While Congress continues work on a relief bill, state and local governments continue to shed jobs. A Washington Post analysis of government data shows that state and local governments have cut 1.3 million jobs since the onset of the pandemic. That’s five percent of government jobs. While tax revenue grew in some states, at least 26 suffered shortfalls. Revenue declined by at least 10 percent in five states.
TPC finds most benefits of the Ways & Means pandemic relief plan would go to low- and moderate-income families. TPC’s Howard Gleckman describes TPC’s analysis of the major tax provisions of the pandemic relief bill that the panel approved on a party-line vote. The bill would reduce 2021 federal taxes by an average of about $3,100. About two-thirds of the benefits would go to low- and middle-income households (those making about $91,000 or less) while about 11 percent would go to the highest-income 20 percent.
What makes a good idea realistic? TPC’s Elaine Maag and Howard Gleckman write that the Ways & Means plan would require the IRS to distribute the refundable credits monthly or quarterly so cash-strapped families would not have to wait until they file their next tax return to receive support. “Advancing these tax credits makes sense, but it won’t be easy,” they warn. “The IRS will need more resources and time to create an efficient system for distributing these payments.”
Congress could improve COVID-19 relief payments. TPC’s Jim Nunns explains how proposed $1,400 payments could be fairer, cheaper, and more effective at stimulating the economy. And, he adds, such a plan could increase assistance for low-income households at no extra cost. “With these changes,” writes Jim, “each dollar spent on the payments would have a much larger stimulative effect because it would go to those who would be more likely to spend, rather than save it.”
Wyden’s warning on digital taxes. Senate Finance Committee Chair Ron Wyden is willing to give the Biden Administration time to work out an agreement on digital taxes, but he’s keeping the heat on. He told Politico, “These unilateral digital taxes are being targeted right at the heart of America’s high-skill, high-wage companies in an area where we have a dramatic advantage. We’re obviously going to give the new administration a chance to engage at the OECD and make sure we get an outcome that protects these American companies…. We’re not just going to sit by while other countries try to plunder them.”
Did you eat too many chocolates on Valentine’s Day? Detox with TPC’s updated Marriage Calculator for tax year 2021. TPC’s Chenxi Lu and Janet Holtzblatt explain what you’ll learn from the updated calculator: Depending on your circumstances, marriage may cause your tax bill to go down (a marriage bonus) or go up (a marriage penalty). Or matrimony may have no impact at all on your taxes. We can’t speak for your waistline).
Tune in Thursday for TPC’s The Prescription with Glenn Hubbard. This week TPC’s Howard Gleckman will talk with Columbia University economist Glenn Hubbard, a former economic adviser to both presidents Bush. Hubbard will discuss the pandemic relief proposals being debated in Congress and overall US economic policy. Register here for the noon event on Thursday.
Perhaps a wealth tax in the United Kingdom? The chair of parliament’s Treasury Committee suggests a one-time wealth tax to fill the country’s public finance hole caused by the pandemic. British Finance Minister Rishi Sunak, however, says such a tax would go against his Conservative party’s values. Sunak’s current emergency fiscal plan will cost $389 billion in the 2020-2021 fiscal year, giving the UK its largest-ever peacetime deficit.
Congress is not in session. The Daily Deduction will resume its regular schedule on February 22.
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