The new Biden administration has many priorities and some ambitious goals. Perhaps none is more immediate than an additional stimulus package to mitigate the deepening impact of a pandemic that has dragged on for nearly a year. After months of declines, initial jobless claims rose again in December to 782,000, which remains above the previous record of 665,000 set in March 2009 (excluding years prior to 1967 when unemployment was measured differently). State legislatures may also implement additional spending cuts in the coming months that could also lead to deleterious effects on unemployment.
With these challenges in mind, it is time to look at the Biden administration’s “American Rescue Plan” to aid in the economic recovery.
General Aid Provisions
State Aid Funding
The Biden administration has called for $350 billion in aid to state and local governments. This aid would be used to maintain services, reopen schools, and distribute the vaccine among other potential uses. There would also be a further $20 billion for tribal governments and $20 billion for public transportation.
CBIZ Perspective: While not strictly tax related, state aid has been one of the sticking points in prior negotiations. This may test the Biden administration’s ability to maintain its ambitious agenda, given that Democrats have the slimmest of majorities in the Senate.
Vaccine and Virus Related Funding
This includes $160 billion for a national vaccine program, more testing, and jobs in the public health sector. The plan provides for $20 billion to fund a national vaccination program, and $40 billion for increasing supplies and manufacturing of personal protective equipment and related items.
The plan calls for $170 billion for K-12 schools and to higher education. This includes money to support safely reopening school buildings and to support distance learning, as well as additional support structures to make up for lost education time.
Additional Loans and Grants
While the Paycheck Protection Program (PPP) has been the centerpiece of prior stimulus packages, it is not the headline in this package. Instead, the Biden plan calls for a $35 billion investment in programs administered by states, local governments, tribes, and nonprofits to fund $175 billion in low-interest loans. There is also $15 billion set aside for grants to small businesses.
Emergency Paid Leave
The credits available for emergency paid leave program created by the Families First Coronavirus Response Act (FFCRA) were extended through the end of March 2021 by the Consolidated Appropriations Act (the Act). However, the Act did not extend employees’ entitlement to FFCRA leave beyond Dec. 31, 2020, meaning employers are longer legally required to provide such leave. The Biden plan would extend the program through Sept. 30, 2021. There are two major changes from the first iteration of the program:
- The exemptions for employers with fewer than 50 and more than 500 employers would be eliminated.
- Health-care providers, first responders, and federal workers would all be eligible for benefits.
Under the program eligible workers could receive as much as $1,400 per week.
CBIZ Perspective: The elimination of the exceptions for very small and for large employers significantly expands this program. However it should be noted that while the refundable tax credit would also be extended from March 31, 2021 through Sept. 30, 2021, only employers with 500 or fewer employers would be eligible for the refundable tax credit. It is also noteworthy that although a permanent paid leave program is not part of this package, the Act extended the employer credit for paid family and medical leave through 2025.
Pandemic Unemployment Assistance
The Act reinstated the federal pandemic assistance program but capped benefits at an additional $300 per week until March 14, 2021. The Biden plan would extend that date until September 2021, and would increase the benefit to $400 per week. It would also fund state work-sharing and extended benefit programs.
CBIZ Perspective: It is notable that the unemployment benefits would not be increased to the initial $600 per week that was including in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This may be a bow to the reality that the $600 per week benefit was unpopular with many business owners.
Worker Pay and Protections
The federal minimum wage would be increased from the current $7.25 per hour to $15 per hour. The tipped minimum wage would also be eliminated, as would a reduced minimum wage that applies to disabled workers. In addition, employers would be encouraged to provide hazard pay, including back pay for 2020, to frontline essential workers. OSHA would also be directed to set forth worker safety standards applicable to businesses and the public sector to protect them from the coronavirus.
CBIZ Perspective: Aside from the state and local aid provisions, this may face the most resistance from other members of Congress. The Biden plan does not contemplate a phased approach to “ramp up” to the $15 per hour target, but such an approach may be seen as economic necessary and part of negotiations.
Eviction Moratorium and Rental Aid
The Biden plan would provide $25 billion in rental assistance and $5 billion for energy and water costs. It also extends through Sept. 30, 2021 the federal eviction moratorium, as well as providing funds for legal assistance to households facing eviction or foreclosure.
CBIZ Perspective: While this provision is ostensibly aimed at assisting renters, the manner of its implementation and funding will have a significant impact on landlords. If enacted, landlords and property managers will need to educate themselves and their tenants on the available assistance to ensure compliance with the program.
Direct Payments and Increase Tax Credits
The primary provision for individuals is an additional $1,400 direct payment to individuals including adult dependents. The child tax credit would be made fully refundable and increased in 2021 to $3,600 for children under age 6. Children aged 6 to 17 would be eligible for a $3,000 credit in 2021. The earned income credit would also be increased for those without children.
CBIZ Perspective: The additional stimulus checks had strong Democratic support when proposed by President Trump. The Biden plan does not specify whether the eligibility requirements will be the same for this new round of payments.
Child Care Assistance
The proposal calls for a one-year increase to the child care tax credit from $3,000 for a single child to $4,000 ($8,000 for two or more children). Families earning up to $125,000 per year would be eligible for the full credit, while families earning up to $400,000 per year would receive a partial credit. The credit would be refundable as well.
Health Coverage Provisions
The Biden plan calls for reducing out of pocket health care coverage costs. This would be done by subsidizing at least a part of COBRA continuation coverage through September 2021. The proposal would also expand the Affordable Care Act’s (ACA) premium tax credit to ensure that enrollees don’t pay more than 8.5% of their income for coverage.
CBIZ Perspective: The Supreme Court’s ruling on the constitutionality of the ACA remains outstanding. Many court watchers believe that the Court will likely uphold the ACA based on the oral arguments held last fall.
The new administration faces pressure to act quickly due to rising unemployment that may be exacerbated by potential state layoffs and budget cuts. The ambitious plan may encounter resistance in the Senate which is divided 50-50, with the Vice President entitled to vote if there is a tie. Further, the prospect of valuable Senate floor time will be partly taken up by another impeachment trial scheduled to begin February 9. In future articles, we will look at the rest of the Biden tax agenda, as well as the procedural hurdles he will face in enacting his plan. For more information on President Biden’s American Rescue Plan, please contact us.
Bill Smith is a Managing Director for CBIZ MHM’s National Tax Office. He can be reached at 301.907.2412 and firstname.lastname@example.org.
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