“Warp Speed” Stimulus Round 3

Taxes

On to round three of coronavirus relief. Last night, President Trump signed into law the safety net bill passed by the Senate yesterday and House last week.  And lawmakers continued work on a third, even larger stimulus package. The White House is proposing a $1 trillion plan, including $50 billion in loans to the airline industry, $300 billion for small businesses, and $150 billion for other unspecified “critical” distressed sectors of the economy. Treasury would send individuals $500 billion in direct payments—$1,000starting on April 6 and another $1,000 starting on May 18. The White House has not specified the mechanism, and observers think the April 6 date is not realistic.

Don’t expect those cash payments to boost the economy. TPC’s Howard Gleckman says Congress should deliver the money, but lawmakers should not expect the cash to boost demand like it does in a typical recession. Consumers are not spending because they are afraid to shop—or  even prohibited from leaving their homes. Demand will only return when public health initiatives break the back of the pandemic.

“If we give everybody cash to boost the coronavirus economy, let’s tax it.” TPC’s Donald Marron explains that giving people cash is a great way to soften COVID-19’s economic blow. But it’s important to make sure the cash goes to those who need it. To be efficient, “Let’s give cash to everyone, and then tax it later. By distributing money today, we get the speed and inclusiveness of universality. By taxing it later, we can recapture some of the benefits from those who needed them least.”

Major charities want  $60 billion in stimulus funding. They are looking to include their ask in the Phase 3 package. The charities group says the coronavirus increases the need for many non-profits to provide services. But the pandemic has forced some programs to close, cut contributions, and increased financial pressures on the organizations. 

Treasury: We are delaying tax payments, not tax filing. Really. When Treasury Secretary Steven Mnuchin announced that Treasury was giving filers until mid-July to pay any balances due, many hoped he really meant the IRS was delaying actual tax filing for 90 days. He didn’t. Treasury put out guidance yesterday that confirmed that taxpayers still will have to file their 1040s or request extensions by April. Preparers, who were hoping the end of tax season would be put off in the wake of the pandemic, are not pleased.  

Trump requests another $241 million for the IRS. The agency could get the extra money to help taxpayers with new tax credits in various stimulus bills. Separately, the IRS is closing field offices in coronavirus hot spots such as Seattle, New York, and San Francisco. 

American CEOs are  feeling blue. The Business Roundtable’s quarterly survey of the CEOs of large corporations  finds that optimism has fallen steeply. “If taken alone, the survey results received from March 2 on would have likely reflected the steepest decline in CEO optimism since the 2008-2009 recession,” the group said.

Maryland legislature approves a digital ad tax. The  lawmakers approved a digital advertising tax to fund a major K-12 school reform effort. The legislation also included a tobacco tax increase. Republican Governor Larry Hogan plans to veto the bill, but the Democratic-controlled legislature has a veto-proof majority. The law will almost certainly be challenged in court.  

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