The Hill reported this week that there is still “much uncertainty” about the path forward after the administration pitched ideas to boost the economy amid the coronavirus outbreak.
Democrats have openly criticized the initial proposals to cut or eliminate payroll taxes, arguing “the president is looking for an excuse to make another tax cut.”
Even some Republicans have been hesitant to embrace it the proposal, The Hill said. In a meeting with Senate Republicans on Tuesday, the President called for payroll taxes to be waived through the election. He also discussed relief for the travel and hospitality industries which have been hit particularly hard by the coronavirus outbreak.
Now, House Democrats say they are planning their own response, which they are expected to release “soon.”
“I think people on the Hill are sort of thinking about what they have in their toolbox” in terms of temporary tax relief, said Jon Traub, a former Republican staff director on the House Ways and Means Committee, now a managing principal at Deloitte Tax LLP. In addition, critics argued that payroll tax cuts won’t stop the spread of the virus after the President’s meeting with lawmakers.
Treasury Secretary Steven Mnuchin, who was also in the meeting with lawmakers, said he was optimistic there is a bipartisan path forward. “We’re having discussions about various different policies,” he said.
Sen. Josh Hawley, R-Mo., said Mnuchin told senators there is still a debate about whether the proposed payroll tax cut would be permanent or temporary. The administration is scoring the cost of both options, Mnuchin told the group.
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Sen. Tim Scott, R-S.C., weren’t ready to commit yesterday to a payroll tax action. Still, the President said he thought Republican senators were “mostly all there” on the idea.
A one-year cut of 2 percentage points in the payroll tax, as was done in 2011, could generate modest economic growth, according to the Penn Wharton Budget Model. In addition, Mnuchin said there are some steps Treasury could take on its own. For example, declaring the virus a federal disaster would allow the department to extend tax filing deadlines and payment due dates and waive late-filing penalties for affected individuals, The Hill said.
Secretary Mnuchin and President Trump also discussed ways to help small businesses and provide paid sick leave for individuals, Sen. James Lankford, R-Okla., said.
Ways and Means Democrats asked for an evaluation of whether the April 15 filing deadline should be extended.
The Hill reported that President Trump decided to abandon his cautious, business-as-usual approach to the coronavirus he had hoped would calm Wall Street jitters after watching stocks plummet while aboard Air Force One on Monday, The Hill said.
The Hill also noted that some elements of the 2017 tax law could pose additional trouble for companies, on top of shaky markets and a drop in demand for services like airline travel. Those changes include a cap on debt interest write-offs and the elimination of companies’ ability to carry back losses to previous years.
“All of those provisions are going to be harsh on companies when things turn down,” Bryan Collins, a former Treasury official, now a managing director at Andersen Tax said.
There also were discussions of an infrastructure package this week, including possible means of financing. In that context, The Hill said Senate Majority Whip John Cornyn, R-Texas, “threw cold water on any across-the-board gas tax increase and pointed out that “a better option—and one preferred by Republicans” — could be a vehicle-miles-traveled tax, and Democrats should consider it, he said.
“Well, if they want an infrastructure bill they’re going to have to get serious about it and that’s one reason why convincing them that a gas tax is not going to pass this Congress is important, because then it will force them to get serious about what might work,” he said.
The Hill also noted that former Vice President Joe Biden’s current tax plan would raise taxes on the richest Americans by about $109 billion over a decade, The Hill said. In contrast, the plan Sen. Bernie Sanders, I-Vt., proposed would raise taxes on the wealthy by nearly $3.2 trillion in that same period, according to a recent estimates from the Tax Foundation, The Hill said.
Biden has called for repealing the tax law cuts benefiting top earners. Sanders would raise the top tax rate to 52% for those making $10 million or more.
So, we will see. Certainly, the continued market volatility along with the spreading coronavirus outbreak will make pressure for federal relief increasingly urgent — proposals producers should watch closely as they are debated, Washington Insider believes.
Welcome
