Treasury Secretary Mnuchin shuts down five emergency Federal Reserve lending programs. Mnuchin said he’d shut down the loan programs Dec. 31, despite a rare public objection from Fed Chair Jerome Powell and strong criticism from Democrats. About $429 billion in emergency COVID-19 relief lending has gone unused, and the Fed agreed to return about $70 billion to the Treasury. Mnuchin wants Congress to reallocate the rest, perhaps for a future relief bill. Powell, in an unusually direct and public response said “The Federal Reserve would prefer that the full suite of emergency facilities… continue to serve their important role as a backstop for our still-strained and vulnerable economy.”
Rettig hopes tax season will start on time, despite an ongoing backlog. IRS commissioner Charles Rettig told the House Ways and Means Oversight Subcommittee that he hopes tax season will start on schedule in late January or early February. But he said the agency still has not processed about 1 million returns filed this year and is still digging through 3 million pieces of unopened mail. Due to the pandemic, the IRS sent most of its workers home in March and has been playing catch-up ever since.
Awaiting a new Treasury Secretary. President-elect Joe Biden says he has picked his Treasury Secretary and promises to name several cabinet positions tomorrow, though his staff won’t say which ones.
Grassley and Wyden still at odds with Treasury over PPP deductibility. Senate Finance Committee Chair Chuck Grassley and top panel Democrat Ron Wyden criticized the latest Treasury and IRS guidance that prevents firms from deducting business expenses they paid for with Paycheck Protection Program funds. In a joint statement, they wrote “We encourage Treasury to reconsider its position on the deductibility of these expenses, and the timing of those deductions, to provide relief to the small businesses that need it most.”
States still need COVID-19 relief, despite improving tax collections. TPC’s Tracy Gordon says relief bills that aided individuals and businesses hurt by the pandemic indirectly helped state and local budgets by boosting spending. But those benefits are expiring just as costs from the latest wave of COVID cases are rising. Tracy argues that additional, immediate state and local fiscal relief is vital. “Helping states and localities in the fiscal equivalent of a 100-year flood should not be partisan issue. It’s time for Congress to get to work.”
What happened to the third rail of American politics? TPC’s Howard Gleckman writes that an amazing thing happened in the 2020 presidential election. The nation elected a candidate who promised to raise Social Security taxes by $740 billion over ten years—and the vow was a non-issue. Howard notes that while Biden’s plan is flawed, “he’s taken a big step towards building political consensus for a solution by putting a tax hike on the table and paying no political price. Other politicians will notice. And as they do, the chances of a real fix to a broken Social Security system surely will improve.”
State ballot initiatives cut taxes for some, raised them for others, and imposed marijuana taxes on many. TPC’s Richard Auxier highlights the fate of this month’s state tax measures. The results were mixed, but several things are clear. Voters, like taxes, are sometimes complicated. Americans are finally united—on marijuana taxes. They also embraced other types of sin taxes. And if a state has not yet legalized and taxed marijuana, it probably will soon.
Why do states tax illegal drugs? TPC’s Nikhita Airi and Aravind Boddupalli note that very few people voluntarily purchase tax stamps in the 17 states that require them for illegal drugs. The stamps serve as proof that taxes were paid on illicit drugs like marijuana, cocaine, or moonshine. The levies raise small amounts of revenue, but those charged with drug possession may face harsh additional civil or criminal penalties for failure to pay them.
Save the date: December 8. TPC will look at President-elect Biden’s tax agenda. President-elect Joe Biden has proposed a broad tax agenda, including tax cuts for low- and moderate-income households and significant tax increases on high-income individuals and corporations. But how much can a Biden administration accomplish? What should it prioritize? Former Treasury Secretary Jack Lew will open the discussion, followed by a panel featuring former Chairman of the Council of Economic Advisers Jason Furman and former Congressional Budget Office Director Doug Holtz-Eakin. TPC’s Tracy Gordon will moderate. Register here for the virtual event.
The Daily Deduction will resume its regular schedule next week. Happy Thanksgiving!
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].
