Get spending—and paying—back on track

Monday’s news that the U.S. government deficit exploded during the previous month of June to a record-breaking $864 billion appeared to confirm the Congressional Budget Office’s predictions that the federal deficit would reach $3.7 trillionby the end of this fiscal year.  Partly responsible for the explosive numbers in June was almost certainly Treasury’s move to delay tax filings until July 15th.

This was a prudent move to alleviate the pain that millions of Americans felt as the coronavirus pandemic put a chokehold on the American economy in the spring. Between 30 and 40 million jobs were lost due to COVID-19 this spring, according to Labor Department numbers. While unemployment and lack of job security were at the top of people’s minds these past few months, and providing a 90-day respite for taxpayers was the right move during such uncertain times, delaying the tax payment deadline any further would have had severe consequences for our tax revenue system on both the state and federal levels for years to come.

According to the IRS, almost 136.5 million returns were already sent in as of mid-June; however, that amount is down about five percent from the previous year. An estimated seven million Americans are still on the hook to file their taxes by today. The good news is that the IRS estimates between $30 and $60 billion in refunds is left to dole out to the American people, averaging about $2,767 returned to each filer. This money will provide a monetary relief to families trying to make ends meet and simultaneously boost the economy.  Federal government income is already down by 13.4 percent from the same time period last year for revenues reaching $2.26 trillion, so

Taxpayers are going to start experiencing the pain that states budgets are feeling, too. With many states going along with the federal governments deferred tax deadline this year, talk of subjecting them to further delays in revenue collections up until just a few weeks ago would have resulted in dire consequences for essential services. Most of the country is experiencing significant decline in state budget revenues—ranging anywhere from 5 percent to a whopping 20 percent. Because the tax filing deadline was extended by three months, many state governments aren’t fully aware of just how bad their deficits are yet.

Personal income taxes make up about 38 percent of state revenues, with another 30 percent generated from sales taxes. With such a significant chunk of income coming from tax filing, to ensure that state and local governments are able to pay their bills on time, the tax filing and payment deadline needs to stand firm for 2020, too.

The realities of this virus have hit us hard. The cost of government programs to cushion the blow of the coronavirus for businesses and families reached $3 trillion in the last four months. We are trying to spend our way out of a health crisis with no shut off valve in sight for the waterfall of government spending. The $1.4 trillion in government spending in 2009 after the 2008 financial crisis doesn’t even register at this point.

But there is hope that we can get back on track. The most recent jobless claims report for the week ending July 4thshowed a drop to 1.31 million, a decrease of almost 100,000 from the week before. 2.5 million jobs were added in May with the unemployment rate falling to 13.3 percent. Even the Congressional Budget Office is predicting that there could be a 5.4% increase in GDP in the third quarter of 2020.

If the U.S. economy is to thrive once again, we need to get our spending under control. We can’t just forget about a $3 trillion—and counting—deficit as we inject billions to prop up the economy. The bill will come due.

If taxpayers are expected to file and pay their share on time, politicians holding the government’s purse strings need to start being responsible, too. Step one is to get back to business-as-usual moving forward and that means keeping the tax filing deadline for 2020 taxes as April 15th next year.

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