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On The Money: Inflation rears its head amid spending debate | IRS chief warns of unpaid taxes hitting $1T | Restaurants fret labor shortage

On The Money: Inflation rears its head amid spending debate | IRS chief warns of unpaid taxes hitting $1T | Restaurants fret labor shortage
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Happy Tuesday and welcome back to On The Money, where, like several NFL teams, we’re skipping workouts due to the pandemic. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL—Inflation rears its head amid spending debate: Economists are closely watching inflation data as prices begin to rise at their fastest pace in almost a decade.

What happened: The Consumer Price Index for March, released Tuesday, jumped a higher-than-expected 0.6 percent from February, the biggest monthly increase since 2012. Prices were up 2.6 percent compared with March of 2020.

The dynamic: While the gain was slightly higher than expected, economists broadly agree inflation is bound to rise over the next few months as the economy recovers from the worst recession since the Great Depression.

  • Prices collapsed in March 2020 as the COVID-19 pandemic derailed the global economy, wiped out tens of millions of jobs, and crushed consumer demand.
  • The 2.6 percent increase in the CPI shows prices recovering toward normal levels from their abnormally low pre-pandemic depths.

The Hill’s Niv Elis breaks it down here.

LEADING THE DAY

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IRS chief warns of unpaid taxes hitting $1 trillion: IRS Commissioner Charles Rettig told lawmakers on Tuesday that the annual “tax gap” between the amount of taxes owed and the amount paid on time could hit $1 trillion a year, prompting bipartisan calls for action.

The figure is much higher than the agency’s previous estimates, and lawmakers on both sides of the aisle at the Senate Finance Committee hearing signaled a willingness to take steps toward narrowing the gap. 

  • Rettig said Tuesday that the IRS’s previous estimate did not focus on cryptocurrencies and income from foreign and illegal sources.
  •  He also mentioned a report published last month by IRS researchers that estimated collecting all unpaid taxes from taxpayers in the top 1 percent of income would raise $175 billion in annual revenue.

“If you add those in, I think it would not be outlandish to believe that the actual tax gap could approach and possibly exceed $1 trillion per year,” Rettig told senators. The Hill’s Naomi Jagoda takes us there.

The context: The focus on unpaid taxes comes amid a debate over how to pay for President Biden's $2.25 trillion infrastructure package. 

  • The White House is pushing for an increased corporate tax rate, in addition to stepped-up enforcement of collecting taxes from companies. 
  • Biden’s recent budget proposal for fiscal 2022 seeks more than $1 billion in extra funding for the IRS.

The bipartisan consensus: Republicans have generally opposed Democrats’ proposals to raise federal revenue through tax increases on corporations and wealthy individuals. But many Republican senators expressed interest in ensuring taxpayers aren’t able to avoid paying money they already owe. 

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“If there are those that are cheating on their taxes and causing us to have such a large tax gap, which I don’t doubt, we should address that,” said Sen. Mike CrapoMichael (Mike) Dean CrapoSenate GOP to give Biden infrastructure counteroffer next week Biden says he and GOP both 'sincere about' seeking infrastructure compromise The Hill's Morning Report - Presented by Facebook - Biden expresses optimism on bipartisanship; Cheney ousted MORE (Idaho), the top Republican on the Finance Committee.

Businesses encounter hiring challenges as demand surges: Restaurants and bars say they are struggling to hire enough workers to keep up with surging consumer demand even though more than 8 million Americans are still unemployed.

  • As COVID-19 vaccinations increase and states ease pandemic-related restrictions, examples of a labor shortage in the hard-hit food and beverage service industry are becoming commonplace across the U.S. 
  • In short, many customers are ready to come back, but few job candidates are available to serve them.

While fears of a labor shortage are most pressing for the restaurant and bar industry, Google searches for job openings fell sharply in March and have just begun to level out, according to Daniel Zhao, senior economist at job posting and employer review website Glassdoor.

“There are a lot of factors that are affecting labor supply right now, but none of them quite fit the pattern that we’re seeing since the beginning of March,” Zhao said. “There isn’t one clean explanation for why this is going on.” 

I break it down here.

ON TAP TOMORROW:

  • The House Financial Services Committee holds a hearing entitled investing in housing and infrastructure at 10 a.m.
  • Federal Reserve Chairman Jerome Powell participates in a discussion with the Economic Club of Washington, D.C., at 12 p.m.
  • The Joint Economic Committee holds a hearing on COVID-19 vaccinations and the economic recovery at 2:30 p.m.

Investing in Sustainability (Wednesday, April 14-Friday, April 16; daily at 3:00 PM ET)

How and why are more companies and organizations investing in sustainability initiatives? Join us for daily conversations as part of "The Sustainability Imperative" as we discuss both the costs and rewards of doing business in an environmentally sensitive manner with Rep. Abigail SpanbergerAbigail Davis SpanbergerFive takeaways on the House's return to budget earmarks Lawmakers say companies need to play key role in sustainability On The Money: Weekly jobless claims fall to lowest level since lockdowns | Retail sales surge in March | Dow, S&P hit new records MORE (D-VA), Rep. Garret GravesGarret Neal GravesGOP sees opportunity to knock Biden amid rising gas prices McCarthy unveils House GOP task forces, chairs House Republicans kick off climate forum ahead of White House summit MORE (R-LA), BlocPower CEO Donnel Baird, CA Sec. for Environmental Protection Jared Blumenfeld and more. View the full schedule and RSVP today.

GOOD TO KNOW

ODDS AND ENDS

  • The chief executives of auto giants Ford and General Motors urged Michigan lawmakers not to pass measures that would be seen as restricting the ability to vote.
  • Senate Republicans are opening the door to embracing earmarks, as Democrats prepare to plow forward with using the spending to funnel funds back to their home states.