In an attempt to ward off a potential recession in the U.S. economy as a result of federal and state actions intended to thwart the impact of the novel coronavirus (COVID-19), Senate Republican, released a massive economic stimulus bill on March 19, 2020. The cost of the package is currently estimated to be a staggering $1 trillion. If enacted, the plan would be one of the largest and most expensive stimulus packages in the history of the United States.
The Senate bill, the Coronavirus Aid, Relief, and Economic Security Act, otherwise labelled the “CARES Act” or the “phase three bill,” is 247 pages in length and contains provisions to help individuals and businesses, as well as a provision to extend the April 15, 2020 tax deadline for 90 days.
The key element of the proposed legislation is the “direct payment” of $1,200 to certain qualifying individuals. The amount is doubled to $2,400 for married couples. Payments to taxpayers whose annual income exceeds $75,000 will see a reduction of $5 for every $100 dollars they earn above the threshold. Thus, for individual taxpayers earning $99,000 (or couples earning $198,000), the direct payment would be zero. Families with dependent children would receive $500 for each child.
Note that the direct payment is decreased for individuals with lower incomes who have little or no federal income tax liability. If these taxpayers have at least $2,500 of qualifying income, they would be eligible to receive a direct payment of $600 ($1,200 for couples).
The idea of making a direct cash payment to individuals has been floated by the President several times in recent days. While there have been multiple comments and narratives addressing two separate direct payments, which were noted in a Treasury Department outline released earlier this week, the legislation, as introduced on Thursday, provides for only one.
Other significant provisions affecting individuals are proposals allowing early withdrawals from qualified retirement accounts for coronavirus-related purposes of up to $100,000 without penalty and several provisions to help students, including enabling the Secretary of Education to defer student loans payments and the continuance of work study payments to students who were unable to work due to coronavirus concerns.
A second key element of the proposal provides $208 billion for loans or loan guarantees to air carriers and other distressed industries, but no more than $50 billion of that relief can go to passenger air carriers. The balance would be provided to companies in other distressed industries, including $300 billion for small businesses.
Interestingly, the bill also provides a much needed extension of the April 15 tax filing deadline to July 15, to match the 90-day tax payment extension announced by the Treasury and the Internal Revenue Service on Wednesday, March 18, 2020. Depending on how quickly bipartisan support can be mustered for this legislation, the extension, if it comes through this stimulus package, may be too late to be of major benefit to taxpayers. [Note: this filing deadline extension was granted by the Treasury on March 20, 2020 – see related post below.] Finally, perhaps the most pressing element of the bill provides for substantial commitments to bolstering healthcare resources.
There is no question that a bill of this magnitude cannot advance through the legislative process without bipartisan support in both Houses. Certainly, Republicans will need to be open to negotiation and some level of concession to Democratic leadership’s wishes, which include provisions designed to prioritize and protect American workers.
Democrats are fashioning a bill of their own in the House under direction of House Speaker Nancy Pelosi and Senate Minority leader Chuck Schumer. The Democrats were held out of the initial development of the Senate proposal, but have been communicating directly with the White House and Secretary of the Treasury Steven Mnuchin. It is expected that key members of both parties will begin to discuss the bill on March 20.