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August 10, 2020

What to expect in Washington (August 10)

President Trump on Saturday signed a memorandum directing the Treasury Secretary to defer payroll taxes for some taxpayers through the end of the year, along with memoranda on unemployment benefits and student loan payment relief, and an executive order on assistance to renters and homeowners. The President said the deferred payroll taxes will be forgiven if he is reelected and that he is studying additional relief on income and capital gains taxes. Discussion over the practical effects of the executive actions and impact on the outlook for another coronavirus bill began on Sunday political talk shows and continues.

On Fox News Sunday, House Speaker Nancy Pelosi (D-CA) said "these are illusions," and that the unemployment approach with a "complicated formula" will "take a while if at all" to put money in the pockets of the American people. (The federal government would provide $300 of the unemployment add-on, and the states $100.) Pressed on whether she should have cut a deal to provide funding in areas not covered under the executive actions — Administration negotiators offered $150 billion in state and local funding — Speaker Pelosi said that to characterize the memos and executive order "as even accomplishing what they set out to do as something that would take the place of an agreement is just not so." She said of a bill, "we need to come to agreement" and meet halfway (though the Administration opposed their split-the-difference offer of a $2 trillion bill.)

On the same show, Treasury Secretary Steven Mnuchin said he will listen to any new proposal from Democratic leaders and if they mount legal challenges to the executive actions and hold up unemployment benefits, "they're going to have a lot of explaining to do." He said, "let's pass legislation on 70 or 80% of the things that we agree on so we can get money immediately to the American public," and specifically cited funding for schools to reopen. Secretary Mnuchin said, "We don't have to get everything done at once. What we should do is get things done for the American public now, come back for another bill afterwards." When and how any talks might resume has not been made clear.

Asked on CNN's State of the Union about the constitutionality of the executive actions, National Economic Council Director Larry Kudlow said they largely involve repurposing funds because, "We have a lot of extra money that has not yet been spent." He also said, "we believe the Treasury Department has the authority to suspend a tax, not permanently, but to suspend a tax on a temporary basis."

Criticism came not only from Democrats. Senator Ben Sasse (R-NE) said in a press statement, "President Trump does not have the power to unilaterally rewrite the payroll tax law."

The Washington Post reported that the payroll tax memorandum, which limits the benefit to those with earnings payable during any bi-weekly pay period of less than $4,000 calculated on a pre-tax basis, works out to benefit those making less than $104,000 annually, and cited economists as saying that "in the absence of a guarantee that the payroll taxes actually will be absolved, businesses would be unlikely to alter worker paychecks." The report said, "businesses are unlikely to begin deferring tax payments or boosting workers' checks by next month — or, perhaps, at all," because the government is going to ask for the money at some point.

The Wall Street Journal reported on Chief of Staff Mark Meadows' role in the negotiations and the White House legislative affairs operation generally, saying he brings "his personal style to negotiations on a new coronavirus-aid package, giving Democratic leaders a firsthand view of the dig-in-your-heels approach he sometimes employed in the House. His addition to the bargaining team, joining Treasury Secretary Steven Mnuchin, has changed the contours of the trillion-dollar-plus negotiations."

The Senate is technically in session this week but most members of both chambers of Congress have gone home and will receive 24 hours' notice prior to a vote related to any coronavirus legislation.


The President's remarks prior to the signing demonstrated the importance of the future of tax and economic policy in the election. He said the biggest problem with the stock market "is the possibility that these radical-left Democrats could win … because they're going to raise taxes — $3 trillion dollars' worth of taxes." The President said, "they want to raise everybody's taxes" and enact the Green New Deal, "which will decimate our country." He previously highlighted the tax increases proposed by Joe Biden.

His comments could be juxtaposed with Biden proposing tax increases to pay for much of his policy agenda and Speaker Pelosi, in repeatedly invoking the Tax Cuts & Jobs Act in calling out GOP frugality on the next coronavirus bill, promising that "when we address the issue of taxation in the country, we will do that in a way that is bipartisan, has sustainability, fairness and transparency."

The global EY Tax COVID-19 Response Tracker has been updated through August 7.


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For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
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