Treasury is distributing stimulus payments, but tax season is off to a slower start. The IRS began electronically depositing stimulus payments over the weekend. However, direct deposit refunds are down by 26 percent compared to this time last year and total refunds are down by one-third. Meanwhile, House Ways & Means’ top Republican Kevin Brady has joined the chorus of lawmakers asking the IRS to extend the April 15 filing deadline.
Democrats: Early tax filers who received unemployment benefits may need help. The American Rescue Plan (ARP) Act exempts $10,200 in unemployment benefits for people with income under $150,000, but some of those people have already filed their taxes. A group of 20 Senate and House Democrats have urged Treasury and the IRS to make adjustments automatically and issue refunds to those recipients, rather than requiring them to file amended returns.
There are still people who have not received their first economic impact payment—from spring 2020. TPC’s Elaine Maag writes that as many as 8 million households who appear to have been eligible for the March 2020 economic impact payments still were as of December while others hadn’t received the full amount to which they were entitled. Elaine sheds light on households in the lowest-income wards of Washington DC: Nearly one in four people who participated in the THRIVE East of the River (THRIVE) partnership reported that they did not receive an EIP.
Bipartisan groups of mayors say they need covid aid. Washington Post columnist Dan Balz reports that both Democratic and Republicans mayors have been lobbying for the assistance, even though GOP members of Congress unanimously opposed the funding.
States may want to cut taxes with ARP’s $220 billion in federal aid, but can’t. The New York Times looks at a restriction added by Senate Democrats to the pandemic relief package. States cannot deposit any federal aid into pension funds or use the federal funds to cut state taxes by “legislation, regulation or administration” through 2024. Some Republican-led states see that provision as a challenge to state sovereignty.
States that legalized recreational marijuana are riding some revenue highs. The Hill reports that a majority of states that allow recreational marijuana reported either record sales or record-high tax collections in the past 12 months. Its analysis of four states’ data shows a slump in sales in the weeks after initial pandemic lockdowns in May and April, but sales surged afterward.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].
