What will a narrow Democratic congressional majority mean for President-elect Joe Biden’s tax agenda? TPC’s Howard Gleckman offers clues to what Biden may be able to accomplish in 2021. Biden will need to act quickly—while controlling the pandemic and before lawmakers focus on their own re-elections in 2022—and pick winnable fights. Moderate Democrats—including the leadership of tax-writing committees—will be more consequential than the Democratic far left. Given that Biden will need 60 votes to pass most bills in the Senate, budget reconciliation measures that require only 50 votes are likely to be the vehicle for modest tax cuts, possibly including expansion of some refundable tax credits, and new savings incentives.
What if Trump had called his proposed $2,000 economic impact payments “tax relief?” Howard wonders whether Senate Republicans would have been so quick to oppose $2,000 pandemic relief payments if they had been framed as tax cuts instead of government “checks.” The payments, after all, are refundable and advanceable individual income tax credits and tax relief usually is far more popular among Republican lawmakers than new spending. But mixed messaging and poor targeting left room for the GOP to blast the financial relief as “socialism for the rich.”
Why are dependents over age 16 still ineligible for economic impact payments? The Tax Hound returned last week with the question. Over 20 million people—dependents who are college students, adults with disabilities, or elderly parents cared for by their adult children—were left out from the payments not once, but twice. Why?
Meanwhile, the IRS is working to correct an error in depositing those payments. Millions of people who used online tax preparers in 2019 did not receive their economic impact payments by direct deposit last week. Money ended up in bank accounts they didn’t recognize: Temporary accounts set up for refund loans or other banking products offered by the online tax preparers. The error is similar to a glitch with the first round of $1,200 stimulus payments last spring.
US suspends tariffs on French luxury goods. The outgoing Trump Administration backed off its threatened import taxes on more than $2 billion in French luxury goods such as Champagne, handbags, and cheese. The White House threatened the levies in retaliation for a French tax on large US digital firms. It is not clear how the incoming Biden Administration will address widespread efforts to impose digital taxes.
Illinois Governor Pritzker may exclude from state taxes a federal pandemic relief tax break. The governor proposed decoupling a federal tax break from state business taxes to help lower the budget deficit. The effect: Firms would be unable to use more generous federal treatment of operating losses to reduce their state taxes. Pritzker said, “Right now, we cannot afford to expand tax breaks to businesses that already receive tax breaks.”
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