COVID-19 will drain $16 trillion from projected economic output over 10 years, CBO figures. The Congressional Budget Office projects that cumulative national output for the next decade will be $16 trillion less than it forecast before the pandemic. CBO projected output will fall by 14.2 percent in the second quarter of this year and 9.4 percent by year’s end. It does not expect growth to fully return to pre-COVID-19 trend before the end of the decade. The forecast includes the positive effects of the several recent coronavirus relief bills.
Tomorrow at 1:00pm: Tax Analysts Webinar: “Addressing the Economic Crisis: What’s Next for Federal Policy.” House Ways and Means Committee chair Richard Neal will make opening remarks. Pam Olson of PwC's Washington National Tax Services and TPC’s Mark Mazur will follow with comments on the scale of the economic crisis, the impact of federal policies to date, and possible future steps. Tax Analysts’ Cara Griffith will moderate a discussion with Pam and Mark. Register here.
Understaffed IRS fails to pursue high-income deadbeats. The IRS failed to pursue 879,415 high-income nonfilers in tax years 2014-2016, according to a newly released report by the Treasury Inspector General for Tax Administration (TIGTA). They had an estimated tax due of $45.7 billion. Nearly 370,000 were never selected for review and The IRS closed another 42,601 without a review. TIGTA said the open cases likely will not be pursued because the IRS lacks resources.
New TPC brief navigates the maze of recent child and work incentive proposals. TPC’s Elaine Maag and Nikhita Airi describe who benefits from the two largest refundable tax credits: the earned income tax credit (EITC) and the child tax credit (CTC). They then describe several proposals to expand these credits or add new ones for low-income families. All the ideas would target benefits to those in the lowest 20 percent of the income distribution.
State tax revenues fell sharply in April. TPC’s Lucy Dadayan runs the grim numbers. While there was a lot of variation among the states, the news for most ranged from bad to terrible. Despite strong pre-COVD-19 revenues in most states, after declines in the March and April only 11 still showed fiscal year increases compared to the same period last year. Seventeen states reported revenue declines of 5 percent of more.
Texas sales tax collections plunge 13.2 percent—the biggest drop in a decade. The state faces a budget crisis of historic proportions. Comptroller Glenn Hegar said sales tax revenue declines were steepest for gasoline, hotels, and alcohol. Oil and gas production taxes fell by three-quarters.
Do cigarette taxes on teens reduce smoking later in life? A new paper for the National Bureau of Economic Research suggests the answer is yes. Researchers Andrew Friedson and Daniel Rees estimate that a one-dollar increase in the cigarette tax at age 14 correlates with 46 percent reduction in smoking as an adult (age 30-66). Among first-time mothers, it is associated reduced smoking in the year they give birth.
Phase One Deal with China heads backward. President Trump threatened to sanction Chinese officials over handling of the coronavirus pandemic, and now China has halted its promised Phase One purchases of US soy beans. The Chinese government has also canceled an unspecified number of US pork orders.
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