Further Coronavirus Relief Uncertain; Executive Actions Taken

The White House’s negotiations with Capitol Hill over a fourth coronavirus economic stimulus package failed last week after three weeks of ultimately fruitless talks.

The failure to make a deal leaves businesses and employees left to survive financially as coronavirus cases rise, and several states roll back orders to reopen businesses, keeping many of them from opening at all. The talks largely broke down over substantial disagreements between the White House and congressional Democrats on funding for state governments, local governments, and public schools, and how much assistance to provide to small businesses.

As it became clear that no deal would be reached last week, the president announced an executive order and several memoranda to federal agencies. These actions were intended to address the economic uncertainty facing renters and homeowners, ease the payroll tax burden on employers, and reauthorize the just-expired federal unemployment benefit provided in the CARES Act. Below is a brief rundown of the relevant aspects of these executive actions, but many of the implementation details remain unknown.

Homeowner Foreclosures and Renter Evictions

The executive order intended to aid renters and homeowners directs the Health and Human Services (HHS) Secretary and the Director of the Centers for Disease Control and Prevention (CDC) to “consider” whether additional measures to prevent evictions are “reasonably necessary” to prevent further spread of COVID-19 and directs the Treasury Secretary and the Secretary of Housing and Urban Development to identify federal funding, if any, available to help renters and homeowners meet their monthly financial obligations. It also directs the Housing Secretary to “promote the ability of renters and homeowners to avoid eviction or foreclosure,” but landlords and lenders remain free to initiate eviction or foreclosure proceedings.

Payroll Tax Deferment

The payroll tax is paid by both employers and employees, and the money collected goes toward Social Security. The memorandum on the payroll tax allows the Treasury Department to permit employers to defer payment of certain payroll taxes from September 1 until the end of this year. The deferment would apply only to certain payroll taxes and only to workers earning less than $104,000 per year, or less than $2,000 per week. Additionally, because Congress must act to change existing tax law, the memorandum simply directs the Treasury Department to delay its collection of the tax from employers. The memorandum allows employers to choose whether to continue to collect the tax from employees and just hold on to it until Treasury’s next steps become clear.

The memorandum also instructs the Treasury Secretary to “explore avenues, including legislation, to eliminate the obligation.” If this provision of the memorandum is effectuated, ostensibly via Congressional action, the deferred payroll tax would not have to be repaid. However, as it stands, because the memorandum does not repeal these taxes, qualifying employers and employees will have to pay the taxes eventually. As noted above, employers could choose to keep collecting employees’ payroll taxes, making it unclear how much this change will benefit eligible employees.

New Unemployment Benefit

Finally, the president issued a memorandum establishing a new unemployment benefit intended to address the fact that the unemployment benefits in the CARES Act expired July 31. According to the memorandum, the payments would be up to $400 per week if states agree to cover 25 percent, or $100 per person per week. For unemployed people living in a given state to be eligible for this benefit, the state must agree to enter into a financial arrangement with the federal government.

The federal share of the unemployment benefit is only available to people in states that opt to participate financially. To cover the cost of the federal portion ($300 per person per week) of these unemployment payments, the president is taking $44 billion from the Federal Emergency Management Agency (FEMA). How long these payments would last is unclear because it depends how many states participate in the program. The more states participate, the faster the allocated funds will be exhausted. This new unemployment benefit is supposed to be effectuated for unemployment claimants eligible as of the week ending August 1.

In addition to potential legal challenges to these executive actions, there are also questions about their implementation. PIA National will be watching for and responding to regulatory actions intended to support the implementation of these programs.

Going forward

Without supporting legislation, these efforts via executive action fall far short of what businesses need to stay afloat. PIA National has been actively advocating for more funding and reforms to the Paycheck Protection Program, for liability protections for businesses trying to bring employees back to work, and for the creation of a COVID-19 Recovery Fund to help businesses survive in the wake of state-mandated shutdown orders.

The White House and Congressional leaders have said they may try to negotiate again in August, and PIA National will continue to urge action on relief for businesses during this unprecedented and difficult time.