As Congress and the Trump administration begin to consider a phase four fiscal stimulus bill, it is important to recognize that the phase three bill they just enacted is actually nearly $800 billion larger than $2.2 trillion. Given the way Washington revenue estimates are made, and the way the bill was rushed through without a detailed report, it is no wonder that most people do not realize that roughly $800 billion of tax relief will be injected into the economy this year over and above the $2.2 trillion figure.
Three tax changes account for most of the additional fiscal stimulus.
One, the bill provides for a $350 billion temporary tax cut by suspending the employer share of payroll taxes until the end of the year. This amounts to a $350 billion interest-free loan to businesses to encourage them to keep their employees on their payroll. Because these deferred taxes have to be paid back in 2021 and 2022, their cost is offset and not included in the total 10-year cost of the bill. A number of other tax relief provisions with front-loaded costs push the upfront stimulus to nearly $400 billion.
Two, the bill includes the Treasury Department decision to delay the individual and corporate tax filing date from April 15 to June 15. According to the Monthly Treasury Statement, this change will save taxpayers about $300 billion in taxes for this period. In effect, this is a $300 billion interest-free bridge loan to taxpayers. This is also not included in the revenue estimate of the bill because the payments will just be delayed and not forgiven.
Finally, the $2.2 trillion figure does not include the $100 billion in tax relief to businesses included in the phase two bill enacted in mid-March.
Added all up, this $800 billion in fiscal stimulus is significant. It is roughly the size of the TARP program passed in 2008 to help banks, and similar in size to the $831 billion fiscal stimulus package enacted in 2009 and signed by President Barack Obama. A fiscal stimulus of this size should not be ignored and should get the recognition it deserves. We may need more fiscal stimulus, but lawmakers should be aware of what they have already done.
Bruce Thompson is a Washington consultant. He was assistant secretary of treasury for legislative affairs during the Reagan administration.
