Will Congress combine a budget and pandemic stimulus? Democrats are making a last big push for a lame-duck bill. Top Democrats now say they’d be willing to work from a $908 billion bipartisan stimulus plan, far smaller than their recent $2.2 trillion version. President-elect Biden says Congress “should come together and pass a robust package of relief to address your urgent needs now.” Their plan may be to combine a stimulus package with a government funding bill that must be extended by Dec. 11. Still, major partisan disagreements remain over the stimulus measure. And Congress still needs to resolve details of the government funding bill. Don’t be surprised if Congress passes another short-term funding bill on Dec. 10.
Without stimulus, S&P Global warns of a double-dip recession. S&P Global Economics’ latest forecast released yesterday says that if Congress fails to pass a new coronavirus relief bill, the US economy will fall into a double-dip recession and could take a year or more to recover.
Federal budget outlook after COVID-19? TPC’s Bill Gale and University of California at Berkeley’s Alan Auerbach, in their latest fiscal update, explain that that the COVID-19 pandemic and associated policy responses substantially raised federal deficits, but temporarily. They project that the debt-to-GDP ratio, currently 98 percent, would rise to 190 percent in 2050 under current law, compared to a pre-COVID projection of 180 percent. Still, they don’t think Congress needs to take immediate steps to address the rising debt.
CFOs bet Biden won’t raise corporate tax rates. Nearly 60 percent of chief financial officers of North American multinational companies doubt Congress would pass President-elect Biden’s proposal to raise the corporate tax rate from 21 percent to 28 percent, according to a survey by CNBC. Caroline Harris of the US Chamber of Commerce told CNBC, “Absent single party control, it will be extremely challenging for the Biden Administration to legislatively roll back the 2017 tax reform.” But she acknowledged that Biden could try to repeal parts of the law through regulation.
It’s complicated to itemize on state and federal income tax returns. Tax filers once made a simple calculation to decide whether to itemize deductions: Do their deductions exceed the standard deduction? But what if the answer is different on their federal and state returns? In a new TPC report, David Weiner examines the links between federal and state itemization decisions and explores the implications of relaxing state rules requiring that state itemization choices match federal ones.
Will New Jersey pass a social equity tax on legal marijuana? Last month New Jersey voters legalized recreational marijuana use. Now, lawmakers may give cannabis regulators the authority to levy a “social equity excise fee” on pot, on top of an already proposed 7 percent sales tax. Revenues would fund programs designed to reduce racial disparities caused by drug laws.
Florida lawmakers look for revenue, but not tax increases, to fill a budget hole. Republican lawmakers want to close the state’s $2.7 billion budget gap by cutting spending and increasing tax collections. But they insist that won’t mean a tax increase. One option: Collect online sales taxes from out-of-state companies. House Republicans once called this idea a “tax increase,” but the GOP Senate President now says “it’s not a tax increase to pay the taxes you owe.”
What about tax on those who work from home? The Tax Hound considers a 5 percent tax on income earned by those who choose to work remotely. The levy, proposed by a Deutsche Bank economist, would fund $1,500 grants to lower-income workers who cannot work from home. But there’s likely a fairer, more efficient way to support those workers and reduce income inequality.
President-elect Biden is in no rush to nix US tariffs on Chinese goods. He told The New York Times that he would not act immediately to remove President Trump’s 25 percent tariffs on half of Chinese exports to the US. Nor would he cancel Phase 1 of the agreement reached between Trump and China that requires China to buy $200 billion in additional US goods and services in 2020 and 2021. Biden first would review the existing agreement and consult with international allies before developing “a coherent strategy.”
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