A $3 trillion coronavirus relief package unveiled by House Democrats on Tuesday would provide for a second round of direct payments to most Americans.
The payments would be similar to the one-time payments created by legislation Congress passed and President Trump signed in March, known as the CARES Act, but would be more generous for dependents.
“Families are feeling the pain of a terrible one-two punch – a national public health emergency coupled with a historic economic downturn,” House Ways and Means Committee Chairman Richard Neal (D-Mass.) said in a news release. “The gravity of our new reality demands substantial solutions, and that’s what Ways and Means Democrats offer in this latest response package.”
Under the Democrats’ bill, most households would be eligible for payments of $1,200 per individual and $2,400 per married couple, plus an additional $1,200 per dependent, up to three dependents. The maximum payment amount a family could receive would be $6,000. The payments created under the CARES Act also provides payments of $1,200 per non-dependent adult, but provides payments for dependent children of $500 and doesn’t include payments for other dependents.
As is the case with the payments created by the CARES Act, individuals with income under $75,000 and married couples with income under $150,000 would be eligible for the full payment amount under the new House Democrats’ bill. The amount would phase out for households with income above those thresholds.
Advance payments would be based on people’s 2019 or 2018 tax returns, and would also be issued to nonfilers who receive Social Security, railroad retirement benefits, Supplemental Security Income and veterans benefits.
The proposal also includes changes to the direct payments in the CARES Act that Democrats are calling improvements, which would also apply to the additional payments Democrats are proposing.
These include allowing all dependents to be eligible for payments instead of just children under 17, allowing payments to go to people who provide individual taxpayer identification numbers in addition to people who provide Social Security numbers, exempting payments from being reduced if someone owes past-due child support, and preventing payments from being garnished by private debt collectors.
The bill also includes a provision to prevent checks and related notices from including the names of the president, vice president, elected officials and Cabinet members, after the administration drew criticism from Democrats for putting Trump’s name on checks created by the CARES Act and the notices informing people of their payments.
Many Democrats have been interested in providing at least one more round of direct payments to individuals, with some expressing support for monthly payments.
Several advocacy groups that back monthly payments expressed disappointment with the bill, since Democrats are only proposing one additional around of direct payments.
“Put simply, the one-time payment in this bill is just another Band-Aid over a gaping wound that is getting bigger every day. Democrats should amend this bill to include monthly payments, lasting until the economy recovers,” said Economic Security Project Action, People’s Action and Young Invincibles.
In addition to the provisions on direct payments, the House Democrats’ bill also includes a number of other tax-related provisions, largely focused on providing relief to individuals.
These include provisions to expand the earned income tax credit, child tax credit, and child and dependent care tax credit for 2020, eliminate the $10,000 cap on the state and local tax deduction for 2020 and 2021, expand a deduction for certain expenses of teachers, and create tax deductions for certain expenses of first responders and front-line workers. The section on the child tax credit would direct the Treasury secretary to create a program for people to receive advanced payments of the credit on a monthly basis.
For employers, the bill would expand the employee retention tax credit created in the CARES Act, create a new refundable credit for fixed expenses such as rent and utilities for businesses impacted by the coronavirus, and create a new refundable tax credit for self-employed individuals who have lost a significant amount of income. It also would clarify that expenses paid with Paycheck Protection Program loans that are forgiven are eligible for tax deductions, after the IRS issued guidance stating that the expenses are not tax-deductible.
The House Democrats’ proposal also would undo provisions in the CARES Act that loosen tax rules on businesses’ net operating losses. Democrats argue that the CARES Act provisions are too generous and a giveaway for the rich, while Republicans say they help provide liquidity to businesses.
The new bill would undo a provision in the CARES Act that temporarily removed a limit on the amount of business losses owners of noncorporate businesses can deduct against their nonbusiness income. The bill also would prevent losses from being carried back to years prior to 2018, while the law Trump signed in March allows losses generated in 2018, 2019 and 2020 to be carried back for up to five years.