Treasury Secretary Steve Mnuchin told Congress on Wednesday that the administration wants to delay the April 15 federal tax deadline for some taxpayers in a bid to soften the blow of the coronavirus outbreak on the U.S. economy.
The move is part of a broader thrust by the Trump administration to seek the deployment of rapid stimulus measures that would bolster the economy and quickly reassure wildly fluctuating financial markets.
Mnuchin told a House Appropriations subcommittee that the tax relief plan would not be subject to a lengthy congressional approval process and would amount to a near-term injection of over $200 billion into the economy that would otherwise go to paying taxes next month.
The tax deadline delay would apply to most individual taxpayers with the exception of the wealthiest Americans, and would cover small and medium-sized businesses, he told reporters.
In practice, the scheme would allow people and businesses not to pay their taxes by the April 15 deadline and not to be subject to interest payments or a fine. Mnuchin did not say what the new deadline would be.
Under current tax rules, taxpayers can get an automatic extension on filing their tax return but they are required to pay tax on the estimated amount they will owe when they do file the return.
Other measures being considered by the Trump administration include the elimination of the “payroll tax” on workers’ gross earnings that is used to fund national retirement programs.
President Donald Trump told Republican senators in a meeting Tuesday he would like to waive the payroll tax entirely through the end of the year, or even permanently suspend it, one attendee told Reuters.
Earlier, Trump signed an $8.3 billion emergency spending bill to combat the spread of the coronavirus and develop vaccines.
Speaking to reporters on Wednesday, Mnuchin likened the outbreak to the fallout from a hurricane, which would merit a financial response.
Stock markets have been rocked by record levels of volatility lately, with fearful investors growing increasingly desperate for more stimulus than the Fed’s recent 50 basis-point rate cut as the COVID-19 outbreak weighs on economic expectations. While the impact of the virus has yet to manifest in business cycle indicators like GDP and jobless claims, fears are mounting that, if left unchecked, the economic impact could spark a recession.
Demand across various sectors of the economy is widely expected to take a hit as individuals and business seek to stay out of harm’s way by canceling travel plans and events, or ordering staff to work offsite.
“The recent sharp drop in Treasury yields suggests a massive slowdown in growth ahead, particularly over the near-term,” said Nick Reece, senior financial analyst at Merk Investments, in an interview.
Reece said another indicator of economic concern was the drop in oil prices, even before the recent OPEC-Russia meeting ended in a fiasco and sparked a price war over crude.
He said virus-related worries had slashed sentiment so deeply that last week’s exceptionally strong recent labor market report failed to counter market pessimism much.
“You saw we had a very, very strong jobs report last Friday, and that was completely ignored by the markets because that is essentially stale data,” he said. “It does not really reflect what we assume is going to be a very big impact from the coronavirus and from the precautionary measures taken because of this.”
An example of measures that are likely to leave a mark on the economy are recent steps taken in the greater-Seattle area, which is suffering the United States’ deadliest coronavirus outbreak. On Wednesday, authorities imposed a ban on gatherings of over 250 people that targeted sports, concerts, worship services and other events in a number of Washington state counties.
Schools should be prepared to close for weeks or months, said Jeffrey Duchin, health officer for Seattle and King County, one of the counties to deploy the assembly ban.
Reuters and The Associated Press contributed to this report.