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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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.

• But Republicans insist that President Biden’s big-ticket spending — the $1.9 trillion American Rescue Plan followed by a $2.3 trillion infrastructure proposal — will further spur higher inflation, putting a strain on consumers.

The Hill’s Niv Elis breaks it down here.

LEADING THE DAY

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. 

“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 Crapo (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 Spanberger (D-VA), Rep. Garret Graves (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

• Former President Trump’s personal lawyers on Monday urged a federal judge to find that a New York state law on congressional tax return requests no longer pertains to the former president because he’s out of office.
• House Democrats from New York on Tuesday escalated their push for the repeal of the cap on the state and local tax deduction, threatening to oppose future tax legislation that doesn’t fully undo the $10,000 limit.
• President Biden on Tuesday announced his intention to nominate Robert Santos, the president of the American Statistical Association, to lead the U.S. Census Bureau.
• The online portal to apply for the federal government’s grant program for live venues pandemic, crashed when it launched last week and has not yet reopened. 
• The stock market held steady Tuesday in response to higher inflation data and top U.S. health officials calling for a  pause of Johnson & Johnson COVID-19 vaccinations.
• The Washington Post: “Housing Secretary Marcia L. Fudge moved this week to reinstate fair housing regulations that had been gutted under President Donald Trump, in one of the most tangible steps that the Biden administration has taken thus far to address systemic racism.”

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.