Economic assistance provided to families under the Coronavirus Aid, Relief and Economic Security Act
, enacted in March, won't outlast job losses and financial distress from the virus, lawmakers said at hearing of the House Ways and Means Subcommittee on Select Revenue Measures. The virus causes the respiratory disease COVID-19.California Democrat Mike Thompson, chairman of the subcommittee, said that economically vulnerable people could fall into irreversible financial disaster if the Senate doesn't take up the Health and Economic Recovery Omnibus Emergency Solutions Act, the Democrats' $3 trillion measure approved by a divided House last month.
The Heroes Act's tax provisions include an expansion of the employee retention tax credit, a repeal of recent changes to net operating losses for corporations, and a two-year elimination of the cap on state and local tax deductions. It would also extend the CARES Act's economic impact payments and expand the child tax credit, the earned income tax credit, and the child and dependent care tax credit.
State governments shut down millions of businesses to curb the spread of the virus, resulting in job losses that hit American workers without warning, Thompson said, adding that many families didn't have enough savings to make up for the loss of income.
"Despite the strongest labor market in 50 years before the pandemic — starting in 2009 with 128 months of growth — over a third of Americans had so little financial security that they would have been unable to cover an unanticipated $400 expense," Thompson said in his opening remarks.
Expanding child tax and earned income tax credits would help mitigate hardships from increasing childhood poverty rates as the impact of the pandemic continues into 2021, Allison Bovell-Ammon, director of policy strategy for Children's HealthWatch at Boston Medical Center, said in response to questioning from Rep. Gwen Moore, D-Wis.
Republicans on the tax panel said that business tax breaks also help families and workers by providing resources to maintain the level of employment. Rep. Adrian Smith, R-Neb., noted that the CARES Act helped individuals by providing economic impact payments and penalty-free distributions from retirement accounts.
The measure also allowed businesses to carry back net operating losses and accelerate the refund of certain business credits known as alternative minimum tax credits. Smith said tax policy that is positive for businesses can also benefit individuals.
Kyle Pomerleau, a resident fellow at the right-leaning American Enterprise Institute, said the distinction between business and individual tax relief isn't helpful in consideration of the virus relief tax legislation.
Business tax relief in the CARES Act was designed to help companies maintain their payroll and workforce, Pomerleau said, citing the deferral of the employer side of payroll tax as another example.
"This effectively, for a short period of time, reduces the after-tax cost of keeping employees hired," he told lawmakers.
--Editing by Tim Ruel.
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