As the U.S. grapples with rising price inflation, a large and growing national debt, as well as a possible economic slowdown due to Omicron, the decision to provide additional fiscal support will prove to be a difficult one. Policymakers can debate how much stimulus is appropriate, but what is clear is that the U.S. fiscal support so far during the pandemic outranks nearly every industrialized country.
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During the pandemic, economic relief administered through the tax code exploded as Congress passed nearly $6 trillion of legislation into law. That left the 2021 tax filing season, which ended May 17, with complications that still linger.
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Congress chose to exempt forgiven Paycheck Protection Program (PPP) loans from federal income taxation. Many states, however, remain on track to tax them by either treating forgiven loans as taxable income, denying the deduction for expenses paid for using forgiven loans, or both.
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Unless the legislature acts, businesses that have received PPP loans and related federal assistance will face $457 million in state taxes through 2024—with more than half of those taxes coming due this spring—despite Wisconsin being on track to see continued general fund revenue growth even amid the pandemic.
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President Biden’s plan builds on previous relief packages and would include larger payments to individuals, expanded relief for households and small businesses, funding for vaccine distribution, and aid to state and local governments.
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The latest $900 billion coronavirus relief bill extends and modifies several provisions first enacted in the CARES Act, Congress’s $2.2 trillion pandemic relief law that was passed in March. With this package, lawmakers will have responded to the coronavirus and related economic hardship with a record-setting $3 trillion of fiscal support.
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The coronavirus relief package represents the second-largest recovery legislation, behind only the CARES Act, for a combined total of more than $3 trillion in support.
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As Congress works to provide another round of emergency economic relief, it is a good time to step back and consider how tax policy affects entrepreneurs and small businesses.
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Combined state and local tax collections were down only $7.6 billion across the period, representing a total state and local tax revenue decline of 0.7 percent compared to the first nine months of 2019.
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A bipartisan group of lawmakers released two compromise relief bills to address the COVID-19 pandemic, totaling about $908 billion: The Emergency Coronavirus Relief Act and the Bipartisan State and Local Support and Small Business Protection Act.
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Policymakers should consider finding ways to simplify the administration of relief during future crises. This will help ensure the relief is timely and targeted, key components of any successful relief package for this crisis or crises in the future.
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With days left until government funding runs out, congressional lawmakers are down to the wire to fund the government and provide additional pandemic-related relief to the households and businesses trying to make it through the winter.
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A resurgence in coronavirus cases and receding economic activity in many states threaten the nascent economic recovery. To address the ongoing crisis, the Senate Republican Phase 4 proposal builds on the CARES Act provisions while modifying others, including a scaled down federal UI benefit.
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From a revenue standpoint, Wisconsin was better off than many states going into this crisis, but the policy decisions—including tax policy decisions—state policymakers make in the months ahead will have far-reaching implications for how quickly jobs and wages are restored in Wisconsin.
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Iowa’s HF 2614, which passed both chambers of the legislature and now waits for the governor’s signature, makes several changes to the state’s tax code, which, although they will affect revenue, will encourage economic growth and make the state’s tax code more competitive.
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As policymakers continue evaluating their evolving revenue and spending options, the importance of enacting policies that enhance business liquidity must remain at the forefront.
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The HEROES Act, the $3 trillion relief package proposed by House Democrats, is the first bid to provide additional phase 4 aid for businesses and individuals amid the coronavirus pandemic.
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The sooner federal policymakers or regulators clarify tax questions about the Paycheck Protection Program (PPP), the more certainty firms will have when they accept the economic relief to keep their businesses afloat.
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When businesses and taxpayers look to the government for relief, it is paramount that lawmakers do their best to craft transparent and coherent legislation that is the least confusing for all.
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If states fail to update their income tax conformity, they will wind up taxing the federal lifeline to small businesses in the CARES Act: the Paycheck Protection Program (PPP) loans.
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