The pandemic relief bill would cut taxes by an average of $3,000—with most relief to low- and middle-income households. TPC’s Howard Gleckman reviews TPC’s new analysis of the Senate’s American Rescue Plan (ARP). It would reduce federal taxes in 2021 by an average of $3,000 and by $6,000 for families with children. Low- and moderate-income households would receive nearly 70 percent of the tax benefits. By contrast, nearly half of the TCJA’s 2018 tax cuts went to households in the top 5 percent of the income distribution, who made $308,000 or more that year. The House is expected to pass the bill today.
Treasury could distribute stimulus checks within days; child tax credit will be more complicated. Reuters reports that nearly 160 million are expected to get payments, some within days, the White House promises. TPC’s Janet Holtzblatt notes “They have already ironed out many of the snafus that slowed the previous rollouts.” It may not be so smooth for the expanded and newly advanceable Child Tax Credit. Nina Olson, former National Taxpayer Advocate and executive director of the Center for Taxpayer Rights, says payments could be held while the IRS determines where children live.
Top House Democrats want IRS to delay the tax filing deadline. House Ways & Means Chairman Richard Neal and Oversight Subcommittee Chairman Bill Pascrell want the IRS to extend the filing season. They complained the IRS is answering only about 27 percent of telephone calls: “We stand in the midst of the most important tax filing season in recent memory, and taxpayers cannot get the help they need from the IRS.” Another problem: Figuring how some taxpayers will exempt up to $10,200 in 2020 unemployment benefits from federal income tax.
Tax increases for infrastructure and climate change? Yes, says Sen. Manchin. In an interview with Axios, Democrat Joe Manchin said he’d push for tax increases to pay for President Biden’s infrastructure and climate change plan. They might include raising the corporate tax rate from the current 21 percent to 25 percent "at least," and repealing "a lot of" the Tax Cuts and Jobs Act’s tax cuts for the wealthy. The Senate Energy and Natural Resources Committee chair also vowed to block any proposal if Republicans aren't included in negotiations, though he believes 10 Republicans would support a bipartisan bill.
Are states better or worse off than they were a year ago? It depends on the state and on what you are measuring, says TPC’s Richard Auxier. But if you compare new state fiscal plans to what governors proposed in January, 2020—just before the pandemic—matters don’t look great. To learn more about the post-pandemic state of the states, tune in to today’s Urban Institute event at 1:30. Register here.
New York State is not out of the budget woods yet. Gov. Andrew Cuomo said that even with $12.5 billion in federal aid from the yet-to-be-signed pandemic relief package, tax increases are still on the table. Lawmakers have until April 1 to approve the state’s budget.
Nearly 3 out of 4 Americans are counting on their expected tax refund. A consumer survey by creditcards.com finds that 73 percent of Americans who expect a refund say the money is important to their financial well-being. About 28 percent of respondents plan to use their refunds for savings, while 25 percent plan to pay off debt. Seventeen percent plan to use their refunds for day-to-day expenses.
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