US Incomes Soar on Covid Relief Payments

US Incomes Soar on Covid Relief Payments

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Plus - Biden talks corporate rates
Thursday, May 6, 2021

Biden Wants Corporate Tax Rate Between 25% and 28%

President Joe Biden said earlier this week that he is open to compromise on his plan to raise the corporate tax rate, and on Thursday cited a range of rates he would be willing to accept: between 25% and 28%.

Speaking to reporters in storm-battered Lake Charles, Louisiana, Biden said his plan to raise the corporate tax rate from the current 21% rate established by the 2017 GOP tax bill was inseparable from his proposal to spend more than $2 trillion on U.S. infrastructure.

“The way I can pay for this is making sure that the largest companies don’t pay zero” while adjusting the corporate tax rate “to between 25[%] and 28[%],” Biden said. “That’s a couple hundred billion dollars, and we can pay for these things.”

The president reiterated his call for bipartisan negotiations over the proposal. “I’m willing to hear ideas from both sides,” Biden said. “I’m ready to compromise. What I’m not ready to do is, I’m not ready to do nothing. I’m not ready to have another period where America has another Infrastructure Month and it doesn’t change a damn thing.”

Biden also emphasized that one of his objectives is to restore what he sees as fairness to the tax system. “You’re entitled to be a millionaire, be a billionaire, just pay your fair share,” he said. “I’m not looking to punish anyone. I’m sick and tired of corporate America not doing their fair share.”

A familiar lower bound: The 25% rate has also been cited by Democratic Sen. Joe Manchin of West Virginia, a moderate who holds considerable sway over Biden’s plans in an evenly divided Senate. Manchin said in April that he would not support an increase in the corporate tax rate to Biden’s proposed 28%, but he could get behind an increase to 25%, which he said is the global average.

The bottom line: The White House still faces difficult negotiations over infrastructure spending and how to pay for it, but Biden has now laid down a marker to guide the talks. With Republicans saying they will oppose all tax increases, Biden’s gesture is probably aimed more at his fellow Democrats as the party weighs moving forward without GOP support.

Covid Relief Sends US Incomes to Record High

Covid relief measures enacted by Congress boosted personal incomes by $1.6 trillion through direct payments between April 2020 and March 2021. Add in the positive economic effects of all Covid relief spending over that time period, and the total increase in personal incomes comes to more than $2.5 trillion, according to an analysis by the Committee for a Responsible Federal Budget.

Looking at the money households had to spend after taxes, nominal disposable personal income grew by an estimated $1.8 trillion, CRFB said – an increase of 10.6%, twice the annual rate seen in the previous three years.

“This massive income growth is almost entirely attributable to COVID relief and prior law unemployment benefits,” CRFB said. “Absent those factors and their economic effects, we estimate personal income would have fallen by about 5 percent or nearly $1 trillion over the past year.”

Looking ahead, the income support payments are expected to fade, likely contributing to a drop in personal incomes over the next 12 months. Even so, a rapidly growing economy should make up for much of the loss in income supports.

Quote of the Day

“One day somebody will write a book on the pandemic & how the economy bounced back. If it's at all accurate that book will include a chapter on the IRS. They were behind the alchemy of turning policy on paper, into money in bank accounts, into food on tables for American families.”

– Treasury Secretary Janet Yellen, from comments on social media celebrating the IRS for distributing billions of dollars through several rounds of direct relief payments. “It's a stunning achievement,” Yellen added. “In the midst of a crisis, the IRS has put on a masterclass in implementation and how the machinery of government should work.”

Nearly 1 Million Sign Up for Obamacare

About 940,000 people signed up for health insurance under the Affordable Care Act between February 15 and April 30, the first 10 weeks of an ongoing special enrollment period. More signups are expected in the coming months, with the enrollment period running through August 15 in most states.

President Biden reopened the Obamacare markets for general enrollment soon after taking office to assist those who lost their jobs or were otherwise affected by the Covid-19 pandemic.

“The surge in sign-ups reflects a growing demand for health insurance,” say Margot Sanger-Katz and Sarah Kliff of The New York Times. “Many Americans have lost job-based coverage during the pandemic, and others who were uninsured before found themselves newly interested in coverage.”

Sanger-Katz and Kliff also note that the total number of signups is almost certainly higher than the figure announced today, since the official data cover only the 36 states with health care marketplaces managed by the federal government.

In addition to new signups, costs fell for many participants. Health and Human Services Secretary Xavier Becerra said Thursday that nearly 2 million people saw reductions in their monthly premiums. New subsidies pushed the average monthly cost to $86 for those signing up in April, down from $117 before the subsidies were enacted.

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