As the entire globe wrestles with the coronavirus pandemic, the various responses on the health front and economic front are being implemented on a national scale as well as the state level. On a national level, Congress recently passed the CARES Act (HR 748), which was immediately signed by President Trump.
HR 748 is a massive bill with a massive price tag and many different facets to stabilize the business community in the United States as well as shore up the soon to be stressed unemployment insurance benefit pools of the various states. The bill also provides immediate cash payments to US taxpayers in the form of $1,200 checks for each person plus $500 per child. Those benefits would start to phase out if a taxpayer’s income in 2019 or 2018 was above approximately $75,000 for a single filer or $150,000 for a couple, and completely phase out if your income was above $99,000 for a single filer and $199,000 for a couple.
On a state level, many states have started to implement similar measures to close schools and non-essential businesses and curtail activities to stop the spread of the virus. The short term and long term consequences to the economy could be substantial and possibly even devastating in many states. The federal bill (HR 478) provides around $150 billion in direct aid to states to combat the virus outbreak and its effects. According to the Tax Foundation in Washington DC, total aid to each state is calculated with a formula. Utah should be receiving around $1.25 billion in aid, while larger states like California, Texas and New York will receive somewhere between $7 to $15 billion each. There is also an additional $340 billion in aid to states for emergency efforts. The Tax Foundation article and analysis can be found here.
While eyes are fixed on what the weekly jobless claims data will show, one can see anecdotal evidence of the economic slowdown in various states around the country. In California for example, according to our sister organization there (CalTax), the clouds on the horizon look rather ominous. They are seeing major slowdowns in all three of their ports- Los Angeles, Long Beach and Oakland, film production has grinded to a halt, all schools and non essential businesses are closed as well as all beaches under a general stay at home order. California averages around 2,500 unemployment claims each day and that has jumped to around 115,000 per day now. California’s Public Employees Retirement System (CalPERS) reportedly lost $69 billion in assets, given changes in the market. Their state retirement plan is one of the most underfunded in the nation and was on thin ice long before this year. A number of local governments have raised the possibility that they could be facing bankruptcy, unless voters approve higher taxes later this year.
Reflecting on the problems of California gives us many reasons to be thankful for the fiscally conservative way that Utah has been managed for many decades. As the next month or two unfolds, the various responses of each state will be formulated and implemented. With healthy rainy day funds, working rainy day funds and many tools available to the Legislature and Governor, Utah will hopefully have a way out of this health and economic storm without causing excess pain for taxpayers and residents.