How Secretary Steven Mnuchin Can Save American Households & Employers From The Coming Tax Tsunami

The U.S. has swung, in only three months, from having among the best job markets in history to having one of the worst, with more than 21 million Americans now unemployed. The public sector will likely have to shed and furlough more jobs in the coming weeks and months, as states face an estimated 20% drop off in tax collections over the next year, with one out of five states looking at a more than 30% reduction in revenue. 

One of the top debates in Washington is over what should be included in the next recovery package and how soon it should be taken up by Congress, if at all. While the Senate has been in session, most members of the House are strewn about the country back in their districts. However, there is an action that the federal government can and should take in the near term to help stave off more economic hardship and job losses. That is for Treasury Secretary Steven Mnuchin to defer the mountain of federal tax payments coming due in July. Even better news for those seeking immediate relief, this action does not require Nancy Pelosi and Mitch McConnell to reach an agreement, nor does it add to the federal debt. 

Expect calls to increase in the coming days and weeks for Secretary Mnuchin to further delay the avalanche of federal tax payments scheduled to come due in July. Taxes due in July include corporate income tax payments for the first and second quarters of 2020, along with alcohol excise tax payments that have been deferred on account of the pandemic. On top of that, first and second quarter estimated income taxes for individuals, which usually means taxes on small businesses, are due, as are balances on 2019 personal income taxes. 

It is estimated that with all these tax payments due in July, $1 trillion is scheduled to be transferred from millions of families and private sector employers, many of whom are struggling to remain in business and keep employees on payroll amid this recession, to federal coffers. Secretary Mnuchin has the authority to delay theses payments until 2021, just as he had the authority to enact the initial delay until July. 

Most states moved all their payment and filing deadlines to July 15 to match the delayed federal due date. If Treasury moves again, it’s reasonable to presume that most states will follow suit. That’s why another deferral by Secretary Mnuchin would translate into hundreds of billions of additional tax dollars left in the economy for a few more months. 

Nearly two dozen conservative organizations sent a letter to Secretary Mnuchin on July 18, arguing that the coming wave of tax payments due in July “would represent an enormous financial burden at a time when many individuals and businesses are struggling to make ends meet due to the impacts of the COVID-19 crisis and the recent civil unrest.”

By exercising his authority once again and deferring these substantial tax payments for another six months, Secretary Mnuchin can help shore up the finances of millions of employers and inject liquidity into the market that businesses can use to maintain payrolls and weather this downturn. This is a more fiscally responsible alternative to the trillions of additional dollars in federal spending that Speaker Pelosi and congressional Democrats are calling for, as deferring payments will not increase the national debt, but merely delay the day in which that revenue hits federal coffers. 

By deferring this estimated trillion dollars worth of payments into 2021, Secretary Mnuchin can provide significant relief to employers who are still navigating pandemic-related restrictions that depress commerce and reduce profits. Not only that, such a deferral would bring needed relief to a heavily-burdened Internal Revenue Service that is not yet fully operational following pandemic-driven office closures. 

By simply extending deferral of the tsunami of July tax payments for another six months, the Trump administration can help businesses avoid shuttering and provide employers with the capital they need to keep workers on payroll. If Secretary Mnuchin declines to defer these payments, millions of families and employers will be a trillion dollars poorer in a matter of weeks.