Surpluses, Confirmations, And Tax Breaks

The US posted a $308 billion budget surplus in April. Treasury announced the largest monthly surplus on record, due to a combination of lower spending after the expiration of multiple stimulus programs and a huge bump in tax revenues tied to the April filing deadline and a booming economy. April spending totaled $555 billion, down more than $100 billion from a year ago. Revenues almost doubled from a year ago. If current trends continue the federal deficit could shrink below $1 trillion this fiscal year. 

Senate confirms Fed nominees. This week the Senate approved Federal Reserve Board Chair Jerome Powell’s renomination to serve another four-year term. The chamber also voted 91 to 7 to confirm Philip Jefferson of Davidson College to a seat on the Board and narrowly approved Lisa Cook of Michigan State University. 

The case for LIFO repeal… TPC’s Thornton Matheson and Thomas Brosy explain that the recent runup in oil prices and general inflation have boosted tax benefits from the “last-in, first-out” (LIFO) inventory accounting method. LIFO exaggerates deductions and understates income and  tax liability relative to average cost inventory accounting. They argue that repealing the LIFO tax break would raise about $1 billion annually while reducing tax subsidies for fossil fuels. Repealing the method could raise substantially more revenue by taxing accumulated LIFO reserves. 

Georgians will soon receive special tax refunds. The state’s department of revenue will issue a first round of refunds this week for those who filed 2020 state income tax returns. Single filers and married individuals who file separately could receive as much as $250. Heads of households could get up to  $375, while married couples who file jointly could receive up to $500. A second round of payments, based on tax year 2021 returns, could start going out in August. 

Germany’s Finance Minister Lindner: No new spending, even with a boost in tax revenue. Finance Minister Christian Lindner said he sees no room for new spending despite a nearly $46 billion increase in projected tax revenue. Linder said “The overwhelming majority of the additional income will be given back to the people.”

Next week’s Prescription webcast will look at state unemployment programs. Michele Evermore, deputy director for policy in the Department of Labor’s Office of Unemployment Insurance Modernization, will be the guest on the Tax Policy Center’s webcast The Prescription next Thursday at Noon. Register here.  

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].