33,327 views | | Jul 22, 2020, 10:51pm EDTZack Friedman Contributor Opinions expressed by Forbes Contributors are their own.
Bestselling Author, The Lemonade Life. I write and speak about leadership and greatness.
Here’s what inside the new stimulus package.
Senate Republicans are expected to introduce their long-awaited, proposed stimulus package Thursday—and here’s what’s likely inside.
Here’s what you need to know.
How much is the second stimulus check? According to the Associated Press, Senate Majority Leader Mitch McConnell (R-KY) wants second stimulus checks of $1,200 included in this proposed stimulus package. However, McConnell and White House negotiators, Treasury Secretary Steven Mnuchin and Chief of Staff Mark Meadows, have not confirmed the amount of the second stimulus checks or the criteria to receive a second stimulus check.
The first stimulus check under the Cares Act was up to $1,200 for each individual, $2,400 for married/joint filers and up to $500 for dependents. If you earned less than $75,000 (individuals) or $150,000 (married/joint filers), you could receive $1,200 for the first stimulus check. The first stimulus check phased out above those income limits until $99,000 of adjusted gross income for individuals and $198,000 for married/joint filers. Since the Cares Act, there have been countless proposals about second stimulus checks, including keeping the same $1,200 one-time stimulus check to $2,000 a month second stimulus checks. Previously, McConnell suggested that second stimulus checks may only be available to Americans who earn up to $40,000 a year. However, that $40,000 threshold likely won’t be the in the proposed stimulus.
The Associated Press reports that Senate Republicans are leaning toward a proposal of $200 per week for unemployment benefits, rather than the $600 a week that Congress authorized under the Cares Act. Why? Many Republicans have believed that the $600 a week unemployment benefit creates a disincentive for recipients to return to work. They also argued that some recipients can earn more than unemployment benefits than from employment. So, Republicans settled on extending unemployment benefits without creating a disincentive to return to work. Unemployment benefits would be extended through December 31, 2020 in this stimulus proposal. Without congressional intervention, unemployment benefits expire this weekend. Congress may use a stop-gap measure while they finalize terms for unemployment benefits after July. Will there also be a return-to-work bonus? Senate Republicans and the White House had rallied around Sen. Rob Portman (R-OH), who proposed a $450 a week cash return-to-work bonus.
President Donald Trump said he would consider vetoing the stimulus package if it does not include a payroll tax cut, which he believes is a pro-growth strategy to stimulate the economy. A payroll tax cut would reduce or eliminate Medicare and Social Security tax. Both employees and employers can benefit, since employers contribute as well. The payroll tax cut may be structured as a payroll tax deferral (rather than an upfront tax cut). A payroll tax deferral could mean the payroll tax could be owed at a later date, which would provide upfront savings. It’s unclear if legislators eventually would forgive the payroll tax before it’s due, or if Americans would be required to pay it in the future. Senate Republicans appear to be leaning toward direct payments to Americans rather than a payroll tax cut. However, Republicans could propose other financial incentives or tax breaks to businesses in lieu of a payroll tax cut.
Republicans plan to propose $105 billion to open schools and $15 billion for child care centers, according to the Associated Press. This includes $70 billion for K-12 schools to reopen, $30 billion for colleges and universities and $5 billion for governors to spend at their discretion. The funding will be available to schools that open for both in-person and remote instruction. In contrast, Democrats are targeting approximately $1 trillion for state and local aid, and $430 billion to open schools. Both parties in Congress understand that state and local governments have been adversely impacted by the Covid-19 pandemic. However, Senate Republicans are not proposing any new state or local aid. Why? They believe that authorization in prior stimuli is sufficient. Without federal support, however, many Democrats argue that some states and localities will face dire financial circumstances, budget cuts and potential bankruptcy.
McConnell made liability protection his top issue for the new stimulus. Businesses, hospitals and schools would receive five-years of liability protection, retroactive to 2019. Liability protection is expected to be included in the Republican stimulus proposal.
Don’t expect student loan forgiveness in the new stimulus. House Democrats passed a weakened student loan forgiveness plan in the Heroes Act that would provide $10,000 of student loan forgiveness only for borrowers who are “struggling financially.” While the Heroes Act provides for an extension of these benefits, Senate Republicans (or Senate Democrats) have not made student loans a top issue of the next stimulus.
The new stimulus legislation is expected to extend the Paycheck Protection Program (PPP), which is scheduled to expire on August 8. Republicans propose to use the unspent $134 billion that was previously authorized to make PPP loans.
Senate Republicans plan to propose $25 billion for Coronavirus testing and contract tracing. According to the Associated Press, the $25 billion is equal to the $9 billion already authorized in a prior stimulus plus $16 billion of new spending.
McConnell says he will introduce the stimulus package in multiple bills, rather than a single legislative proposal. The total amount could increase as Democrats demand higher funding for their legislative priorities, such as extending unemployment benefits and increasing aid to states and localities, among others. What is the timeline for the new stimulus? Congress has until August 7 to reach a deal on the new stimulus when members leave for summer recess until September. House Democrats proposed $3 trillion for the Heroes Act (their proposed stimulus bill which hasn’t passed the Senate) and is more than double McConnell’s proposed legislation. Senate Republicans hold 53 seats in the U.S. Senate, and will need Democrats to secure a bipartisan stimulus package. If Congress does not finalize legislation in July or August, then the new stimulus could be delayed until after Labor Day. However, if Congress finalizes the new stimulus before August 7, it’s possible that second stimulus checks could be sent as early as late August.
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Zack Friedman is the bestselling author of the blockbuster book, The Lemonade Life. Apple named The Lemonade Life one of "Fall's Biggest Audiobooks" and a "Must-Listen."… Read More
Zack Friedman is the bestselling author of the blockbuster book, The Lemonade Life. Apple named The Lemonade Life one of "Fall's Biggest Audiobooks" and a "Must-Listen." Zack is the Founder & CEO of Make Lemonade, a leading online personal finance company that empowers you to live a better financial life. He is an in-demand speaker and has inspired millions through his powerful insights, including more than 100 million people who have read his advice. Previously, he was a chief financial officer, a hedge fund investor, and worked at Blackstone, Morgan Stanley, and the White House. Zack holds degrees from Harvard, Wharton, Columbia, and Johns Hopkins.Read Less