The coronavirus financial rescue package the House will take up Friday would save U.S. households and businesses nearly $1 trillion in taxes this year, though companies would have to pay a chunk of that back starting in 2021.
The Joint Committee on Taxation estimates that overall during the next decade, the tax provisions of the massive relief bill will cost $591 billion. That's roughly one-fourth of the overall $2.2 trillion preliminary cost White House officials have tallied up, though some independent projections are even pricier.
The biggest immediate savings from the package comes from a payroll tax holiday for employers, which will put off the need to pay $352 billion in Social Security taxes on wages and salaries until after this year.
The payback requirement is stiff: Half is due by the end of 2021 and the rest by the end of 2022, on top of payroll taxes they'd have to ordinarily have to pony up. That could create pressure on lawmakers to stretch out the repayments if the economy hasn't fully recovered post-COVID-19. But as long as the IRS recoups the money within the 10-year budget window, the overall cost of the aid package comes down substantially.
The largest piece of the package that doesn't need to be repaid are the measure's centerpiece: tax rebates of up to $1,200 per person. Married couples filing jointly get up to $2,400, with an extra $500 per child. The benefit starts to phase out above $75,000 and $150,000 in adjusted gross income for individuals and joint filers respectively. Price tag: $292 billion, according to JCT.
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The biggest break on the business side other than the payroll tax holiday is a suspension through the end of this year of rules imposed under the 2017 tax law that limited the amount of losses noncorporate businesses, otherwise known as pass-throughs, could deduct. It would also waive the limits for the previous two tax years as well, generating refunds for partnerships, S corporations and sole proprietors. That provision will save pass-throughs nearly $170 billion.
Businesses of all stripes would also see the return of net operating loss carryback rules eliminated in the 2017 law, stretched out to the previous five years. That means companies could take any losses incurred during the past three years and use them to offset any taxes paid in any of the five preceding years, generating refunds.
That would save companies nearly $89 billion on their 2020 tax bills, but then they'd have to pay higher taxes in future years because the loss deductions wouldn't be available anymore, so the IRS would recoup $54 billion of that revenue.
Another significant cost savings for companies is intended as more of an incentive to keep workers on payroll: a tax credit for 50 percent of the first $10,000 of each employee's quarterly wages if the firm has been shut down or has seen revenue cut in half by the coronavirus. That would "save" companies $55 billion, JCT said.
The post JCT: Coronavirus aid bill to cut taxes by $591B over 10 years appeared first on Roll Call.
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