The nation's uneven recovery from the pandemic will be disastrous for economically vulnerable families facing unemployment with no savings and growing debt, said Rep. Mike Thompson, D-Calif., chairman of the House Ways and Means Subcommittee on Select Revenue Measures, at a hearing to examine Congress' failure to act on virus-related tax legislation.
"Those at the lower end of the socioeconomic scale tend to actually stimulate the economy the most when they get things like a $1,200 stimulus check," said Rep. Brendan Boyle, D-Pa., highlighting what he considered a key benefit of the Coronavirus Aid, Relief and Economic Security Act passed by Congress in March.
Boyle and other subcommittee Democrats sought support from witnesses for the Health and Economic Recovery Omnibus Emergency Solutions, or Heroes Act, a $3 trillion virus relief bill that passed the House in May. The legislation expands on the economic stimulus payments from the CARES Act, provides hazard pay for essential workers and funding for state and local governments.
Betsey Stevenson, an economics professor at the University of Michigan, said wealthier Americans treated the CARES Act stimulus payments differently than poorer ones, who immediately put money back into the economy by spending it to survive.
"One of the problems we've seen is that high-income households have really boosted their savings," she said. "And when you're saving, you're not spending and that's part of what's caused the economy to contract."
But Alex Brill of the right-leaning American Enterprise Institute said Congress shouldn't approve more costly economic recovery payments because they aren't well targeted toward households directly impacted by the pandemic.
Despite bipartisan support in the House and Senate, Brill advised lawmakers to "minimize the size and scope of the payments if unable to avoid this policy entirely."
Brill supported an expansion of the employee retention tax credit, which was enacted under the CARES Act to encourage companies to pay salaries and provide health insurance benefits in the hope that normal business operations can resume quickly once the crisis ends. The Heroes Act would make the credit worth 80% of qualified wages up to $15,000 per calendar quarter and up to $45,000 for the calendar year.
Among the changes suggested in his testimony, Brill said the wage cap should be raised to $12,500 per quarter and the credit should not be phased in as proposed by the Heroes Act. Moreover, the credit should not be made retroactive to avoid firms from receiving a windfall, he said.
Rep. Suzan DelBene, D-Wash., a sponsor of the employee credit legislation, said the Heroes Act expanded the provision so that it would be eligible to employers who also took out a Paycheck Protection Program loan under the CARES Act.
She said Lombardi's, an Italian restaurant in her congressional district, rehired 95% of its workers using the PPP, but the owners "are hesitant to hire new employees without incentives like the employee retention tax credit."
--Editing by Joyce Laskowski.
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