Path to Next Stimulus Uncertain Following House Passage of HEROES Act
Wednesday, 20 May 2020
19 May 2020
On Friday evening, the House of Representatives approved, by a vote of 208199, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800), viewed as House Democrats’ initial proposal in what could be a multi-week negotiation over a potential next round of COVID-19 stimulus legislation. As previously reported, the $3 trillion package would enact a number of sweeping tax and other reforms, including expanded economic impact payments, enhanced credits and deductions, temporary elimination of the limitation on the deduction of state and local taxes, net operating loss changes, and certain retirement reforms. A broad overview of the legislation is available here ; a detailed, section-by-section summary is available here ; and information on the state and local relief provisions of the bill is available here.
Despite House passage of the Democrats’ proposal, the path forward for the next round of stimulus legislation is uncertain. Even prior to the passage of H.R. 6800, Senate Republicans criticized the legislation and stated it dead on arrival in the Senate. Speaking on the Senate floor, Majority Leader Mitch McConnell (R-KY) referred to the legislation as a “seasonal catalog of left-wing oddities,” a “totally unserious effort,” and a “Democratic wish list.”
More broadly, many Republicans in Congress and President Trump have expressed a desire to wait until they have had an opportunity to assess the impact of previous relief packages before enacting another round of expensive stimulus legislation. Regarding next steps, Senator Majority Whip John Thune (R-SD) said last week that “[i]n terms of [timing], I suspect that doesn’t happen until sometime after Memorial Day.” Casting even further doubt on the immediate prospects for another round of legislation, Senator John Kennedy (RLA) said last week that he would “put the chance of another bill right now at way less than 50 percent.”
In contrast, for weeks, Democrats have called for further congressional action to deliver additional relief to the American people, and as the health and economic effects of COVID-19 have worsened, some Republican Senators have begun to join them, expressing openness to an additional legislative package. Senator Susan Collins (R-ME) recently said that she agreed “we need to be working on an alternative to the House’s $3 trillion wish list bill.” Senator Rob Portman (ROH) likewise agreed that Congress was “going to have to do more,” but emphasized that doing so with the benefit of more information regarding the impact of initial rounds of legislation would be to everyone’s advantage
If and When Negotiations Begin, Significant Progress Must be made to Reconcile Parties’ Priorities
If and when negotiations regarding another round of stimulus legislation do begin between the House, Senate, and White House, there will be significant disparities that must be overcome in the parties’ priorities. For instance, Democrats in Congress have called for up to $1 trillion in additional relief funding for state and local governments, entities that have seen tax revenues plummet amid the pandemic. Looking ahead to the potential impact of the pandemic on the November 2020 election, Democrats have also called for expanded voting by mail. In contrast, if an additional package is to reach the President’s desk, Republicans have called for liability protection for employers and healthcare workers amid the pandemic, as well as various forms of regulatory relief to reduce burdens on businesses as the economy reopens. Further, President Trump has been vocal in his support for a payroll tax cut for employers, among other things, going so far as to call the provision a “must do” if he is to sign another package.
In contrast to previous stimulus packages, it therefore appears likely that the next round of legislation could require significant negotiation and compromise, although the emergence of further negative news regarding the health and economic effects of the pandemic could hasten the process. The K&L Gates Tax Policy team will keep you apprised as a Phase 4/CARES 2 package takes shape and as related tax developments continue to emerge. K&L Gates has been closely monitoring the policy and legal implications of the coronavirus crisis. For more updates on coronavirus, please visit Responding to COVID-19.
No tax-related hearings are scheduled at this time.
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