See you next year, coronavirus relief? Speaker Pelosi’s office told CNN yesterday that a deal would have to be reached by the end of the day on October 20 in order to pass a bill before Election Day. A $1.8 trillion deal is on the table, according to Treasury Secretary Steven Mnuchin, but key divisions remain between Republicans and Democrats… and between the White House and Senate Republicans. Senate Majority Leader Mitch McConnell said the Senate would hold a vote on a $500 billion relief package that won’t likely become law. Businesses and families probably will not see any financial relief from the long-lasting effects of the pandemic until the lame duck session of Congress after the election, or next year.
The federal budget deficit has hit a record $3.1 trillion for the current fiscal year. Treasury announced the figure on Friday, an amount over twice the previous record of $1.4 trillion in 2009 during the Great Recession. The federal government spent $6.55 trillion in 2020, including $2.2 trillion in spending and tax cuts enacted through coronavirus relief legislation in March and April.
Democratic presidential candidate Joe Biden’s plans for taxes and Social Security. Biden would raise taxes by $2.4 trillion, nearly all on business and high-income households over the next decade. Updated TPC analysis shows that under Biden’s plan, in 2022, on average all but the highest-income 20 percent would get a tax cut, while the top 1 percent—those making about $790,000 or more—would see substantial reductions in their after-tax incomes. As for Social Security, he would expand Social Security’s payroll tax base and reduce the size of the projected gap between benefits and revenues by about one quarter, extending Social Security’s solvency for about five additional years.
COVID-19 is changing the labor market. What about tax policy? TPC’s Nikhita Airi argues that increasing income support through the tax code can ensure that low-wage workers are not left behind once the economy regains its footing and temporary relief programs end. Nikhita explains how the Earned Income Tax Credit could be modified to provide expanded benefits to people with earnings.
A case study of tax fairness: President Trump. TPC’s Steve Rosenthal testified last week before the House Ways & Means Committee’s Subcommittee on Oversight in response to New York Times reporting on President Trump’s taxes. The picture of Trump’s returns, argues Steve, calls into question the president’s returns in three respects: (1) the fairness of the amount of income taxes he reportedly paid, (2) the fairness of his reported business losses, and (3) the fairness of the IRS audit of his income taxes. Steve concludes that the amount of income tax reportedly paid by Trump—$750—is not fair. But one can’t determine whether his reported business losses or the IRS audit of his income taxes are fair without more information.
Speaking of losses: New York City lost $755 million in tax revenue because of sagging real estate deals. Sales of commercial and residential properties are down 45 percent this year. The city lost $755 million in revenue from transfer and mansion taxes levied on real estate trades. The city also collects taxes on mortgage recording, so the revenue loss is likely bigger.
And speaking of fairness: Texas billionaire charged with biggest tax evasion case in US history. Houston billionaire and CEO of auto software company Reynolds and Reynolds Robert Brockman faces federal charges of taking $2 billion through a scheme to evade taxes, hide assets, and launder money. The 39-count, 42-page indictment includes charges of money laundering, conspiracy, wire fraud, and tax evasion, and alleges that in the late 1990s, Brockman formed companies on the British Virgin Islands and later used them to conceal assets from the IRS.
The House and Senate are currently not in session. The Daily Deduction will post Mondays until the Senate returns.
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].
