The coronavirus (“COVID-19”) pandemic understandably has hundreds of millions of Americans worried about their families and livelihoods. This fear has prompted the federal government to take up “stimulus” relief as lawmakers consider creating an open-ended, multi-billion-dollar federal paid sick leave program. In their rush to force-feed the economy taxpayer dollars, elected officials are resorting to an old, failed playbook that is ill-suited to the current, peculiar crisis that America faces. Rather than consigning America to an “anti-stimulus” package of stagnation and excess debt for years to come, policymakers ought to use the tax code to help protect Americans from the coronavirus calamity. Only well-targeted, right sized and fiscally smart policies can keep our country afloat at such a scary, uncertain time.
Over the past few days, Americans have heard their leaders argue about how best to use taxpayer dollars to “stimulate” the economy. The government is on the cusp of offering coronavirus-stricken (or exposed) Americans two-thirds of their salary for up to three months if they take off of work. This policy succeeds politically because of its veneer of generosity but will fail the millions of Americans in limbo from COVID-19 because of the changing landscape of technology and the workforce. Currently, more than 26 million Americans have a job that ordinarily allows them to telework at least some of the time.
Remote workers play an invaluable role in keeping the economy humming along with jobs such as maintaining cybersecurity, fulfilling online orders, researching cures to diseases such as COVID-19, and yes, writing op-eds. Current proposals offer little to these workers aside from a temporary exit-ramp off of their jobs, even if they are perfectly healthy and simply may have had contact with an infected person. The government wants to use taxpayer dollars to wean these Americans off of work and duplicate benefits for the more than 70 percent of workers that already have paid sick leave benefits. These dollars could instead be used to help out the hardest-hit workers (i.e. waiters, janitors, flight attendants), many of whom do not have benefits enjoyed by better-off workers in the current economy.
America deserves policies that address current problems that Americans actually face. Virtually all Americans with wage income pay some payroll taxes which typically hit a higher percentage of poor families’ income than their well-to-do neighbors. These workers’ employers also pay payroll taxes on their employees’ behalf, making it more expensive to retain workers at a time when the sky is falling. Slashing these onerous taxes, then, can pack a one-two punch by delivering relief for workers while making employees less expensive to keep on payroll. Policymakers must also accept that some Americans will fall through the cracks and get laid off, and be prepared to help get these workers back on their feet. Congress is wisely opting to bolster unemployment insurance for the time being, but sadly, even this temporary assistance won’t work for all workers.
About 16 million Americans are self-employed, including scores of childcare workers, carpenters, and construction workers. These workers are usually ineligible for unemployment benefits, though, according to NerdWallet the self-employed can collect benefits in most states if they “structure…[their]…business as an S corporation and put…[themselves]…on the payroll as a salaried employee…” In difficult economic times, these hurdles make life difficult for self-employed individuals and amount to government favoritism toward traditional employees. These struggling workers don’t even have the opportunity to pay into the federal unemployment insurance system and are shut out from benefits when they’re needed the most.
In this difficult time, Congress should partner with states to extend an on-ramp onto the system for these workers and temporarily reprieve all workers from paying unemployment taxes. This way, the government can level the tax playing field between different types of work while extending temporary relief to struggling Americans so long as the pandemic continues.
Congress should also consider broader-based relief for working families. Health Savings Accounts allow Americans to use pre-tax dollars for purchasing healthcare supplies, yet, applicability has bizarre limitations. HSA holders can’t use their hard-earned dollars to buy over-the-counter pain, congestion, and fever relief medications without a prescription, despite the immense immediate need for said products. Lawmakers should permit these pre-tax purchases and help millions of Americans get back on their feet. There are no easy answers to deal with the coronavirus catastrophe, and it’ll take an array of approaches to get America back on the right track. But targeted tax reform is surely better than a wasteful “stimulus” package to keep our country afloat.
Ross Marchand is the director of policy for the Taxpayers Protection Alliance.