TO GROW THE ECONOMY, PUT OFF TAX PAYMENTS UNTIL 2021By PETER ROFF
July 13, 2020
Despite what critics say, Trump has responded well to the coronavirus pandemic. He mobilized the federal government and private industry in ways not seen in decades. It’s likely the interventions he sparked led to faster testing on a broader scale, helped keep the spread of COVID-19 under control, and resulted in fewer deaths than might otherwise have been the case.
We’ll never know for sure. The experts’ models were way off, even when early-stage interventions are factored in. Concerns about the current spike in the number of people testing positive for COVID-19 should be tempered by relief that considerably fewer people are dying from it.
Meanwhile, as the result of actions taken by many of the nation’s governors (mostly in blue states), the U.S. economy hit the skids. A record number of jobs have been lost, and Congress tried to make up for it with a flood of new spending it will take at least a decade of above-average economic growth to get it back.
It would be good for the country if Trump focused on measures going forward to get the economy off its back. Businesses must reopen, governors must lift lockdowns and, if they are needed again if the hypothetical second wave hits, they need to be localized, specific, and well thought out.
Several steps can be taken to help bring about the V-shaped recovery everyone is hoping for. There are lots of positive indicators in the economy that its possible. Every policy decision from now until at least the end of summer ought to be taken specifically to enhance the possibility that will occur.
Just as the president was right to postpone tax filings and payments from April 15 to July at the height of the crisis, he would be right to have Secretary of the Treasury Steve Mnuchin tell the U.S. Internal Revenue Service to postpone the payment of those taxes until sometime in 2021.
The economy has just started showing signs of life. Taking $1 trillion in the form of taxes would almost assured plunge us back into a recession, and push the recovery back by months.
The National Bureau of Economic Research said the recession caused by the lockdowns resulting from the coronavirus panic started in February. They also called it steep but short-lived. July 2020 should be a month of recovery because of strong, perhaps stronger than normal economic activity. But that only happens if people are engaged in productive activity, buying and selling goods and services in the marketplace.
Several prominent economists have endorsed this idea. Influential political groups including the National Taxpayers Union and Americans for Tax Reform have also signed on. Trump and Mnuchin have it within their power to make this happen. They should order it be done with all dispatch. File in July but pay next year.
Certainty is important as businesses plan what to do next, whether to hire or fire, whether to stay open or close, and whether to expand. Knowing that the taxes due would not have to be paid until sometime early next year gives them that much more time to use their available cash to put people back to work rather than send it to Uncle Sam.
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