Shared with Permission from Eide Bailly. Authored by Jay Heflin
President Joe Biden recently unveiled a $1.9 trillion “American Rescue Plan” he wants Congress to turn into legislation and approve as soon as possible.
It is important to note that the president’s proposal is not legislation. It will be up to the members of Congress to create the legislation, which may modify or delete some measures that Biden included in his plan.
The decision on what is included will ultimately depend on what can pass the Senate. Given the speed at which President Biden wants to approve his proposal, it will likely take 60 votes in the Senate in order to avoid a filibuster, which means that all 50 Democratic senators and at least 10 Republican senators must approve his plan for it to pass. As for the House, Democrats control the chamber, and only a simple majority will be needed to pass legislation. House passage is not expected to be a problem.
What’s Included in President Biden’s Rescue Proposal?
Not included: Tax increases
Nothing is included to offset the fiscal cost of the plan. The president’s position is that now is not the time to worry about deficits given low interest rates and the fact the pandemic is worsening as infection rates break records on a near daily basis.
Still, President Biden suggested that at some point tax increases will likely enter the discussion, although he did not focus on rate increases.
“We can do it without punishing anyone by closing tax loopholes for companies that ship American jobs overseas or that allow American companies to pay zero in federal income taxes. Asking everyone to pay their fair share so we can make permanent investments to rescue and rebuild America is the right thing for our economy, it’s the fair thing and decent thing to do.”
-President Joe Biden
Included: Modifications to tax credits
Families First Mandate
The president wants to extend and expand the Families First mandate to provide paid sick and family leave to all employees by eliminating exemptions for employers with more than 500 or less than 50 employees and extending the mandate to cover healthcare workers and first responders. The mandated leave period would be increased to 14 weeks:
- Employers with less than 500 employees would continue to receive refundable credits to offset costs. Reimbursement would also be provided to state and local governments.
- The paid leave mandate would be in place until the end of September 2021.
Child Tax Credit
The plan calls for an increase to the Child Tax Credit to $3,000 ($3,600 for a child under age 6) for each child 17 and younger. The credit would also be fully refundable.
Expand the Earned Income Tax Credit
President Biden seeks to “raise the maximum Earned Income Tax Credit for childless adults from roughly $530 to close to $1,500, raise the income limit for the credit from about $16,000 to about $21,000, and expand the age range that is eligible including by eliminating the age cap for older workers and expanding eligibility for younger workers so that they can claim the credit,” according to the proposal. Workers hit with pay cuts in 2021 would not see a reduction in EITC payments as a result, according to the plan.
Expanded Child Care Tax Credits for One Year
The proposal calls for an expansion of the Child Care Tax Credits for one year to $4,000 for one child or $8,000 for two or more children under the age of 13. The tax credit will be partially refundable; the full 50 percent reimbursement of childcare spending will be available to families making less than $125,000 a year. The refundability phases out for families earning over $125,000 but less than $400,000.
Also included in the proposal
- Additional $1,400 stimulus checks for individuals earning less than $75,000 ($150,000 for a couple filing jointly).
- $400 per week in “enhanced” unemployment benefit payment. The current amount is $300 and is scheduled to expire in mid-March. President Biden seeks to increase that payment to $400 and make it available until September 30. After September, the payment will be extended depending on the economic recovery in each state.
- Expand unemployment benefits for gig workers, who normally don’t qualify for this assistance.
- $35 billion in aid to small businesses.
- $160 billion to create a national vaccination program.
- $350 billion in funding assistance for state, local and territorial governments plus $20 billion for public transit systems.
- $170 billion to help schools to open.
- Increase the minimum wage over time to $15 an hour.
- Extend the eviction moratorium through September 30, 2021. This provisions also includes $30 billion to help landlords make ends meet.
Will the Proposal Move Forward?
As stated above, passage by Congress is unclear. Senate Republicans have already questioned why lawmakers should approve another relief bill while the $908 billion relief package enacted in December has barely begun to provide relief.
Senator Marco Rubio (R-FL) has called on Biden to only advance the $1,400 stimulus payment and allow the rest to pass in subsequent legislation. Also, moderate senate Democrats are expected to be hard sells in supporting a plan that costs nearly $2 trillion. Senate Republicans also oppose increasing the minimum wage.
Senate Republicans might be enticed to support the package if it is expanded to include COVID-related liability protections for businesses. Still, such an addition would be troublesome in the House, as Democratic leaders in that chamber oppose the measure.
In other words, this proposal is so big that it has something for everyone to oppose and support.
What are Next Steps for the Proposal?
As for timing, Congress will likely take up this measure as soon as possible and hope to pass it from both chambers before the enhanced unemployment benefits expire in mid-March. Still, it bears repeating, passage is not certain at this point, and some proposals may be dropped or modified while others are added as the legislation moves forward.
Interested in learning more?
Eide Bailly and Choice Bank are hosting a free webinar on this topic focused on tax law changes for businesses. Sign up to join or for a copy of the webinar here.