Business of Tax: All COVID-19, All the Time for Tax Wonks
Things were off to a smooth start this year for many tax advocacy groups and think tanks. Then the pandemic struck.
“I was in Colorado for a talk in early March, and I had just become aware at this point that this [coronavirus] might be a big deal,” recalled Mark Mazur, director of the Urban-Brookings Tax Policy Center (TPC). “When we flew out there and met people, shaking hands was the norm. Four days later, at the end of the trip, not so much.”
Shortly thereafter, the TPC largely shifted its policy focus from covering topics like the presidential campaign to issues related to the coronavirus response, such as the tax provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), how likely they are to work, and what comes next.
Mazur compared the shift in focus to how the TPC would operate if Congress were close to passing a huge tax reform bill. The key difference? This was “totally, totally unexpected,” he said.
Scott A. Hodge, president of the Tax Foundation, told Tax Notes that once his team realized in early March that the coronavirus was shaping up to have a major impact on the country, a lot of planned content had to be shelved. Very quickly, it was all hands on deck. “Everybody’s been hyperfocused on it,” he said.
Fortunately, the Tax Foundation staff was already familiar with remote work tools like the messaging app Slack and the videoconferencing platform Zoom, which made for a relatively seamless transition to remote work in mid-March, according to Hodge.
Since then, Hodge said, his staff has been immersed in work related to the COVID-19 response by Congress and the Trump administration. “When the first version of the CARES Act came out, in the span of like six hours we had six different versions of it. It was like Lucy and the football,” he said.
Now, with new developments occurring almost daily, the Tax Foundation’s policy teams are keeping in close contact with the layout and marketing teams. “As soon as you’ve got something ready, you pass it off to them and it’s off to the races,” Hodge said.
Frank Clemente, executive director of the progressive group Americans for Tax Fairness, said he had expected tax policy to be front and center in the lead-up to the November elections. His group had planned to go on the offensive in support of Democrats’ shift toward ambitious tax proposals that would ensure the wealthy and large corporations pay more in taxes.
But now, “our entire agenda is turned upside down,” Clemente said. “You can’t go on offense in this environment, obviously. It’s hard when you’re working on a progressive, proactive agenda that’s very message-oriented."
Clemente said that he’d looked forward to being able to make the case for the progressive tax agenda during the presidential campaign season, but the election campaign has effectively paused for now. And with the world in a recession, “no one wants to talk about raising taxes,” he added.
Mazur said that to keep up with the rapid pace, TPC researchers have largely halted work on research projects and moved to blog posts. Instead of spending two months working on a project that results in a brief, it’s “a few days of thinking” that leads to a post, he said.
Hodge said that one positive from the pandemic has been a surge in interest in his group’s content, akin to the surge in the months leading up to enactment of the Tax Cuts and Jobs Act in December 2017. “It’s been pretty breathtaking the amount of hits and traffic to the website, the downloads. It suggests we’re delivering the content people want to see,” he said.
Right Up Our Alley
Some tax policy group leaders say they found the pivot to coronavirus-related issues to be a natural one.
“We’ve always focused on pragmatic, legislative, and administrative issues, so shifting toward the COVID-19 response was not a terribly difficult thing to do,” said National Taxpayers Union President Pete Sepp.
Sepp said his group has focused on elevating issues identified by tax practitioners and the tax policy community to policymakers in the executive branch and Congress. They were able to use an extensive network of contacts to help shape discussions over issues, like Treasury and the IRS extending deadlines for return filings and payments, he said.
“Now is not the time to build up your electronic Rolodex. If you haven’t developed the capacity to reach out during the crisis, you’re already last in line,” Sepp said.
Chuck Marr of the Center on Budget and Policy Priorities said the crisis has enabled his organization to highlight a long-standing problem: underfunding at the IRS.
Over the past decade, Republicans have whittled the IRS’s budget down by a fifth, and IRS personnel levels have commensurately dropped by about 25 percent, Marr said. “Now, you shift to the crisis, and the IRS is the agency that’s supposed to be in charge of one of the crucial pillars of the response: delivering stimulus payments,” he said.
The crisis has exposed the repercussions of those budget cuts, like archaic computer systems that lead to glitches, according to Marr. The clear lesson is that the IRS needs to be rebuilt, and that the country “needs a well-functioning IRS in good times and bad times,” he added.
Although the momentum behind an ambitious progressive tax agenda has largely vanished for now, Clemente pinpointed the provision in the CARES Act that temporarily repeals the limitation on deductions for losses of noncorporate taxpayers as one that is “really animating our work right now.”
That provision, which Clemente deemed the “millionaire’s giveaway,” was initially estimated by the Joint Committee on Taxation (JCX-11-20; JCX-12-20) to cost nearly $170 billion over decade and provide 82 percent of its benefit to taxpayers with incomes over $1 million. The JCT has since revised its 10-year estimate to $135 billion (JCX-11R-20).
Clemente said that battling it out over that provision and others like it will likely keep his coalition busy for the foreseeable future.
It’s still unclear what the coming months hold.
Many tax wonks have had to temporarily shelve projects related to the coming election and its corresponding tax proposals, but they say that the party conventions this summer could serve as a jumping-off point for revisiting those topics.
Mazur said he expected to see his staff begin to campaign tax proposal issues later this summer, although he added that to a large extent, they’d have to play it by ear, depending on how the next sets of legislative actions play out.
Clemente said that as the election season ramps up ahead of November, it’s likely the discussion will fundamentally be about how President Trump handled the pandemic, so it won't be possible to move ahead with a broad progressive agenda anytime soon.
The next administration will be stuck with a deep recession, and any major legislation will likely be in the form of a recovery package aimed at “plugging the leaks in the dike” rather than making new investments, he said.
Hodge named a different indicator of when he would know the crisis was subsiding and his organization could shift back to more normal tax policy coverage: “For me, it's when the Washington Nationals start playing baseball again.”
Follow Jonathan Curry (@jtcurry005) on Twitter for real-time updates.