Congress Should Reject Pelosi's Partisan "HEROES Act"

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Posted by Alex Hendrie on Tuesday, September 29th, 2020, 2:56 PM PERMALINK

House Speaker Nancy Pelosi and Congressional Democrats have re-released their partisan “Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act." 

This legislation would use the COVID-19 pandemic as an excuse to spend trillions of dollars on liberal priorities like bailing out state and local governments. It would do nothing to assist Americans that have lost their employer provided healthcare and would pave the way for an expansion of government healthcare. It would also suspend the cap on state and local taxes (SALT), a policy that does nothing to help the middle class.

Lawmakers should reject the HEROES Act and instead focus on more targeted solutions to help American families and businesses through the Coronavirus pandemic.

$500 billion state and local government bailout

The HEROES Act contains $238 billion in bailouts to states, $179 billion in bailouts to local governments, and $19 billion in bailouts to tribal and territory governments.

Pelosi is pushing this funding through despite the fact that states have already received funding to offset Coronavirus-related costs, including money for hospitals in both relief packages.

Federal bailouts in times of crisis has historically led to expansions in state spending, creating a moral hazard and disincentvizing decision-makers from being prudent stewards of taxpayer resources. Following a $20 billion federal bailout for state budgets after a market downturn in 2003, state spending rose by 33 percent in the subsequent five years and state debts increased by 20 percent in the following four years.

Pelosi’s $500 billion blank check to fiscally irresponsible states is the wrong approach and would put taxpayers in fiscally responsible states on the hook for bad decisions in other states. 

Extends $600 Unemployment Program that Will Hinder Economic Recovery

Pelosi is also pushing to extend the $600 supplemental pandemic unemployment program. While American workers should be given assistance, this unemployment program subsidizes welfare over work.

The $600 per week benefit is in addition to existing unemployment insurance, which varies by state, but typically totals 50 percent of previous earnings up to a cap. The combination of these two programs mean that millions of Americans would receive more money from being on unemployment than they would from working. In fact, according to the Heritage Foundation, a job would have to pay more than $62,000 a year to exceed the pandemic unemployment insurance payments.

This is a significant disincentive for Americans to rejoin the workforce, and could lead to a shortage of applicants as five out of every six Americans on UI receive more than they otherwise would in their job, according to the Congressional Budget Office. 

Because of this disincentive, the CBO has predicted that an extension of the $600 supplemental pandemic benefit will reduce economic output and lower employment. In total, the Heritage Foundation estimated that this disincentive to work could increase unemployment by 13.9 million, and reduce GDP by up to $1.49 trillion.

Paves the Way for Expansion of Government Healthcare

The Coronavirus pandemic has caused business closures and a rapid decline in commerce, resulting in millions of job losses. Out-of-work Americans have also lost their employer provided healthcare.

As a result, the number of Americans on government healthcare is beginning to increase. 

Lawmakers should step in and ensure that Americans can keep their private sector healthcare and are not forced onto government healthcare, an outcome that would move us closer toward the Left’s ultimate goal of socialist, single payer healthcare. 

Pelosi’s HEROES act helps pave the way toward this expansion of government in several ways. First, the legislation creates a special enrollment period for Obamacare. Second, the bill fails to include any COBRA subsidy to help Americans keep their employer provided healthcare.

Combined, these two policies will push Americans away from employer provided care and toward expensive, one-size fits all government healthcare.

Rather than forcing Americans onto government healthcare, lawmakers should consider enacting COBRA subsidies to help Americans retain their employer provided care. While it is far from the ideal solution, it is a reasonable, targeted, and temporary policy proposal to help American families.

Employer provided care is extremely popular with the American people with 8 in 10 Americans saying they were satisfied with this care in recent polling. This healthcare provides Americans with vastly more affordable options, choice, and access when compared with government healthcare.

Moving forward, we should be looking to build upon the private healthcare system, not replace it with more government.

Suspends Cap on State and Local Taxes (SALT)

The HEROES act also suspends the cap on state and local taxes (SALT) for 2020.

Rolling back the SALT cap would do nothing to help fight the Coronavirus, nor would it do anything to help the middle class. Instead, it would expand ineffective tax policy that subsidizes high tax, big government states. 

The 2017 Tax Cuts and Jobs Act limited the deduction for state and local taxes (including property taxes and either sales taxes or income taxes) to $10,000. 

Democrats falsely claim this $10,000 cap raised taxes. They say the cap erodes fairness in the tax code leading to double taxation because individuals are now paying federal taxes on income that was already subject to state and local taxes.

This argument misses the mark. The fact is, the majority of Americans are seeing tax cuts. The TCJA reduced taxes for roughly 90 percent of Americans and for taxpayers at every income level through lower rates, the expanded standard deduction, and the doubling of the child tax credit.

The TCJA also raised the income tax thresholds that the Alternative Minimum tax kicked in, meaning that an estimated 4.5 million families are now able to claim $10,000 in SALT deductions, which was previously disallowed by the AMT.  

It is also important to note that the majority of Americans were not deducting state and local taxes before the cap and are therefore unaffected by the change to the deduction.

This policy should be rejected. Rather than repealing or rolling back the SALT cap, lawmakers should repeal the SALT deduction entirely as part of legislation that offers broad based tax reduction for American families. 

Photo Credit: Gage Skidmore

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