No Time to Worry, or Wonder If

Mnuchin: “Now is not the time to worry about shrinking the deficit.” Treasury Secretary Steven Mnuchin told CNBC that the economic crisis warrants extraordinary stimulus from Congress and the Federal Reserve. His remarks conflict with some congressional Republicans who argue that an improving economy makes additional spending on coronavirus relief less necessary. Politico reports that the bipartisan Problem Solver’s Caucus is quietly shopping a roughly $2 trillion plan that has drawn Mnuchin’s interest. 

Or does a coronavirus relief bill hinge on Speaker Pelosi? House Speaker Nancy Pelosi continues to hold out for at least $2.2 trillion in relief. She thinks President Trump, who is behind in the polls to Democratic challenger Joe Biden, will be willing to sign on to a bill in excess of $2 trillion. If he caves to political pressure, if economic indicators begin to trend downward, or if moderates on either side of the aisle press for a deal, a relief bill still may surface before the election. That’s a lot of ifs.

Analysis: Biden’s tax plan would hit the top 0.1 percent hard. The Penn Wharton Budget Model finds Biden’s tax plan would raise their average effective federal tax rate (including their share of his corporate tax hikes) from 30.6 percent to 43 percent in 2021. On the other hand, middle-income households would pay an effective rate of 17.3 percent, up from 16.9 percent. Excluding the corporate increases, the average effective individual income and payroll tax rate would rise by 10.6 percentage points for the top 0.1 percent but remain unchanged for low- and middle-income households.  

This week’s The Prescription: California’s economy. Tune in to this week’s episode of TPC’s webcast The Prescription. Irena Asmundson, chief economist for the California Department of Finance, will talk with TPC senior fellow Howard Gleckman about how California’s economy is coping with the concurrent challenges of the pandemic and wildfires.

Save September 29, 1:30 to 2:30 pm for the State of the Cities 2020.  The Urban Institute and TPC’s State and Local Finance Initiative host a virtual event on how cities are leading through a pandemic. Current and former city leaders and policy experts will discuss how large and small communities are coping with the pandemic and what that could mean for services, jobs, and an inclusive economic recovery. Learn more and register here.

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].