But the White House and the Senate GOP remain at odds. Senate Majority Leader Mitch McConnell plans to release a coronavirus relief bill this week. But Republicans remain uncertain about what it should include. President Trump says he won’t sign a bill without a payroll tax cut, through that idea has little traction in Congress. The White House also objects to more funding for COVID-19 testing or other pandemic mitigation while GOP lawmakers want billions of dollars more for these efforts. Other contentious issues for the GOP—how much state and local government aid to include and what to do about jobless benefits.
As for those unemployment benefits… The additional $600 per week included in the CARES Act expires on July 31. States need an extension before July 25 or unemployment benefits will revert to state levels for the last week of the month. Some lawmakers want to limit expanded benefits to the amount of a person’s prior wages. Michele Evermore of the National Employment Law Project said such a design means states “would have to redo everything about how benefits are determined.” Those complications could delay payments for several weeks.
US Supreme Court will expedite implementation of its Vance ruling on Trump’s tax returns. Its rulings usually take a month to go into effect, but the High Court agreed to expedite its ruling that the President does not have absolute immunity from a Manhattan grand jury subpoena for his tax returns. The President’s attorneys have until July 27 to challenge the subpoena on other grounds. District Attorney Cyrus Vance is pushing for a quick resolution because the statute of limitations for alleged Trump crimes will soon run out.
State sales tax receipts shrank by $6 billion in May. TPC data reflect a 21 percent decline compared to May 2019. TPC’s Lucy Dadayan shows how stay-at-home orders, voluntary decisions to close businesses, sales tax filing and payment deadline extensions, and COVID-19 cases all contributed to the freefall of sales tax revenues.
Advice to the IRS: Hit “pause” on correspondence audits. TPC’s Janet Holtzblatt explains that the IRS can’t conduct correspondence audits when it can’t open its own mail—an estimated 12 million pieces are backlogged due to the pandemic. Correspondence audits are narrowly focused on one or a few items, and many delay income tax refunds. Janet concludes: “This year is a mess. For now, the IRS should temporarily give up on correspondence audits and just pay the refunds claimed by taxpayers. Then it needs to think about how to improve its process of correspondence audits for the longer term.”
What about electronic filing? No mail involved, but still no refund? TPC’s Howard Gleckman describes two reasons why even electronic filers who arranged for direct deposit have not received refunds for returns filed months ago. First, IRS return processing algorithms routinely hold up millions of e-filed returns each year that must be reviewed by a human. And the pandemic has delayed most of that work. Second, the federal government may just be slow processing payments, which is not a good look during an economic slowdown.
Using synthetic data to improve tax policy research. TPC’s Len Burman describes how TPC, other Urban Institute staffers, and the IRS Statistics on Income (SOI) Division developed a statistical representation of data on about 26,000 lower-income individuals who do not file income tax returns. The ultimate goal: A synthetic public use file that represents the entire tax filing public, allowing researchers and policymakers to see how potential reforms could affect households at all income levels. The initiative is made possible with support from Arnold Ventures.
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