Unsanitized: The COVID-19 Report for July 17, 2020

Cap COVID Spending? OK, But Repeal the Trump Tax Cuts
Also, Pelosi speaks on bailout oversight

 

The Internal Revenue Service building in Washington. (Graeme Sloan/Sipa
via AP Images)

First Response

As we head into crunch time on coronavirus relief, the demands coming
from the White House threaten to upset the entire deal. Donald Trump
remains obsessed with a payroll tax cut
,
which nobody in Congress, really, wants. Any payroll tax cut with any
real impact on people-a three-month holiday would run around $300
billion
-would
cut deeply into the other White House demand for a relief bill topping
out at no more than $1 trillion
.

The proper amount of spending for this bill is "whatever it takes." If
you don't like the cost, maybe you shouldn't have completely botched
the policy response such that major regions of the country have to shut
down again. The same people whining about expense are the ones who drove
the country into despair. The cost of a continued runaway virus is much
higher than the cost of emergency measures to ensure millions of people
have adequate food and shelter during this crisis.

But if you really, really must constrain the response, and you really,
really must have this payroll tax cut, then I have an idea: get rid of
all the other long-term tax cuts mostly targeted toward the rich, many
of them passed in the very last coronavirus relief bill.

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They don't get much discussion but there were a host of tax provisions
in the CARES Act,
passed in March. In fact there was a payroll tax holiday, but for the
employer side, not the employee. Not only can employers delay payroll
taxes to next year, they can eliminate them if they retain employees.
The two measures are estimated at about $66 billion, and the savings
falls on the business.

A bigger tax break has been termed the "Millionaire's Giveaway
" by Americans for Tax
Fairness. This $135 billion tax break allows people with partnerships or
other structures to carry forward losses from previous years and offset
gains in their taxes in future years. It only affects people making half
a million dollars in income from the partnership or more. The same type
of deduction for businesses costs another $25 billion; the oil and gas
industry in particular

has been using that one, converting their losses in recent years into
corporate welfare checks. There's also an interest deduction available
to larger corporations ($13 billion). Certain aviation taxes were
suspended ($4 billion); see if that shows up in a lower ticket fare.

Add it up and that's $243 billion in tax giveaways to rich people and
corporations in the CARES Act. If the White House wants a payroll tax
cut it can come out of that. Most of the benefits from those changes
don't hit until next year and the payment of 2020 taxes, and beyond.
It makes sense to pull up spending (tax breaks are spending through the
tax code) to when it's needed now.

The Heroes Act, the House Democratic bill, actually accomplished a form
of this, by cancelling the Millionaire's Giveaway permanently, as it
was due under the Trump tax cuts to come back in 2026 anyway. That
brings in $246 billion overall
,
according to the Joint Committee on Taxation, enough for a decent-sized
payroll tax holiday.

And as long as we're talking about the Trump tax cuts, we could
eliminate the measures most tilted to the rich and powerful-the
corporate tax cut, the S-corporation pass through for rich people who
set up partnerships, the deducations for dividends on foreign earnings,
and the inheritance tax cuts-and take in about $3 trillion
. If
the next relief bill simply has to be capped at $1 trillion, then you
could do $4 trillion in spending and add these measures in and hit that
number.

Again, I think it'd be ridiculous to offset anything for emergency
relief. But playing by the rules set up by the White House isn't an
obstacle, thanks to the trillions of dollars in offsets Trump created
with his tax law. There is also a case to be made that rebalancing the
inequality baked into the tax code is good public policy anyway, and if
it can facilitate critical crisis spending under the stupid strictures
of straitjacket budget politics, all the better.

Unfortunately, Chuck Schumer is trying to leverage the new bill to get a
tax cut for well-off people, particularly in his own state, by removing
the cap

on the state and local tax deduction imposed in the Trump tax cuts. That
was also in the Heroes Act (albeit just a two-year suspension).
There's no need whatsoever for this kind of long-term help for people
who itemize when the unemployed and the poor are in desperate trouble
right now. Wealthy people don't need another champion to engage in
special pleading for them.

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Days Without a Bailout Oversight Chair

112
. 
And Nancy Pelosi's remarks at her weekly press conference deserve
special attention. She was asked where the bailout oversight chair was.
Pelosi confirmed that Gen. Joseph Dunford, former chair of the Joint
Chiefs of Staff, was the choice, but "some process in the Senate, which
I was not aware of" was the reason it fell apart. That probably refers
to a standard financial disclosure, and it's definitely a mark of
leadership to blame that. Dunford is on the board of Lockheed Martin,
and apparently he had more integrity than the Speaker to consider that
an irresolvable conflict.

But the real problem was the follow-up. Pelosi said she's proposed
someone to Mitch McConnell. She went on to say that Dunford was the
perfect choice, being "a person of his stature and in the military; a
person who knows how to manage things." Does she know anything about the
position she's filling? It's oversight of a complex set of financial
transactions. The military isn't exactly a paragon of budget
transparency (there hasn't been an audit in decades), and more to the
point, generals at the joint chiefs don't have a lot of day-to-day
facility with corporate bonds, levered credit facilities, or really
anything involved in the job. But "there are plenty of people in the
military" who could do it, Pelosi said. She said "apolitical" twice,
too.

When Harry Reid chose the bailout oversight chair in 2008, somehow he
didn't see the military as the only talent pool. He picked a
bankruptcy law professor out of Harvard who made the position a
launching pad. So with Harry Reid we get Elizabeth Warren in that slot.
With Pelosi we get a military daddy.

Now, you may want to knee-jerk defend Pelosi by saying that McConnell
has to agree. First off, it's Pelosi with the stars in her eyes about
the generals. Second, Democrats touted this as the big get in
negotiations over the CARES Act. If McConnell was part of the
decision-making, knowing who he is, maybe it wasn't such a big get.

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Odds and Sods

Speaking of Pelosi, Robert Creamer of Democracy Partners had a problem
with me characterization of her leadership

in the pandemic last week. So I allowed him to air his grievance, and
then I responded. You can find that here
.

Artist Steve Brodner has a tribute to the forgotten men and women we
have lost to the coronavirus crisis. It makes up the back page of the
latest issue of our magazine. You can see it here
.
All of our coronavirus coverage is at prospect.org/coronavirus
. And send me your thoughts and tips
via email .

We Can't Do This Without You

Today I Learned

* A new one-day record

in cases, again. That 100,000 case/day number is creeping up. (CNBC)

* Brian Kemp is suing the city of Atlanta

over his mask mandate. (Atlanta Journal-Constitution)

* Research from JPMorgan

shows that late processing of unemployment claims had a dramatic impact
on spending, as you'd expect. Our sclerotic administrative state has
real consequences. (JPMorgan)

* States spending hundreds of millions of dollars on consultants to help
build unemployment websites that don't work
.
(The Markup)

* Carnival Cruise Lines definitely seems like a good ongoing investment
.
(Financial Times)

* The CDC took down its own data

after the Trump administration re-routed states to report to them.
(Politico)

* How Thailand is getting its coronavirus response right
.
And really the entire southeast Asian region. (New York Times)

* An AP history teacher struggles with remote learning
.
(Washington Post)

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