The pandemic could slash state revenues by $200 billion through fiscal 2021. TPC’s Lucy Dadayan estimates that COVID-19 will hammer state revenues in the fiscal year that began yesterday (for most states). Extrapolating from the 27 states that already have updated their revenue forecasts, Lucy figures the pandemic reduced revenues from pre-COVID-19 projections by $75 billion in the budget year just ended, and will cut another $125 billion in the new year. If the pandemic worsens, as it appears to be doing in many states, the revenue decline could be worse.
Before leaving for its July 4 recess, the Senate and House passed an extension of the PPP application deadline. Congress passed the extension just before the program was due to expire. Businesses with fewer than 500 employees now could apply for Paycheck Protection Program loans until August 8. The program still has about $130 million in untapped funds.
Senate Democrats want to extend expanded unemployment benefits. They introduced legislation yesterday to extend the $600 federal increase in weekly unemployment benefits beyond July 31. The American Workforce Rescue Act, introduced by Senate Minority Leader Chuck Schumer and top Finance Committee Democrat Ron Wyden, would maintain those benefits until a state’s three-month average total unemployment rate falls below 11 percent.
If there’s another relief bill, will the IRS avoid current stimulus check pitfalls? For example, up to 365,000 low-income people did not receive the stimulus money for their dependent children. IRS Commissioner Charles Rettig told the Senate Finance Committee this week that the agency now has tools to help make people aware that they are eligible for payments. Rettig acknowledged that “We have some limitations on abilities and capacities to move things through, but we’re sympathetic with trying to get as much funds out to as many people as possible as quickly as possible.”
Check out TPC’s new chart book on the effects of tax incentives on home ownership. Federal tax law provides many benefits for homeowners. This chartbook focuses on the home mortgage interest deduction. It shares updated estimates of the distributional effects of the subsidy,,shows how those estimates could change if people pay down mortgages in response to an elimination of the deduction, and analyzes revenue-neutral alternatives that replace the current deduction with a tax credit.
Tax Day is around the corner. Who’s ready? The Tax Hound wonders how tax filers have spent the first-ever extended tax filing season. Has the July 15 deadline changed Americans’ behavior? Or, as has been the case historically, have people who expected refunds already filed? Are those waiting until the last minute filers with a balance due?
Tune in next Thursday at noon. On July 9, TPC presents its next online conversation on The Prescription: Fiscal Policy in a COVID-19 Economy. Next Thursday’s guest will be Raphael Bostic (@RaphaelBostic), president and chief executive officer of the Federal Reserve Bank of Atlanta. He’ll be interviewed by TPC senior fellow Howard Gleckman (@howard_gleckman). Register here.
Congress is not in session. The Daily Deduction will post Mondays until July 20, when it will resume its regular schedule. Have a happy, safe and peaceful Fourth of July.
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