Welcome to Tax Day 2020

Update 455 — Welcome to Tax Day 2020:
The Cost of Fighting COVID via the Code

The Trump administration’s reflexive economic policy response to COVID — and just about everything else — has been tax cuts, breaks, deferrals, deductions, and delays. The COVID tax relief measures have gone under the radar but represent a kind of fiscal policy that is, by default, no fiscal policy at all.

Meanwhile, Trump’s tax policy has left the budget, social programs, and state and localities impoverished. We have no national infrastructure program because Trump insists on financing it entirely through tax incentives. 

On Tax Day 2020, we reflect on what Trump’s tax policy has meant and what will need to be done to fix it.



COVID Tax Relief

Before the pandemic, President Trump’s main fiscal policy achievement was cutting taxes and adding $1.9 trillion to the national debt. The 2017 Tax Cuts and Jobs Act (TCJA) slashed the corporate tax rate from 35 to 21 percent, lowered the top marginal tax rate for individuals, and added several other deductions for top earners — a windfall for corporations and the wealthy. 
The tax cuts were ill-timed, juicing an already growing economy. And they will not “pay for themselves,” an assertion disproven even before the pandemic began. Now, we’re left with fewer options to fund recovery efforts when relief is actually needed.

Tax relief has largely taken a backseat during this crisis to other fiscal measures such as small business lending and unemployment insurance. The most prominent tax-related provision was $1,200 economic impact payments or “recovery rebates” for tax filers making less than $75,000, estimated to cost $292 billion. Less noticed was a provision Senate Republicans snuck into CARES lifting the TCJA’s $250,000 deduction limit for pass-through entities. Per the Joint Committee on Taxation, nearly 82 percent of the beneficiaries from this change make over $1 million. 

Trump’s Unwelcome Summer “Holidays”

In negotiations for the next relief package, tax credits, cuts, and holidays are all back on the table. 

During the CARES Act debate, the White House floated a payroll tax cut that Congress nixed in the final package. But National Economic Council Director Larry Kudlow stated that a “payroll tax holiday” is among the White House’s priorities in the next package. This holiday would target relief to those still employed but would do nothing for the millions of unemployed Americans who face benefit cut-offs at the end of July. It would also further erode needed social security funds.

Kudlow also suggested a capital gains tax holiday. Capital gains are highly skewed toward the wealthy. Per the Tax Policy Center, in 2018, the top one percent accounted for nearly 69 percent of realized long-term capital gains. A capital gains tax holiday would almost exclusively benefit the wealthy. It could also hamper future tax revenues as the wealthy rush to realize gains during the holiday. So far, neither of Trump’s holidays have gained traction in Congress.

Any spending in the next package should do more to target low-income individuals. Further benefits for the wealthy would cut much-needed revenues and provide little return for the real economy. While these COVID-related tax provisions are temporary, November’s election may bring further long-term changes to the tax code.

Tax Day 2021

In 2017, the TCJA transformed an already skewed tax code to be even more favorable for the rich. Vice President Biden has stated his intent to “get rid of the bulk of Trump’s…tax cuts” and promises a more equitable tax system. Beyond reversing the TCJA, Biden’s tax platform goes further in instituting a progressive tax system:

  • Repealing TCJA Provisions: The central piece to Biden’s repeal effort is reinstating a 39.6 percent top individual income tax rate, applied to income above $400,000. Biden would also phase out the Qualified Business Income (QBI) deduction for those same individuals.
  • Social Security Tax: Biden proposes adding a 12.4 percent Social Security payroll tax on wages above $400,000. This would create a “doughnut hole” where wages between $137,700 and $400,000 avoid Social Security tax. This gap would close over time as the $137,700 adjusts with inflation.
  • Long-Term Capital Gains: Under current law, the top rate for long-term capital gains is significantly lower than the top rate on personal income and short-term capital gains. Biden will raise this rate to 39.6 percent for individuals earning over $1 million. He would eliminate the ‘stepped-up basis’ loophole, which allows inheritors of property to avoid capital gains taxes on these assets upon receipt and significantly reduce their tax burden when they sell.
  • Corporate Taxes: Biden will raise the corporate income tax rate from 21 to 28 percent. He also proposes a 15 percent minimum tax for corporations with over $100 million in book income. Qualifying corporations will owe the larger of their standard tax bill or the 15 percent minimum tax, which allows them to deduct net operating losses and overseas tax liabilities, effectively reversing the TCJA’s elimination of the corporate AMT.

Per the Tax Policy Center, these changes will generate $156 billion in revenue in 2021 and over $1.5 trillion through 2025.

Revenue Forecasts for Vice President Biden’s Key Tax Proposals (Billions)

Higher Top Individual Rate$17.4$133.7
QBI Phase Out$23.8$201.1
Social Security Tax Change$51.9$386.8
Increased Capital Gains Taxes$5.3$188.3
28% Corporate Income Tax$49.1$552.1
“Corporate Minimum Tax”$8.2$66.4

Source: Tax Policy Center

Room for More

Although Vice President Biden’s proposed tax reforms would create a more progressive tax code, they will do little by themselves to provide relief to low-income families most affected by the recession.

Per a National Academies report, combining a universal $2,700 annual Child Tax Credit with a 40 percent expansion of the Earned Income Tax Credit would reduce child poverty in the United States by half. This would cost around $110 billion per year. The HEROES Act would expand both credits but continues to languish in the Senate. 

A Progressive Code for a Progressive Future

As negotiations begin on the next relief package, Democrats will need to hold the line against attempts to tilt the tax code further in favor of the wealthy. It might be an uphill battle as the administration believes that any problem can be solved with tax cuts. Even if voters oust Trump in November, the effects of his reckless tax policies will prove fiscally challenging for years, maybe decades. The need for sensible, progressive reforms to the tax code needs to be a top priority for the next Democratic administration.

49 thoughts on “Welcome to Tax Day 2020”

  1. Nice post. I learn something totally new and challenging on websites I stumbleupon every day.
    It will always be exciting to read through content from other writers and practice something from other websites.
    0mniartist asmr

  2. My programmer is trying to convince me to move to .net from PHP.
    I have always disliked the idea because of the costs. But he’s tryiong
    none the less. I’ve been using WordPress on numerous websites
    for about a year and am nervous about switching to
    another platform. I have heard fantastic things about blogengine.net.
    Is there a way I can import all my wordpress content into it?
    Any kind of help would be greatly appreciated! 0mniartist asmr

  3. What’s Taking place i am new to this, I stumbled upon this
    I have discovered It absolutely useful and it has aided me out loads.
    I am hoping to give a contribution & help other users like its helped me.

    Great job.

  4. What’s up to every body, it’s my first pay a visit of this
    web site; this blog consists of remarkable and in fact excellent stuff designed for readers.

  5. It is perfect time to make some plans for the future and it’s time to be happy.
    I have read this post and if I could I desire to suggest you few
    interesting things or tips. Perhaps you could write
    next articles referring to this article. I wish to read
    more things about it!

  6. Greate article. Keep posting such kind of info on your page.
    Im really impressed by it.
    Hi there, You have done an excellent job. I will certainly digg it
    and in my opinion recommend to my friends. I’m sure they will be benefited from this website.

  7. I loved as much as you will receive carried out right here.

    The sketch is attractive, your authored subject matter stylish.

    nonetheless, you command get bought an nervousness over that you wish be delivering the following.
    unwell unquestionably come further formerly
    again as exactly the same nearly a lot often inside case you shield this hike.

  8. Hi there! I know this is kinda off topic but I was wondering which blog platform are you
    using for this website? I’m getting fed up of WordPress
    because I’ve had problems with hackers and I’m looking at options
    for another platform. I would be fantastic if you could point
    me in the direction of a good platform.

  9. scoliosis
    I love your blog.. very nice colors & theme. Did you
    create this website yourself or did you hire someone to
    do it for you? Plz respond as I’m looking to create my own blog and would like to know where u got this from.
    appreciate it scoliosis

  10. scoliosis
    Does your website have a contact page? I’m having problems locating it but, I’d like to
    shoot you an e-mail. I’ve got some suggestions for
    your blog you might be interested in hearing. Either way, great website and I look forward to seeing
    it develop over time. scoliosis

  11. Howdy! This blog post couldn’t be written much better! Looking through this
    post reminds me of my previous roommate! He continually kept talking about this.
    I am going to forward this post to him. Pretty sure he will have a good read.
    Thanks for sharing!

  12. Excellent post. I was checking continuously this blog and I’m inspired!
    Extremely helpful info specially the last section 🙂 I maintain such
    information a lot. I used to be looking for this certain information for a long time.
    Thank you and good luck.

  13. I blog often and I seriously appreciate your content.
    This great article has truly peaked my interest. I’m going
    to bookmark your blog and keep checking for new details about
    once a week. I subscribed to your Feed as well.

  14. You could definitely see your enthusiasm within the article you write.
    The sector hopes for more passionate writers such as you who aren’t afraid to mention how they believe.
    All the time follow your heart.

  15. I’m not sure why but this web site is loading extremely
    slow for me. Is anyone else having this problem or is it a problem
    on my end? I’ll check back later on and see if the problem still exists.

  16. I don’t even know how I ended up here, but I thought this
    post was good. I don’t know who you are but definitely you
    are going to a famous blogger if you are not already 😉 Cheers!

  17. Useful information. Fortunate me I found your website accidentally, and
    I am stunned why this twist of fate didn’t came about
    in advance! I bookmarked it.

    Have a look at my webpage … site

  18. Your style is very unique compared to other people I have read stuff from.
    Many thanks for posting when you have the opportunity, Guess I will just bookmark this blog.

  19. My coder is trying to persuade me to move to .net from PHP.
    I have always disliked the idea because of the expenses.

    But he’s tryiong none the less. I’ve been using WordPress on numerous websites for about a year and am anxious about switching to
    another platform. I have heard good things about blogengine.net.
    Is there a way I can import all my wordpress content into it?
    Any kind of help would be really appreciated! https://buszcentrum.com/nolvadex.htm

  20. My coder is trying to persuade me to move to .net from PHP.
    I have always disliked the idea because of the expenses.

    But he’s tryiong none the less. I’ve been using WordPress on numerous websites for about a year and am anxious about switching to another
    platform. I have heard good things about blogengine.net.
    Is there a way I can import all my wordpress content into it?
    Any kind of help would be really appreciated! https://buszcentrum.com/nolvadex.htm

  21. My partner and I absolutely love your blog and find many of your post’s to be just what I’m looking for.
    can you offer guest writers to write content to suit your needs?
    I wouldn’t mind publishing a post or elaborating on many of the subjects you write with regards to here.
    Again, awesome blog!

Leave a Comment

Your email address will not be published. Required fields are marked *