Small businesses could get a tax break for coronavirus protective measures — including gloves, masks, hand sanitizers, work boots and more — under a plan that’s winning support from both Republicans and Democrats in Congress.
Under the bipartisan plan, nonprofits, veterans organizations, independent contractors, farmers, self-employed workers and small businesses could each get a credit of up to $25,000 a year for purchases of personal protective equipment and other coronavirus prevention supplies.
Rep. Derek Kilmer, D-Washington, found that pleas for help with coronavirus-related equipment came up repeatedly as he traveled around his Tacoma-based district. Twenty-four House members, including Rep. Denny Heck, D-Washington, are sponsoring the bill. Rep. Brenda Lawrence, D-Michigan, is the chief sponsor.
“Small businesses want to reopen and they’ve been through the ringer,” Kilmer told McClatchy.
As he discussed with business owners and others what they needed from the federal government, Kilmer said a tax credit “came up a fair amount.”
Such equipment could include gloves, medical masks, N-95 respirators, eye protection, gowns and aprons, boots or closed-toe work shoes, cleaning detergents, hand sanitizers, and cleaning products or tools, plexiglass protectors and more.
The credit would be available in any year when the president declares a coronavirus-related emergency. President Donald Trump declared such an emergency in March.
Some Republicans want an even more expansive credit. Rep. Kevin Brady, R-Texas, top Republican on the tax-writing House Ways and Means Committee, has promoted a plan to allow any business to get a break.
That plan, championed by economist Douglas Holtz-Eakin and distributed to the media by Brady’s office, puts no limit on the credit at the moment. It would go further than the House bill in that it would allow the break to include workplace modifications.
Holtz-Eakin, a senior adviser to Republican John McCain’s 2008 presidential campaign and chief economist for President George W. Bush’s Council of Economic Advisers, told McClatchy he is open to imposing a limit, either the amount of the credit or allowing a certain amount per employee.
The credit would be refundable. That means that if businesses do not earn a profit during the year, they could get the tax break anyway, perhaps as money subtracted from the payroll taxes they have to remit regularly.
Republicans on Ways and Means plan to introduce the plan as a “Healthy Workplace” tax credit that “would help businesses to offset the costs” of their coronavirus prevention measures, Brady said last week. Committee Democrats did not respond to a request for comment.
“Republicans believe we should support private investment in a safe, healthy workplace without doing damage to the tax code,” Brady told McClatchy in a statement. “We need to use the tax code to restore worker and customer confidence by creating a temporary tax incentive through the end of 2020 to help businesses defray costs for testing, PPE, and reconfiguring workplaces.”
The tax break is under discussion at the White House, where Trump’s economic team is currently studying tax credits and deductions it could seek in the next economic relief bill. Negotiations on that legislation are expected to begin shortly.
Under consideration are a tax credit to encourage consumers to engage in tourism, a tax deduction for business meals and entertainment and the renewal of a business expensing provision that will sunset without congressional action at the end of 2022.
Brady told McClatchy that he supports extending the measure that allows businesses to immediately write off the full cost of improvements, also known as business expensing.
“We should also expand expensing to include property and structures related to COVID-19 safe and healthy workplaces and make permanent the expensing provision in the [Tax Cuts and Jobs Act] to provide certainty for long-term non-residential investment,” he said.
Business groups such as the U.S. Chamber of Commerce and the National Retail Federation told McClatchy their top priority is to get cash in the hands of businesses that have been negatively affected by coronavirus.
Neil Bradley, chief policy officer at the Chamber, said that some businesses have low personal protective equipment costs and are in greater need of liquidity that can help bridge revenue gaps associated with coronavirus.
“It’s better than not doing anything, but it doesn’t really address the underlying problems of the business,” he said of the proposed tax break.
The Chamber of Commerce is lobbying lawmakers from both parties to give businesses the ability to receive business tax credits now that would ordinarily be due to them later.
The retail group’s Rachelle Bernstein said that the organization is also seeking to help businesses with liquidity now so that they can pay for the significant, additional COVID-19 costs they are incurring and purchase inventory for the holiday season, when retail makes most of its money.
“Right now we are really focused on what would provide for liquidity that’s needed for our businesses to make the expenses they need, to be able to get reopened safely and to bring the consumer back in and have the product they need for the consumer to purchase,” she said.
Several ideas are likely to be considered in July by Congress and the White House. The Senate is due to leave Thursday and return July 20.
“The White House is studying and prioritizing pro-growth economic measures that incentivize employers and our great American workforce to return to the labor market,” White House deputy press secretary Judd Deere said in a statement.
Economists are split over the value of such a break. “Refundable payroll tax credits that are used for PPE or other protections for consumers and workers seems sensible to me,” said Josh Bivens, director of research at the Economic Policy Institute, a liberal research group.
He suggested limiting any break based on how many workers a business employs, “to reduce how gameable it is,” and combining it with other stimulus, notably extending the $600 unemployment benefit that is set to expire at the end of July.
At the nonpartisan Urban-Brookings Tax Policy Center, senior fellow Howard Gleckman was wary of the idea of such credits.
“Once a legislator starts making a list, trouble follows. If the purpose is to protect employees and customers, why distinguish between small business and others? Don’t we want customers of Applebees to be just as safe as customers of Mom’s cafe?” he asked.