Congress is nearing a deal on the next coronavirus relief bill. Treasury Secretary Steven Mnuchin said yesterday that the Trump Administration and Congress were nearing an agreement on a roughly $450 billion plan. It would add about $350 billion to two small business lending programs that were included in the Coronavirus Aid, Relief and Economic Security (CARES) Act Congress passed just three weeks ago, $75 billion for hospitals, and $25 billion for COVID-19 testing. Hill Democrats said they were “close” to an agreement. As of Sunday, the measure did not include additional assistance for state and local governments. Congress could pass the bill early this week.
Some advice about those coronavirus tax refunds. The Treasury Department announced last week that those getting veterans benefits and Supplemental Security Income (SSI) would not have to file tax returns to get their CARES Act rebate payments. But TPC’s Janet Holtzblatt has some advice for those who do: “Do not—repeat, do not—send the Internal Revenue Service a paper return—especially if you are expecting a tax refund or want a COVID-19 recovery rebate based on your 2019 income.” For now, the overburdened IRS is not opening its mail. You can track your recovery rebate on a new IRS website called “Get My Payment” and learn about tax policy during the pandemic through TPC’s webinar, here.
Who benefits from the CARES Act tax cuts? TPC’s Thornton Matheson explains that the recovery rebate program will account for about half of the CARES Act’s tax cuts. Nearly all of the rest come from five changes in the tax treatment of businesses, including pass-through losses, employee retention credits, net operating losses, interest deductions, and payroll tax deferrals. More than a quarter of the tax cuts go to taxpayers with the top ten percent of incomes.
Who should pay for COVID-19 economic relief? TPC’s Gene Steuerle argues for a future progressive surtax on income and profits averaged across all taxpayers. Low-income people would pay no more in taxes, while taxes would be increased on those whose incomes rebound. Gene concludes that such a levy might even give the American people greater faith that the federal government [will] act in their long-term, not just short-term, interest.”
The economy is collapsing quickly, and employment recovery will be slow. TPC’s Lucy Dadayan and Donnie Charleston illustrate that the more than 20 million unemployment insurance claims in just the past four weeks exceeded total jobless claims in the 1990 and 2001 recessions and topped the first 50 weeks of claims in the 2008-2009 Great Recession. Lucy and Donnie conclude that “if commerce can gradually resume, we may see a slowing of the rate of new unemployment claims, but it will be a long time before those 20 million newly unemployed will be back to work.”
The COVID-19 pandemic may delay EU tax information reporting. The European Union’s requirement that law firms or companies disclose cross-border arrangements that may result in tax benefits is due to take full effect on July 1. However, Bloomberg Tax reports that several countries failed to implement the rules by January 1, which means that they might not be ready or able to submit the first disclosure reports on August 31. Companies and tax advisers may have to guess—at the risk of severe penalties for failing to disclose.
Former Treasury Secretary Paul O’Neill has died. The plain-spoken former head of Alcoa was President George W. Bush’s first Treasury Secretary. O’Neill, a deficit hawk, often got in trouble with other top administration officials for his candid views on tax policy, including Bush’s 2001 tax cuts. After his tenure ended in 2002, he became a leading critic of the Bush administration and a strong supporter of steps to slow climate change. He also was an advocate for improving health care quality and safety, and for clean water in Africa (where he teamed up with the pop singer Bono).
Congress is not in session. The Daily Deduction will post Mondays until it 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].
