Tax and Spend Tuesday, a roundup of news, views and policy proposals affecting your paycheck and pocketbook!
The $1.9 trillion COVID-19 package that passed the U.S. House and awaits Senate action has raised hackles in states that stand to benefit less – because their economies have been open – than states that implemented tough lockdowns.
Georgia was among the first to reopen its economy, in April 2020, with Gov. Brian Kemp issuing some sensible direction in his executive orders and resisting the pressure from some local governments to shutter more businesses. His pragmatic approach is why Georgia has enjoyed employment figures higher than the national average and why Georgia’s economy has made a comparatively strong comeback amid the pandemic.
And he is irate at how the congressional legislation turned out. “Out of all fifty states, this bill hits Georgia the hardest and rewards California and New York the most,” Kemp noted in a statement. “It is very disappointing to see Georgia Democrats vote to send $1.3 billion less to our state than previous federal aid formulas would have allocated to the Peach State. Instead of using allocation formulas that enjoyed bipartisan support and provided funds based on population, this legislation rewards lockdown states with high unemployment rates.” He urged Georgia’s new U.S. senators, Raphael Warnock and Jon Ossoff, both Democrats, to “use their considerable influence in an evenly divided Senate to level the playing field for hardworking Georgians.”
Read the bill – the American Rescue Plan Act – here.
U.S. Rep. Barry Loudermilk of Georgia had this to say about the package:
Economists are warning that this bill is 6.5 times larger than is needed, and only 9% of the bill is targeting COVID. The $2 trillion does not include the devastating costs the policies in this ‘emergency’ bill will have on middle-income Americans and small and medium sized businesses, but does include pet projects like Pelosi’s $100 million for a subway tunnel, $86 billion to bail out union pensions, and $200 million museums and libraries, among others. This type of reckless spending is an atrocity that our children, grandchildren and great grandchildren will pay for.”
In case you’re wondering: A check by PolitiFact agreed that only 9% of the package directly addresses the pandemic.
Tax cut proposal: The pandemic squelched legislators’ 2020 efforts to follow through on their promise to further cut tax rates for Georgia filers. There’s renewed hope, however, in legislation filed by House Ways and Means Chairman Shaw Blackmon that would increase the standard deduction for Georgia taxpayers. “By reducing the amount of income taxed, House Bill 593 would cut what’s owed by millions of Georgians who use the standard deduction when they fill out their returns,” The Atlanta Journal-Constitution reports. “While the tax cut would be relatively small – less than $100 for a married couple filing jointly – Blackmon said it would cost the state about $120 million a year. And, particularly if Congress passes a massive new $1.9 trillion COVID-19 relief package – which would include more state aid – a much larger state tax cut may be on the way.”
IRS IOUs: The IRS has already received nearly 35 million tax returns this year, and there are some surprise tax bills awaiting filers, reports KMOV4.com. While millions went unemployed because of the pandemic, they’re about to find out those unemployment benefits are taxable. If you did not have withholding, that could be painful. How much you can expect to pay depends on your earnings, and it could be 20-25% of benefits, according to one CPA. Also taxable are those jobs people picked up to make up for lost income like Uber, Postmates or DoorDash. And those earnings count as self-employment business income. Meanwhile, U.S. Sen. Dick Durbin of Illinois has introduced legislation that would waive federal income taxes on the first $10,200 of unemployment benefits received in 2020.
What you don’t owe: The IRS sent out more than 160 million stimulus payments since the CARES Act was signed into law on March 27, and millions more in the second round of stimulus payments. According to the IRS, “the payment is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer’s refund or increase the amount they owe when they file their 2020 or 2021 tax return next year. A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs.” Source: AARP
‘Netflix tax’: Now that Georgians marinating at home during the pandemic have immersed themselves in the online world, legislation in the Georgia House seeks to add a sales and use tax on digital goods in the state – streaming services, e-books, video game downloads and other digital products that are currently untaxed. “While I’m not a big fan of raising taxes and I’d love to talk about an income tax cut, I think it’s important that we’re taxing things at the same level,” said the bill’s sponsor, Dalton GOP Rep. Kasey Carpenter. AT&T is opposing the legislation because it would tax streaming services but not satellite service, according to the Georgia Recorder. Carpenter said his proposal would add $100 million to state revenue and $90 million for local governments.
Compiled by Benita M. Dodd, vice president of the Georgia Public Policy Foundation.
