A “phase four” stimulus package could be introduced and voted on in the House of Representatives as early as this week, according to Democratic leadership. We don’t yet know exactly what a new stimulus plan from the House might look like, or what provisions Republican congressional leaders and the Trump administration will insist on including, but here’s a rundown of what could be in the next stimulus package, the price tag of which could certainly rival the massive $2.2 trillion CARES Act.

House Democrats want a “phase four” stimulus package ASAP

To be clear, we don’t have any specifics at this point regarding what Democratic leadership might want included in the next stimulus package. But, House Majority Leader Steny Hoyer said that a vote on a bill could come as soon as this week, and here’s what House Speaker Nancy Pelosi has previously indicated could be in it:  Man with handful of money giving a thumbs up.

IMAGE SOURCE: GETTY IMAGES.

  • Aid for states and local governments: Many states and local governments are facing massive budget shortfalls as a result of lost revenue and coronavirus-related spending, and could have trouble funding schools, emergency services, and other essential operations without financial help from the federal government. This is likely to be the largest item in the next stimulus package, with reports indicating as much as $1 trillion in funding just for this purpose.
  • Testing funds: Virtually every public health expert has agreed that COVID-19 testing capabilities are a crucial part of any larger-scale reopening plan. So, it’s likely that the next stimulus package could include billions in funding for testing and contact tracing.
  • More stimulus checks: Any massive stimulus package would likely contain additional direct payments, or “stimulus checks,” for American households. This is a popular idea among both parties, with both congressional Democrats and Treasury Secretary Steven Mnuchin mentioning them as potential components of the next stimulus package.
  • Other funding possibilities: There are several other components that Democratic leaders have mentioned. For example, the next stimulus package could contain funding to help support the U.S. Postal Service, additional unemployment funding, and more money for Medicare.

The White House has some different ideas

The Trump administration isn’t necessarily opposed to any of the things House Democrats will reportedly include in the next stimulus effort. And the massive CARES Act certainly included provisions from both sides of the aisle.  

However, the administration reportedly wants to see tax cuts for businesses, individuals, and investors included in whatever stimulus package comes next. Just a few possibilities for what could be proposed:

  • Payroll tax cuts: The CARES Act allows employers to defer their share of payroll taxes for 2020 if they choose to do so but didn’t do anything to reduce payroll taxes. President Trump reportedly wants to reduce or even suspend payroll taxes for employees in order to give workers more money in each of their paychecks.
  • Corporate spending: One proposal that has been mentioned is an expanded tax break for corporate spending on meals and entertainment. This would give businesses of all sizes a potential tax cut and would also encourage spending in businesses that have been especially hard-hit in the pandemic (restaurants and entertainment venues).
  • Capital gains taxes: In a May 5 Tweet, the president mentioned the possible elimination of capital gains taxes. This is perhaps the least likely of these three tax breaks to gain significant political traction, as a capital gains tax holiday would be perceived as a benefit primarily for the rich.
  • Extended tax deadline: The 2019 tax deadline has been extended until July 15, but there’s a significant chance it could be extended even further. And this may not even need to be included in a stimulus bill, as the Treasury has the authority to push the deadline to Oct. 15 if it chooses to do so.

The administration may be in wait-and-see mode

While President Trump has mentioned the need for tax breaks in whatever stimulus action is taken next, the administration doesn’t seem to share the same sense of urgency as Democratic leaders. White House economic advisor Kevin Hassett recently said that a fourth stimulus package isn’t needed right now, calling such an effort “premature.”  

Hassett suggested that it might be more prudent to watch the trajectory of the COVID-19 infection numbers and how the U.S. economy responds to states starting to reopen before deciding what the next steps should be. Treasury Secretary Steven Mnuchin, who played a key role in negotiating the CARES Act, also said that the administration wanted to be cautious before spending trillions more in taxpayer money.

A very fluid situation

The bottom line is that a phase four stimulus package certainly looks likely, but the contents and timing of such an effort are anyone’s guess at this point. We should get more clarification on the proposals from both sides of the aisle in the coming days and weeks, but for now there’s nothing set in stone.

The Motley Fool has a disclosure policy.

Reference: https://www.fool.com/investing/2020/05/12/is-another-2-trillion-stimulus-package-coming-soon.aspx

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