Tax Day: Fraud Fights and Budget Battles

Happy Tax Day, folks! Welcome to the first edition of Arnold Ventures' Public Finance newsletter, in which we will share regular research, policy, and advocacy updates on all the fiscal drama happening on Capitol Hill. Come for the tax jokes, stay for the analysis and insights! 

First, how about some tax trivia to lighten up the day? 

Believe it or not, Tax Day wasn't always April 15th. When the federal income tax first kicked off in 1913, the original filing deadline was March 1st. Maybe Congress was less patient back then? They relaxed slightly, moving the date to March 15th in 1918, before finally settling on the infamous April 15th in 1955. Bonus fact: Residents of Maine and Massachusetts often score an extra day to file their taxes when April 15th falls on Patriots' Day. Similarly, when Tax Day conflicts with Emancipation Day in Washington, D.C., the entire nation gets an extension.

Thanks for subscribing! Sharing is caring, so feel free to pass this sign-up link along to any tax nerds you know who might be interested. 

The True Cost of Playing Baseline Games  

It is news to no one here that lawmakers love tweaking the rules, and right now they are eyeing the budget assumptions Congress has used for decades to judge the fiscal impact of their policies. We have spilled quite a bit of ink on the topic. 

In a recent op-ed, AV Vice President for Public Finance Andrew Moylan points out that while a “current policy” baseline may seem appealing, especially to those who support extending pro-growth tax policies, it’s ultimately a gimmick that creates a misleading picture of our fiscal outlook. It would do more than just distort the picture when analyzing extension of TCJA; it could open the floodgates to even bigger “cost-free” deficit explosions down the road. And, to quote ourselves, “Using one approach over another does nothing to change how much we spend, how much revenue comes in, and how much debt we need to float to cover the difference between the two.” 

For those so inclined, AV Program Integrity Fellow Doug Criscitello wrote a deeper dive on the topic that outlines the history of the issue and provides some case studies, while AV Executive Vice President for Public Finance George Callas takes aim at the most egregiously misleading assertions about the merits of current policy in a myth-busting piece you will definitely want to read.  

Expect more on this topic since budget wars never really end, they just reduce in intensity. And hey, if metaphors are your thing, the Upshot has a fun list to add some levity to the baseline conversation. 

Cracking Down on Pandemic Fraud 

In a recent statement of support, we applauded the House for passing H.R. 1156, the Pandemic Unemployment Fraud Enforcement Act, which bumps the statute of limitations for pandemic-era unemployment fraud from 5 to 10 years. With the five-year anniversary of the pandemic last month, time is running out to prosecute fraudsters who ripped off the system. Massive fraud takes time to untangle, and without action, criminals could walk free so kudos to Representative Jason Smith (R-MO) and the House Ways and Means Committee for taking action. 

Now, it is the Senate’s turn to pass the bill to help save billions. No pressure, Senators! 

In Other News 

• Senate Budget Resolution Gossip: What They Are Saying About the Senate Budget Resolution and the Current Policy Baseline 

• Non-Profits Gone Wild: Writing for the Washington Examiner, AV Tax and Fiscal Policy Fellow Scott Hodge joins Professors Roger Meiners and Andrew P. Morris to break down how century-old nonprofit tax exemptions are now subsidizing commercial ventures. Spoiler alert: they have ideas to fix that (and raise revenue that can help broaden the base and lower rates in the process).    

• Fraud Alert: The U.S. Department of Justice announced that a St. Louis woman has been charged in connection with a $177,000 pandemic-era Employee Retention Credit fraud scheme.