A second stimulus check or a travel tax credit? What experts are saying about possible economic revitalization efforts
photo by: AP File Photo
After a round of federal stimulus checks granted qualifying U.S. citizens money to help pay for living expenses and boost the economy, Americans may be wondering if a second round of payment could be on the way as COVID-19 continues to spread.
On Monday, President Donald Trump told a reporter for Scripps’ television stations, “We will be doing another stimulus package. It’ll be very good. It’ll be very generous.”
The president, however, did not say how much the stimulus would be. Instead, he noted that it could be announced over the next couple of weeks.
The Journal-World spoke to economic experts and health and government leaders in Lawrence and across the United States about possible economic revitalization efforts such as a second stimulus check or a travel tax credit.
Donna Ginther, a professor of economics at the University of Kansas, said she believes with a second wave of the virus looming, another round of money is necessary.
“There’s lots of economic hardship being experienced right now. It’s affected all sectors of the economy. Unemployment claims are still really high,” said Ginther, who is also the director of KU’s Institute for Policy & Social Research.
Ginther said the economy will not see a V-shaped recovery, but rather one in the shape of Nike’s swoosh logo: a sharp downturn and then a gradual return to normal.
“We’ve tried six weeks of returning to normal and now we’re starting to see the virus coming back again,” she said. “We are going to need additional government support.”
Possible economic revitalization efforts
A second stimulus package has already passed the U.S. House of Representatives, but has stalled in the Senate in recent weeks.
The Health and Economic Recovery Omnibus Emergency Solutions Act (the HEROES Act) is a $3 trillion stimulus bill that includes a second stimulus check of up to $1,200 for qualifying individuals and each dependent up to a maximum of three. It would extend the stimulus money to 17- and 18-year-olds — who will be eligible as dependents — as well as college students who are claimed as dependents on their parents’ taxes. American citizens who are married to immigrants without a Social Security number would also qualify.
Still, the GOP is wary of the idea of a second stimulus check, the Associated Press reported Tuesday. Treasury Secretary Steven Mnuchin, the lead White House negotiator on the first package, said, “We’re going to take our time and make sure that we’re thoughtful. Whatever we do, it will be much more targeted, much more focused on jobs.”
Another option would be a travel tax credit, which Trump discussed in May at a White House roundtable.
The U.S. Travel Association is calling for an “Explore America” temporary travel tax credit worth 50% of qualified travel expenses incurred in the United States between the date of enactment and Dec. 31, 2021, up to a maximum credit of $4,000 per household. Expenses must be over $50 and may include meals, lodging, recreation, transportation, entertainment, business meetings or events and gasoline.
“[The] Explore America tax credit that Americans can use for domestic travel, including visits to restaurants. That’s a big deal,” Trump said at the White House roundtable.
In addition, Republican Sen. Martha McSally, of Arizona, unveiled a proposal on Monday called the American Tax Rebate and Incentive Program Act, or the American TRIP Act. It offers a tax credit of $4,000 per adult to take a vacation 50 miles or more from home. For couples, that tax credit increases to $8,000, as well as $500 for each qualifying child. The tax credit in the TRIP Act is on 100% of expenses. If passed, it would be retroactive to the start of the year and last until the end of 2022.
What experts are saying
Experts and leaders in the fields of economics, government and health were largely in favor of a second round of stimulus checks, but consternation was expressed about how a travel tax credit might affect the ongoing COVID-19 health crisis.
Ginther said that while she believes the government should offer additional economic support, a broad-based second stimulus check is not necessarily needed. Rather — should there be a second round of money — it would be beneficial to target it to people who have lost their jobs either completely or for an extended period of time.
Ginther’s top priorities in terms of economic revitalization efforts include expanding unemployment benefits and increasing support for state and local governments, which Ginther said are at the forefront of addressing the COVID-19 crisis.
Joe Gentry, a former 15-year economics professor at Alpena Community College in Alpena, Mich., agreed that state bailout dollars are needed, as well as an extension of unemployment benefits. But Gentry said people need to be given an incentive to return to work. Receiving higher earnings under unemployment benefits than what people made in their jobs will not create that incentive, he said.
Gentry said he would support a second stimulus check, noting that “even though we’re showing signs of economic improvement … there are households that are not still able to meet their regular budgets” and small businesses are still “severely” struggling.
But not all leaders and experts the Journal-World spoke to were in favor of a second round of stimulus checks.
Michael Hough, a Republican state senator for Maryland, does not believe a second round of stimulus checks is necessary, noting that the United States is already in extreme debt and that adding more wouldn’t be helpful.
“A thousand-dollar check doesn’t make up for a $22 trillion economy being shut down for a month or two,” he said.
The first stimulus checks were given out when everything was shut down, Hough noted, but now that things are reopening, “We should be adding jobs and money should be coming back into the economy on its own.”
Hough and Gentry both expressed interest in a travel tax credit, noting that it would likely be beneficial to their local economies in Frederick, Md., and northern Michigan, respectively.
“We depend on tourism here and it is pretty impactful,” Gentry said. “So I would say, yeah, a $4,000 tax credit would probably benefit us.”
Gentry hopes that if a travel tax credit materializes, it is well defined so that it is more focused on tourism than travel, and that it could not be used for routine activities.
But other experts feared that a travel tax credit could increase the number of COVID-19 cases in the country.
Carrie Brainard, the public information officer for the Mid-Ohio Valley Health Department in Parkersburg, W. Va., expressed apprehension at the idea of a travel tax credit at this time.
“From a health perspective, the ‘Explore America’ travel tax credit would not be a good idea,” Brainard wrote in an email.
She noted that the health department has already seen examples of people disregarding warnings for places with hot spots of COVID-19, like Myrtle Beach, S.C., and that the health department has identified pockets of outbreaks in several counties from people who traveled to these areas.
Brainard said that in the event of a second round of stimulus checks, “I would hope that they would use it to pay off debt and/or shop locally at the businesses that have been heavily impacted by the shutdown.”
Ginther expressed similar anxiety at the idea of a travel tax credit in light of the ongoing health crisis. While the travel and tourism industry is being hit hard, Ginther said that “health policy is really economic policy.”
“I think the thing that will help the travel industry the most is getting the virus under control,” she added.
Michael Davidson, executive director of Explore Lawrence, the travel and tourism agency in Douglas County, said that in terms of the tourism industry, he’s not sure that either a second stimulus check or a travel tax credit would be effective.
“If I give you an extra $1,200, will that motivate you to travel? Or are you more concerned about your safety?” he asked. “Until we overcome this fear of travel, I don’t know if the stimulus or the tax credit is going to have any big effect.”
Davidson said that according to a report done in April, Lawrence at that time had lost $12 million worth of business from the cancellation of 21 public events due to COVID-19. Now that Douglas County has been reopening, Davidson said the tourism industry is beginning to see a return in the leisure market — which he defined as people visiting friends or family or going to destination attractions — and in the youth sports sector.
He also said that marketing efforts will likely be shrunk to a 200-mile radius, for while Lawrence has “always been a drive destination,” Davidson said he doesn’t think people will be traveling much farther than 200 miles.
The biggest challenge will be to make visitors feel safe when they travel, Davidson said.
“Will a tax break or a stimulus check help?” he asked. “Not if people aren’t willing to travel.”