There exists a “grand opportunity” for Congress and the administration to come together and pass a $1 trillion-plus infrastructure package to counter the economic impacts of the coronavirus disease that has killed several people in the U.S., House Ways and Means Chairman Richard E. Neal said Tuesday.
Neal and Treasury Secretary Steven Mnuchin appeared to be in agreement on the issue as Mnuchin told the Ways and Means panel an infrastructure package remains “a priority" of President Donald Trump, particularly “if there is a need to stimulate the economy” due to impacts from the coronavirus-caused illness known as COVID-19.
Neal said infrastructure spending would be more effective in boosting the economy than additional tax cuts, which the White House has been contemplating for months but hasn't offered a concrete plan.
Trump on Monday night tweeted that House Democrats should get behind a one-year cut in payroll taxes. Currently, both employees and employers pay 6.2 percent Social Security tax on wages up to $137,700, plus another 1.45 percent Medicare tax on all wages.
"Great for the middle class, great for the USA!" he wrote.
Trump wasn't clear what taxes he would cut or on whom, though economists agree the burden of the employer share of payroll taxes is borne by workers because the money would otherwise go to higher wages.
Neal didn't directly address the president's tweet with Mnuchin during the hearing, but afterward dismissed the suggestion.
"There's this grand opportunity to talk about infrastructure and make it the serious issue that the country needs and demands,” Neal told reporters. “That plan implemented quickly could provide long-lasting stimulus that would go on for decades. A cut in the payroll tax cannot be based on emotion, it's got to be based upon a plan. … And the plan that we offered here today was to proceed with infrastructure.”
Congress and the Obama administration cut the employee share of the Social Security payroll tax from 6.2 percent to 4.2 percent for 2011 and 2012 as a temporary stimulus measure as the nation recovered from the Great Recession.
At the time, the cost was estimated at about $120 billion per year, though that was when the payroll tax was limited to the first $110,100 in wages. The Committee for a Responsible Federal Budget estimates the cost could hit $150 billion for a similar 2 percentage point cut now, and more if the employer's share of taxes is also cut.
The overall tax benefit in dollars would also flow to higher-income households to a greater degree. That's because a 2 percentage point tax cut on $100,000 would save an individual $2,000, while the same rate cut would save someone earning $50,000 only $1,000.
Neal and other House Democrats support legislation that would expand earned income tax credits for childless adults, focusing benefits on workers living near the poverty line, as well as child tax credits for families currently earning too little to qualify for full credits. Republicans have resisted such provisions thus far.
Neal and Mnuchin both referred to their ongoing talks in which Neal is asking for an expansion of the tax credits and Mnuchin seeks a technical correction to the 2017 tax code overhaul. Bill drafters mistakenly required retailers to expense property improvements over 39 years rather than the single year intended.
During the hearing, Rep. Suzan DelBene, D-Wash., complained about the administration's focus on economic impacts rather than the health threat from the virus. In particular, she complained about quotes from National Economic Council Director Larry Kudlow last week when he said stocks looked “cheap” to him.
DelBene noted that several deaths from COVID-19 in the United States have occurred in her suburban Seattle district. “It doesn’t inspire confidence when people hear that language” from the administration, she said.
After expressing his condolences to the people in Delbene’s district, Mnuchin said, “Our number one concern is the health impact on the communities and not the economic impact.”
The administration is asking for a 2 percent increase in Treasury’s funding to nearly $13.4 billion, or $291 million more than in fiscal 2020. That doesn’t include a proposed move of the U.S. Secret Service’s $2.4 billion budget from the Department of Homeland Security back to Treasury where it was located before the reorganization that followed the Sept. 11, 2001, terrorist attacks.
The biggest component of the Treasury budget is the proposed $12 billion in funding for the IRS, which would represent a 5 percent increase.
At the hearing, Neal criticized the administration’s overall fiscal 2021 budget, which he says “doubles down” by “expanding benefits for wealthy Americans and special interests at the expense of the middle class.”
Further, Neal pointed to “business friendly” regulations written by the IRS after the 2017 tax code overhaul. Those regulations were connected to a recent estimate from the Congressional Budget Office that international business tax collections are expected to be $110 billion lower that projected in 2017.
Neal, however, did compliment the budget’s proposed increase for the IRS, although that agency’s budget would still be lower than it was a decade ago even with the increase.
Mnuchin noted that part of the budget increase the administration is seeking for the IRS is aimed at increasing the frequency of audits on higher-income taxpayers.