What is the economy worth? Federal Reserve Chairman Jerome Powell urged Congress yesterday to approve another big COVID-19 relief package. “The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” Powell warned. It is extremely unusual for the Fed chairman to explicitly urge Congress to adopt fiscal stimulus.
How much will the economy contract? The Wall Street Journal reports on its monthly survey of economists (paywall). While those surveyed expect a deeper contraction in the second quarter of 2020, about 85 percent still think a recovery will begin in the second half of the year. The bad news: They expect Gross Domestic Product to shrink 6.6 percent this year, far worse than 4.9 percent decline they predicted last month.
Overturning the ACA means a tax cut for the wealthy. TPC’s Howard Gleckman explains the impact of a US Supreme Court decision to overturn the Affordable Care Act (ACA). If the court scraps the entire Affordable Care Act—the position argued by the Trump Administration—more than 20 million Americans would lose insurance coverage. But ACA repeal also would cut taxes for the top 1 percent by about $32,000 in 2019 (or 1.9 percent of after-tax income) and by about $200,000 (or 2.5 percent of after-tax income) for the top 0.1 percent. Taxes for middle-income households would be cut by an average of $50, about 0.1 percent of their after-tax income.
Trump’s payroll tax idea has one fan on Capitol Hill. While most Democrats and many Republicans show no interest in cutting the payroll tax, a top priority of President Trump, the idea has one fan. Senior Ways & Means Republican Kevin Brady says he’d favor temporarily cutting both the employer and employee share of the levy.
Colorado’s constitution could trigger tremendous property tax cuts. The state constitution’s Gallagher Amendment sets guidelines to determine property valuation and assessments. If economic forecasts hold, state lawmakers may have to cut residential property taxes by nearly 18 percent in 2021. That would be the second-largest cut in modern history, and would hurt every level of government. School districts, for example, could lose $491 million. States already face dire budget challenges as a result of the pandemic.
Anecdotally, a silver revenue lining, online. Bloomberg Tax reports that since the pandemic, some online sales and use tax collections were at least 25 percent higher during the early months of the pandemic compared to the same period last year. States’ shelter-in-place orders as well as compliance with new South Dakota v. Wayfair-driven sales tax collection rules likely contributed to the uptick.
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- © Urban Institute, Brookings Institution, and individual authors, 2020.