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Quick Fix
— A new paper argues that wealth is quite concentrated at the top, but the increase hasn’t been as pronounced as other estimates have suggested, raising questions about the rationale for a wealth tax.
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— Another new paper insists the federal government needs to further delay tax filing deadlines, just as the IRS is ramping up staffing to deal with the current filing season.
— Well then: Treasury Secretary Steven Mnuchin says that families of dead persons who received a direct stimulus payment should send that money back.
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Driving the Day
BRIEF RETURN TO NORMALCY: Remember when the wealth tax was the talk of the tax world?
A new paper out this morning from Owen Zidar of Princeton, Eric Zwick of the University of Chicago’s business school and Matt Smith of the Treasury Department cast the authors’ further doubt on how much revenue a wealth tax would raise.
The paper found that the top 0.1 percent in the U.S. doubled their share of the country’s wealth between 1978 and 2016, from 7 percent to 14 percent. That’s clearly a big jump, and Zidar, Zwick and Smith noted that the top 1 percent own the same amount of assets as the bottom 90 percent. But the authors also found that the increase in the top 0.1 percent’s wealth is half the size of previous estimates.
Perhaps even more interestingly, Zidar, Zwick and Smith argue that wealth and assets flocking to the top has not been the key driver of inequality in the U.S. Instead, they maintain that private business income, largely from doctors, lawyers, accountants and the like, is the major culprit.
Not surprisingly, that finding also led to the projection that a wealth tax would raise less revenue than other calculations, particularly the trillions estimated by the Berkeley economists Emmanuel Saez and Gabriel Zucman. The authors projected that a wealth tax that looks an awful lot like the first version released by Sen. Elizabeth Warren (D-Mass.) would have raised $117 billion in 2016, or seemingly well short of the $2.5 trillion over a decade estimated by Saez and Zucman.
Better methods for battling inequality, the authors added, would be repealing the 2017 tax law’s 20 percent deduction on pass-through income and a payroll tax loophole named after Newt Gingrich and John Edwards.
MAYBE LATER? Moving the filing deadline back three months from April 15 was a good start for the IRS, along with a variety of other delays, Nicole Kaeding and Andrew Moylan at the National Taxpayers Union Federation write in their new paper.
But it’s also not nearly enough: At the very least, they write, the deadline for filing and paying any 2019 taxes should be moved once more from July 15 to Oct. 15.
Treasury has also moved estimated first- and second-quarter tax payments for businesses and the self-employed to the middle of July. But the NTUF paper suggests just scrapping estimated payments altogether for this year, and having final payments due next year when a taxpayer or business files their 2020 return.
Why the further delays? Kaeding and Moylan argue that the economic benefits of such a move, which would also ease the burden on the IRS and tax professionals, outweighs the loss of revenues at a time of low interest rates and when deficits are a secondary concern.
Speaking of which: The IRS, which just asked for volunteers to return to work and help shepherd the filing season to completion, is now offering face masks to any staffers who couldn’t or didn’t provide their own, Pro Tax’s Aaron Lorenzo reported.
It’s still not clear how many employees actually accepted the IRS’ call to come back. The agency requested 10,000 staffers, but the IRS isn’t saying anything about the kind of response it's gotten — though the Professional Managers Association, which represents agency management, says it hasn’t heard anything to suggest the tax collector is having trouble filling its spots.
Did we mention deficits? Economists are trying to buck up Republicans worried about the growing federal debt, ahead of another congressional debate about funneling more money into an economy ravaged by the coronavirus, as our Victoria Guida and Marianne LeVine report.
BUT, HOW? Mnuchin told The Wall Street Journal that Treasury would be cross-checking databases to see which payments of up to $1,200 per individual had been sent to the deceased.
But as Pro Tax’s Aaron Lorenzo reported, Treasury hasn’t yet spelled out its full plan for clawing back any money wrongly sent to dead people. President Donald Trump had already made some noise about getting that money back, but others watching the situation figured recovering those payments wouldn’t really be worth Treasury’s effort.
Another wrinkle, as noted by the WSJ’s Kate Davidson and Richard Rubin: Should or will Treasury treat those who died in 2020 but received payments different from those who passed away in 2018 or 2019 and got a rebate?
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Around the World
ANOTHER COVID PROBLEM AREA: Catholic bishops in Germany are growing increasingly worried that church revenues will take a tumble because of the coronavirus, the Catholic News Service reported. Germany charges a church tax on the wage of people who declare a faith, with the state keeping only about 3 percent of those revenues. Catholics paid some 6.6 billion euros, or around $7.2 billion, in church taxes in 2018. But that figure could drop dramatically based on the number of people who lose their jobs, though there are no firm estimates yet on how much less revenue churches can expect. “We must weigh what we as a church can still afford in the future and what we must say farewell to,” one bishop said recently.
Around the Nation
DO WE STAY FRIENDLY NEIGHBORS? A provision in New York’s tax law could put billions of dollars up for grabs between the Empire State and its neighbors, Bloomberg reported. The issue: New York forces anyone who works there but lives elsewhere to pay state taxes. That even goes for people who work at home for New York offices, with one fairly pertinent exception — when working from home is a “necessity,” as it currently is because of Covid-19. It’s not clear how this will all work itself out, though out-of-state people have had zero luck so far in wiggling out of paying taxes in New York and the state is historically very territorial on this issue. (No wonder why: New York gets around $700 million a month in income taxes from out-of-state residents.) But experts say some kind of coordination among New York and its neighbors will likely be necessary to avert all kinds of confusion.
Quick Links
Moody’s: States are going to need more aid from the feds to avoid making big spending cuts.
The coal industry has been lobbying for relief from taxes it pays to help black lung victims, citing cash flow issues because of the coronavirus.
New Jersey homeowners could get a 20-day reprieve on property taxes.
Did You Know?
The evangelical Christian group Gideons International distributes over 80 million Bibles a year.
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