than before the 2008 financial crisis, according to Financial Times analysis showing that a decade of government efforts to cut deficits and reform taxes has left the corporate world largely unscathed. Companies’ effective tax rates — the proportion of profits that they expect to pay, as stated in their accounts — have fallen 9 per cent (two percentage points) since the financial crisis. This is in spite of a concerted political push to tackle aggressive avoidance...“There has been a lot of action and gestures that are very visible but the reality is different. Rate cuts and patent boxes [tax breaks for intellectual property] have been the dominant forces on corporate tax — and that reflects the continued dynamics of tax competition,” said Mihir Desai, professor of finance and law at Harvard university. “Call it a great irony or hypocrisy, but it’s one of the two.”
Bonuses Aside, Tax Law’s Trickle-Down Impact Not Yet Clear
January 23, 2018
There are good ways to start measuring how much the Trump tax cuts might be helping American workers. Tracking the bonus announcements flowing from corporations is not one of them....The flurry of high-profile bonus announcements “are hard to interpret,” said Mihir Desai, an economist at Harvard Business School and Harvard Law School whose research supports the idea that corporate tax cuts lead to at least modest wage increases. “They may well be evidence for these gains, but just as well may be an example of savvy public relations. The reality is we’ll have to wait for a few years and good empirical work to really know the answer.”
Economics may not be driving corporate generosity
January 22, 2018
Republicans have been touting the number of companies handing out employee bonuses and pay raises — such as Walmart and Bank of America — as a surprising sign that the Trump administration’s tax cuts are working their economic magic faster than anyone expected...But a deeper look at the list of approximately 200 companies shows that more than economics is probably at play, with business experts and analysts saying that alternative motivations are likely to be behind the sudden flood of corporate generosity...Mihir Desai, a finance professor at Harvard Business School whose research was used by the White House to estimate how tax cuts would boost workers’ wages, said he believed the recent wave of bonuses could reflect lower tax rates but also an effort “to take some of the heat off what corporations are currently feeling.”
Mihir Desai; First Coast Connect (audio)
January 10, 2018
An interview with Mihir Desai...Republicans in Washington struck a tax overhaul deal just before Christmas. It was a major political victory for the GOP Congressional leadership and President Donald Trump. Supporters say the tax overhaul will spur economic growth but opponents say it was just a Christmas present for corporations and the nation’s most wealthy.
In Tax Overhaul, Trump Tries to Defy the Economic Odds
December 21, 2017
When President Trump adds his distinctive signature to the tax bill, he will also be making a huge bet that the Republican strategy of deep cuts for businesses and wealthy individuals will fuel extraordinary growth across the board...Some provisions of the bill were intended to be sharp and short. Next year, for example, businesses will be able to borrow money and deduct the cost of those loans at the current rate of 35 percent. But later on, when they reap the profits, they will pay a tax rate of only 21 percent. That could end up causing firms to simply shift the timing of investments they would have made regardless of a change in the tax code. “The really hard question a year from now is going to be is how much of the miniboom we see is just an acceleration of stuff that was going to happen anyway or additional investment that is really going to spur the economy,” said Mihir A. Desai, a professor of finance at Harvard Business School.
What Investors Need to Consider About Tax Reform
December 20, 2017
An article by Mihir Desai. The Senate and House are poised to vote on a tax plan, starting on Tuesday. Here are some questions to consider as we approach 2018: How much of this year's stock market gains reflect anticipation of corporate tax cuts?
Mihir Desai explains the Wisdom of Finance
December 15, 2017
In this episode of Alphachat, Matt Klein talks with Harvard professor Mihir Desai about the deep connections between finance and the humanities. Special thanks to Elisheba Ittoop for help with editing this episode.