Taxes

Bipartisan Tax Credit Measure Aims To Keep America Working

Tax Credit Measure Aims To Keep America Working

Some Republicans are warming to the House Democrats’ plan that would provide businesses with a $194 billion employee retention tax credit, The Wall Street Journal reported.

Both parties are looking at bipartisan ways to keep workers employed and prevent businesses from shutting down.

Under the House plan, which was introduced earlier this month as part of a second stimulus totaling $3 trillion, employers could claim a tax credit for as many as 59 million workers, the news service reported. 

President Donald Trump’s alternative is a payroll tax cut.

Democrats say their idea would be exclusively for companies that have been hurt or closed by COVID-19, and the incentive for each impacted worker would be larger.

For example, the plan pushed by House Speaker Nancy Pelosi (D-California) would provide employers with up to 80 percent of their wages and benefits to a maximum of $45,000 per worker. There would also be a credit for expenses such as rent.  

Democrats insist it is a simple solution, because eligible companies would just pocket the taxes withheld from employees’ paychecks. 

In addition, the proposal would favor small and medium-sized businesses (SMBs) because smaller firms get the subsidy for all their employees. For bigger ones, the incentive would kick in for furloughed workers who are still receiving wages or benefits.

The measure comes as 2.4 million Americans filed for jobless benefits for the week ending May 16, pushing the total number out of work to 38.6 million since March, according to the Department of Labor.

Proponents say the credit would be available to employers of all sizes, and unlike the federal $600 supplemental weekly unemployment insurance benefit, the subsidy keeps workers on the job.

Critics have said the extra benefit had the reverse effect as intended, because some workers can make more money staying home, at least through July when the program ends. The House's proposed tax credit would last through the year’s end.

“It can be a cost-effective way of doing this,” Joseph Davis, global chief economist at the investment firm Vanguard Group, which worked with the House Ways and Means Committee to develop the plans, told the WSJ. “If you can, try to maintain the employer-employee relationship and not sever it.”

Rep. Kevin Brady of Texas, the top Republican on the tax-writing House Ways and Means Committee, said he would consider expanding the credit. “It’s an important tool,” he told the news service. "So we’re interested in continuing to make that credit work."

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