U.S. House Democrats today unveiled the HEROES (Health and Economic Recovery Omnibus Emergency Solutions) Act, a $3 trillion coronavirus relief bill that contains multiple policy priorities, including more than $1 trillion in funding for state and local governments, a new round of economic stimulus payments to individuals, the temporary elimination of a cap on state and local tax (SALT) deductions, and the extension of enhanced federal unemployment benefits.
Direct Aid to State and Local Governments
The centerpiece of the House bill is getting money to state and local governments, many of which are facing severe budget shortfalls due to the COVID-19 pandemic.
Counties are making significant financial investments to address immediate public health and safety needs. At the same time, counties are experiencing massive and unprecedented declines in revenue as a result of the coronavirus pandemic.
The combined effect of these changes will likely undermine county revenue structures and support for education, public safety, roadway maintenance, and other essential services.
The bill includes $500 billion for states, $375 billion for local governments, $40 billion for tribal communities and territories, and $75 billion for state and local governments to provide residents with housing assistance. The bill also designates $755 million in aid for the District of Columbia.
Furthermore, the legislation allocates $3.6 billion for election contingency planning, $1.5 billion for wifi hotspots for school children, and $1 billion for distressed communities via community development financial institutions.
This is far more than the CARES Act, which established a $150 billion relief fund for state and local governments. Most notably, the HEROES Act authorizes state and local governments to use relief funds to make up for lost revenue due to the coronavirus public health crisis. Under the CARES Act, state and local funding can only be used to cover costs directly related to coronavirus-related response efforts.
According to a preliminary analysis by the Tax Foundation, Maryland would receive $4,762,775,158 in state aid and $4,807,684,470 in local aid. Maryland’s total allocation amounts to $9,570,459,628 ($1,583 per capita).
Second Round of Stimulus Payments to Individuals
The bill calls for a second round of economic stimulus payments of $1,200 per family member, up to $6,000 per household. The rebate would phase out for higher-income households.
Temporary Elimination of the SALT Cap
The bill eliminates (for two years) the $10,000 cap on SALT deductions.
The SALT deduction allows taxpayers to subtract state and local income, sales and property taxes from their federal tax payment. The 2017 federal tax overhaul capped SALT deductions at $10,000 – a move of particular import in states like Maryland.
Maryland, Connecticut, New Jersey, and New York are appealing the 2019 decision that tossed a lawsuit challenging the federal government’s cap on SALT deductions.
Boost to Payroll Protection Program
The bill would pump an additional $10 billion into the Payroll Protection Program, which has been bolstered in past bills. The funds would be used to ensure under-served businesses and nonprofit organizations have access to grants through a disaster loan program.
Extends Unemployment Benefits
The bill extends the $600 weekly federal unemployment payments through next January. The enhanced benefits are currently set to expire on July 31, 2020.
Hazard Pay for Front-Line Responders
The bill includes $200 billion in hazard pay for essential workers on the front lines of the crisis.
Trouble in the U.S. Senate?
The U.S. House is expected to vote on the package as soon as Friday, but the bill faces an uphill battle in the U.S. Senate. Senate Majority Leader Mitch McConnell has indicated he does not intend to bring the bill up for consideration in the upper chamber.
According to Bloomberg:
[President] Trump said last week he’s in “no rush” to get another aid package, but last week’s jobs report that showed employers cut 20.5 million jobs in April, and statements from the president’s economic advisers that the unemployment rate will hit 20% or more, are certain to add urgency to talks.Senate Majority Leader Mitch McConnell on Tuesday dismissed the bill as a “big laundry list of pet priorities” on Tuesday.
Stay tuned to Conduit Street for more information.