Tax credit to keep Americans employed during coronavirus crisis garners bipartisan support
More than 38 million Americans lost their jobs as a result of the pandemic
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As layoffs triggered by the coronavirus pandemic, and ensuing economic catastrophe, drag on, lawmakers from both sides of the political aisle are pushing to make an existing employee retention tax credit more lucrative.
The $3 trillion economic relief package passed by House Democrats earlier this month included an expanded wage subsidy, known as the employee retention tax credit, to broaden incentives for businesses to keep workers on their payroll.
The House plan would give employers enough money to cover 80 percent of their worker’s expenses, or up to $45,000 in wages or health care costs per employee. Eligible businesses could keep taxes withheld from worker’s paychecks. The amount of relief would be scaled to the loss of revenue experienced by each business, according to the bill's text.
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“Congress can once again act in this ‘country-first’ spirit by expanding this bipartisan initiative to reduce layoffs, protect workers’ health insurance benefits, and help ensure a quick and robust economic recovery,” Rep. Stephanie Murphy, D-Fla. said in a joint statement with a pair of Democrats and two Republicans who have signed the bill.
Under the House plan, the credit would increase from the $10,000 in tax credit offered now. It would also expand the number of businesses eligible, raising the threshold for businesses having more than 100 employees to those with more than 1,500 workers or gross receipts that exceeded $41.5 million last year. Businesses that tapped the government-backed Paycheck Protection Program would also be allowed to take advantage of the credit, which they cannot currently do.
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The expanded tax credit would reach 60 million employees and more than 6 million businesses, according to an estimate provided by the Joint Committee on Taxation. More than two-thirds of the employees work for businesses with fewer than 1,500 full-time employees; almost 90 percent of the money would go to small- and medium-sized businesses.
State and local governments would also be eligible to claim the credit.
The House’s plan would last through the end of the year; it tries to navigate a thorny problem encountered by other relief measures, like the expanded $600-per-week unemployment benefits. The enhanced benefits still mean that roughly half of American workers stand to earn more on unemployment than they did at their jobs, and critics have argued the extra money could de-incentivize individuals to return to work once they’re called back.
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“It’s an important tool. So we’re interested in continuing to make that credit work,” Rep. Kevin Brady, R-Texas, the top Republican on the Ways and Means Committee told The Wall Street Journal.
Already, 38.6 million workers have lost their jobs as the coronavirus pandemic brought the nation’s economy to a grinding halt, a rate unseen since the Great Depression. A bleak report issued by the Congressional Budget Office last week forecast that even as states begin to roll back stay-at-home guidelines originally adopted to slow the spread of the virus, the economy’s recovery will stretch through 2021.
The CBO projected that unemployment will fall to 8.6 percent by the end of 2021, roughly 5 percentage points higher than it was pre-crisis.
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