March 23, 2020
March 23, 2020
The GOP Senate stimulus bill voted down yesterday is a slight improvement over the first GOP proposal released Thursday, but it still fails to prioritize workers and families or provide fast relief to those who need it most.
The modified bill provides most households with benefits, including $1,200 for each tax filer or spouse and $500 for each child under 17, with benefits starting to phase out for those with incomes exceeding $150,000 for married couples, $75,000 for singles, and $112,500 for single parents.
But for millions of families, these are theoretical benefits that may materialize too late or never and pale in comparison to what they would receive under a much bolder and more comprehensive Democratic Senate bill.
Modified GOP Bill Fails to Provide Fast Relief to Those Who Need It
The modified GOP bill does away with the previous proposal’s restrictions on poor households’ eligibility to receive cash payments. In theory, all low-income people could eventually receive payments under the modified bill.
The problem is that many of those eligible would not receive a payment soon or in some cases ever because immediate payments are limited to households that filed a tax return for 2019 or 2018 or have received Social Security benefits.
As illustrated in the chart below, 7.5 million tax filers and their families would not receive checks anytime soon because they have not filed a tax return and do not receive Social Security benefits. The vast majority of these have incomes below about $24,200. This GOP version leaves out 19 percent of households (20 percent of adults and 24 percent of children) with incomes below that amount.
As others have pointed out, left behind are veterans, very low-income seniors, people with disabilities, and others whose incomes are so low that they are not required to file tax returns.
The modified GOP plan’s payments are still unavailable to immigrants working in the United States who file taxes using an Individual Taxpayer Identification Number (ITIN) excluding an additional estimated 4.3 million adults and 3.5 million children from the benefit. In contrast, the proposal from the Senate Democrats includes ITIN filers, recognizing their contribution to the economy.
Modified GOP Bill Fails to Provide Big Enough Boost to Those Who Need It
Even if we assume that everyone eligible for the $1,200 payment per tax filer (or per spouse) and $500 per child receives those payments, the benefit is not significant enough to provide a powerful countermeasure against the current crisis.
For millions of working families who are losing their income, this benefit will not cover expenses for very long. Total payments in the modified bill are $278 billion, a modest improvement over the $216 billion from the previous bill but nowhere near the $1.4 trillion in rebates offered under a Democratic proposal from Sens. Cory Booker, Michel Bennet, and Sherrod Brown that provide a payment of up to $4,500 for each adult and child in a household.
As illustrated below, for those most in need, the poorest 20 percent, the Democratic Senate proposal would boost average incomes by nearly 50 percent. (This assumes incomes do not fall — a tough thing to predict in these uncharted economic times.) The modified GOP bill would boost incomes for this low-income group by nearly 11 percent. This is about double the benefit in the previous GOP proposal, but still nowhere near the help offered under the Democratic proposal.
Modified GOP Bill Prioritizes Corporate Bailouts Over Helping Workers and Families
The modified GOP bill would spend nearly twice as much on a corporate bailout with few strings attached as it would spend on payments to households. The bill would set aside $500 billion for assistance to industries affected by the recent economic downturn and would give the Treasury Department virtually unlimited discretion to identify the industries and businesses eligible for this aid. President Trump has recently signaled that airlines and cruise ship companies would be among the designated beneficiaries.
Incredibly, the bill would do virtually nothing to guarantee that businesses receiving loans would use them for their most important purpose—avoiding employee layoffs. The legislative language says only that businesses “shall, to the greatest extent practicable” not give current employees the boot. Even worse, the bill gives the Treasury Secretary discretion to allow companies to use these funds for stock buybacks. The 2017 tax cut gave companies incredible freedom to engage in stock buybacks instead of bolstering employment and capital investment. It is vital that the current plan avoid a repeat of this mistake.
As important, the bill includes no mechanisms for achieving transparency in the decision-making process for allocating these funds. Since one lesson of the 2017 tax cut’s Opportunity Zones provisions is that discretionary tax breaks can be allocated in unethical ways even when clear guidelines exist, there’s every reason to expect that this process would be abused going forward.