The Fed cuts interest rates. In response to the growing outbreak of coronavirus, the Federal Reserve cut interest rates by 0.5 percent, its biggest emergency rate cut since the depths of the Great Recession. Fed Chairman Jerome Powell, under heavy pressure from President Trump to lower rates, acknowledged the limits of the move: “We do recognize a rate cut won’t reduce the rate of infection. It won’t fix a broken supply chain. We get that; we don’t think we have all the answers.” The stock market doesn’t think so. The Dow fell nearly 800 points on the news.
Followed by a tax cut? President Trump says he backs a “simple payroll tax cut” in response to the coronavirus though, oddly, he said he wants Congress to propose one. TPC’s Howard Gleckman doubts it would do much to address those broken supply chains or encourage consumers to spend if shelves are empty and buyers are afraid to leave their homes.
And more infrastructure spending? Treasury Secretary Steven Mnuchin has another idea: an infrastructure spending bill. In testimony to the Ways & Means Committee yesterday, he suggested Trump would prioritize such an effort, though attempts to agree on a plan have been stalemated for years. Ways & Means Chair Richard Neal said he’d prefer an infrastructure bill to tax cuts.
Speaking of infrastructure….TPC’s Aravind Boddupalli and Erin Huffer look at how federal motor fuel taxes effect mass transit. Public transit ridership is rising, but federal support is flat. That leaves it to state and local governments to fill in the gap. Public backing for mass transit is strong while support for tax increases to pay for it is not.
Some alternative fuel tax extenders may hitch a ride on a green energy bill. It is not exactly the Green New Deal but this week, the Senate will take up the bipartisan American Energy Innovation Act. Sponsors call it a down payment toward a more sustainable energy future. It may also be a vehicle for several alternative fuel tax subsidies, such as those for electric vehicles, wind and solar power, and battery storage that have, or are due to, expire.
The battle heats up over a graduated income tax in Illinois. The Fitch credit rating agency says it is critical for the state to get a constitutional amendment permitting a graduated income tax on the November ballot. The new tax structure that would replace the state’s flat rate income tax is a top priority of Gov. JB Pritzker. Fitch says “failure of the income tax amendment would trigger fiscal actions that could exacerbate the state’s structural budget challenges and pressure local governments, including school districts.” But others say it would do little to fix the state’s years-long fiscal mess.
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