Phase 4 Relief: Do’s and Don’ts

Nearly four months after the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law, policymakers are on the cusp of proposing yet another round of COVID-19 relief. Struggling Americans across the country are hoping for targeted relief that will help them pay their bills on time and defray COVID-19-related medical expenses. But, if the past is prologue, they’ll likely be forced to foot the bill for unrelated expenses (e.g. Postal bailouts and corporate welfare). In order to ensure that policymakers stay focused on coronavirus relief and reject wildly unrelated measures, the Taxpayers Protection Alliance (TPA) has prepared a preliminary “Do’s and Don’ts” compilation for members of Congress:

Do…

Offer broad-based tax relief to workers

Here’s a crazy idea: instead of having taxpayers send their dollars halfway across the country and have their earnings sent back to them, lawmakers should let people keep more of their hard-earned dollars. Fortunately, broad-based tax relief is looking more and more likely as the Trump administration insists on a payroll tax cut. Thanks to the CARES Act, employers have an up-to-two-year reprieve on paying their portion of payroll taxes.

But the employee side of the equation has been left untouched, despite workers’ significant struggles since the start of the pandemic. Many workers deemed “essential” are now earning less than those on unemployment insurance, yet there has been little direct relief for them in previous phases of relief (with the exception of stimulus checks). According to estimates by the Urban-Brookings Tax Policy Center, even a modest payroll tax cut could go a long way in tiding over millions of struggling households. For example, a 2 percent payroll tax cut could put more than $1,000 in the pockets of 121 million workers.

Tie unemployment insurance to previous pay

Congress will likely have a lively debate over what to do about the current $600-per-week federal unemployment benefit. This large temporary benefit was an integral part of the CARES Act, but the bump in benefits is set to expire at the end of July. Senate Democrats are already pushing for an open-ended extension of this policy, but that policy would create far more problems than it would solve. According to the Congressional Budget Office, continued bolstered benefits would result in unemployment payouts exceeding previous take-home pay for more than 80 percent of recipients.

Fortunately, there’s a way to avoid this disastrous scenario. Capping federal unemployment benefits to 100 percent of employees’ previous wages, as proposed by Reps. Ken Buck (R-Col.) and Ted Budd (R-N.C.), would lessen the problems posed by expanding benefits. With this pivotal policy reform, lawmakers could expand federal unemployment benefits by two more months without having to worry about incentivizing unemployment.

Implement targeted aid to states, localities

Already, calls abound to give states and localities more federal taxpayer dollars to cope with the coronavirus crisis. While it is important for Congress to give struggling jurisdictions the resources they need to treat patients and adjust their education systems, a blank check rather than targeted, conditional aid would result in unnecessary expenditures and lead to large, unintended consequences. For example, Maryland would have received $9.5 billion in the Health and Recovery Omnibus Emergency Solutions (HEROES) Act even though their revenue shortfall is expected to amount to $5 billion over the next three years.

Relief legislation previously proposed by House Democrats would have bailed out states across the country to the tune of $500 billion, subsidizing the reckless pre-pandemic fiscal practices of states such as Connecticut and Illinois. In 2019, watchdog group Truth in Accounting found that these two states would need $51,800 and $52,600 respectively from each state taxpayer to pay outstanding obligations. But now, fiscally irresponsible state officials realize that they can recoup these dollars by bilking federal taxpayers from sea to shining sea. Instead of blank checks, Congress should focus on devoting dollars to specific ends such as treating COVID-19 patients (without dictating specifics such as healthcare operating models).

Don’t…

Bail out the U.S. Postal Service

If the recent past is any guide, the latest relief package is bound to include bailout funds for the U.S. Postal Service (USPS). Passed by the House in May, the HEROES Act included a $25 billion bailout for the USPS. But even this astronomical figure pales in comparison to the $75 billion (plus) that former Postmaster General Megan Brennan requested from Congress in April.

These bloated bailout requests are grounded on the idea that, absent a significant infusion of taxpayer dollars, the agency will have to shut down and even…close post offices. Fortunately, this cannot be further from the truth and the USPS has enough liquidity to last it until at least May 2021. That should buy the agency enough time for substantial reform and new Postmaster General Louis DeJoy appears up to the task. Instead of groveling for taxpayer dollars, America’s mail carrier needs to reduce waste, fraud, and abuse and change its pricing and mail operations.

Introduce rate-setting (price-fixing) for healthcare services

Since the start of the pandemic, healthcare workers have risked their lives to help treat roughly 4 million American COVID-19 patients. But some lawmakers have used this crisis to try to cut pay for doctors and nurses rather than bolster hazard pay. Sen. Lamar Alexander (R-Tenn.) and Rep. Frank Pallone (D-N.J.) have repeatedly proposed rate-setting as a “solution” to surprise medical billing, which happens when an out-of-network doctor bills a patient at an in-network facility.

Their rate-setting (aka price-fixing) proposals would benchmark doctor pay to median in-network insurance rates, effectively slashing pay overnight and making doctors’ and nurses’ lives needlessly difficult. In California, rate-setting has led to the widespread consolidation of doctor’s offices and soaring patient complaints. There is never a good time to export that failed model nationwide, especially during a pandemic.

Sneak corporate welfare into legislation

Lawmakers will almost certainly try to sneak corporate welfare into this latest relief package. Congress, after all, is beholden to a vast array of special interest groups keen on using taxpayer dollars to fund favoritism toward their industries. In particular, lawmakers should be on the lookout for “green” companies such as Tesla attempting to insert tax subsidies for electric vehicles (EV) into Phase 4 legislation.

Tesla has already reached the current cap that limits EV tax credits to the first 200,000 “clean” vehicles produced, but lawmakers and presidential candidates Joe Biden have expressed interest in abolishing or relaxing these program limits. Expanding EV payouts would benefit not only large corporations such as Tesla, but also wealthy consumers who don’t need any help from Uncle Sam. According to research from the Pacific Research Institute, about 80 percent of EV credits accrue to households earning six figures. Now is the time for relief to struggling Americans, not well-off households and connected corporations.

To conclude…

With the uncertainty of what Congress could add to the next relief bill, this is not an exhaustive list of Do’s and Don’t’s. TPA will be weighing in further as the legislation is introduced and works its way through Congress. Stay tuned.