Congress recently passed H.R. 1319, the “American Rescue Plan Act of 2021,” which is projected to increase the deficit by $1.9 trillion over the next decade.
In a $1.9 trillion spending bill where $160 billion goes to COVID-19 vaccination and testing, it’s fair to say that the majority of the provisions do not combat COVID, but perhaps soften its economic impact. Unfortunately, not all of the spending happens now when it’s needed most, as hundreds of billions of dollars in approved expenditures will occur years down the line. For example, $86 billion will be funneled into underfunded union pension plans. The pension plans have until 2025 to apply for the benefits, and the funding will cover payouts through 2051. Regardless of one’s view of the merits of this provision, promises of funding four to 30 years hence will not provide an immediate “shot in the arm” for the economy.
You may have heard about the House of Representatives wanting to increase the minimum wage to $15 per hour. While that was in the House’s version of the act, it was removed by the Senate because not only did it lack the support of several Democratic senators, it also was not inherently a budget item that would qualify for the reconciliation process used to pass the act with a simple majority.
Having discussed what is not in the act, let’s shift to what is there. Perhaps most prominent on this list are the additional stimulus checks of $1,400 per person for eligible taxpayers and their dependents. The income qualification band is much tighter than with prior payments as, under Senate amendments, the checks phase out completely for individuals who earn more than $80,000 per year, or married couples who earn more than $160,000. Refundable child tax credits of up to $3,600 per child are extended, with similar income phase-out limitations. The act includes expanded child care tax credits, and some lower-income individuals may receive housing assistance from two possible pools of funding: $30 billion in emergency rental assistance and $10 billion in mortgage assistance.
Several provisions address work displacement. The previously enacted enhanced unemployment payments of $300 per week are extended through Sept. 6. COBRA coverage is continued through Sept. 21, with government subsidies to help individuals pay for the extended health insurance. Finally, employee retention credits and paycheck protection program benefits are expanded generally, with some industries such as airlines, restaurants, and venue operators receiving separate, targeted assistance.
The act contains $360 billion in block grants that will be allocated to states, cities, tribes and territories. Oklahoma will get some of the money, but the formulas used in the act disproportionately favor more populous cities and states. Tribal nations will be lobbying the Treasury Department for their share of $20 billion of these funds.
It wouldn’t be an act of Congress without including something nobody understands, so the act repeals Section 864(f) of the Internal Revenue Code, which allows U.S. multinational companies to elect to apportion their interest expense on a worldwide basis for foreign tax credit purposes. This arcane provision is scored as a tax increase that will raise $20 billion over the next 10 years. Given its short list of affected taxpayers and relatively minuscule revenue benefit, it is not clear why this one tax provision made the list and other tax changes the Democrats would like to advance have been delayed until possibly later this year.
* This article first appeared in The Journal Record on March 12, 2021, and is reproduced with permission from the publisher.