There's Still Time for Steven Mnuchin to Delay the Tax Deadline
Come July 15, millions of American individuals and businesses will be expected to pay taxes originally due April 15, plus second quarter taxes for those that file quarterly. That means that the Internal Revenue Service still has about two weeks to avoid potentially compounding the challenges Americans are facing just as recovery efforts are taking hold.
Though lockdowns have eased in many states, the novel coronavirus continues to ravage the country. Even companies that have been able to reopen have not returned to “business as usual,” as they have had to grapple with depressed consumer demand and continued constraints on operations necessitated by the pandemic.
In this fragile context, requiring the payment of around $1 trillion in taxes could prove catastrophic for recovery efforts. Businesses that are skating by on loans aren’t in a position to handle a sudden tax expense, nor are American individuals getting by on unemployment benefits.
A recent survey by audit defense company TaxAudit found that over a third of respondents are worried that they don’t have enough resources to pay their 2019 tax bills. Businesses, meanwhile, would be responsible for Q1 and Q2 estimated tax payments at the same time, saddling many with unusually large tax bills at the worst possible time.
The true benefit of delaying the payment deadline is that it effectively provides businesses and individuals with badly-needed liquidity at next to no cost to the federal government. Delaying the payment deadline does not reduce the amount of tax owed to the federal government by a single cent, it just gives Americans more time to muster the resources needed.
While Treasury would have to sell bonds to raise the money to keep the federal government afloat, yield rates on Treasury bonds remain low and the economic consequences of $1 trillion in taxes might actually prove more costly by tipping more businesses into financial non-viability..
It’s true that Internal Revenue Service (IRS) Commissioner Chuck Rettig has already signalled that the tax filing deadline will remain in place. But a delay to the more important tax payment deadline remains on the table. And the Department of the Treasury retains the statutory authority to push tax payment deadlines back all the way into April of 2021. Pushing the deadline back a few more months is well within their reach.
These concerns about the impact of sticking to the July 15 tax payment deadline led more than 50 national and state-based organizations to sign on to a National Taxpayers Union Foundation letterurging Treasury Secretary Mnunchin to delay tax payment deadlines until 2021. The Treasury Secretary’s authority to delay tax deadlines explicitly exists for the purposes of dealing with national emergencies. If a nationwide pandemic and recession doesn’t qualify as an emergency deserving the exercise of these powers, what will?
Secretary Mnunchin has the opportunity to deliver relief to American individuals and businesses on a massive scale in a cost-effective manner. Such home-run opportunities come around very rarely in the context of a recession. All that remains is for the Secretary to take advantage of it before it’s too late, and $1 trillion gets yanked out of the recovering economy for little purpose.