What might be in phase four of coronavirus stimulus?

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payroll tax coronavirus stimulus phase four
Image source: NikolayFrolochkin @ Pixabay

Many Americans are wondering if phase four of Congress’ coronavirus stimulus efforts will include a second round of checks for the general public. The more lawmakers talk about what they want and don’t want to see, the less and less likely it will be that there will be a second round of coronavirus stimulus checks.

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Payroll tax cut in coronavirus stimulus phase four

President Donald Trump has called for a payroll tax cut to be included in phase four of the government's coronavirus stimulus efforts. Republicans initially seemed uninterested in such a tax cut, but that appears to have changed. The trend within the GOP is to focus less on short-term efforts like a second round of coronavirus stimulus checks and more on sweeping efforts aimed at promoting growth as the economy reopens.

Former Trump Senior Economic Adviser Steve Moore told Fox Business that Republicans are "rallying around" the idea of suspending the payroll tax instead of more government spending. He believes that in the coming weeks, the big debate will be over whether a payroll tax is included in phase four of the coronavirus stimulus efforts or whether it includes a second round of checks or other spending instead.

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The payroll tax funds Medicare and Social Securities. Employees and employers each pay 6.2% for Social Security and 1.45% for Medicare. The highest earners pay another 0.9%. Suspending the tax should provide an incentive for employers to hire more workers because their payroll costs are lower. It would also provide workers an increase in pay.

One concern with suspending the payroll tax is the fact that it cuts funding to Medicare and Social Security. However, Moore said the government could take funds from elsewhere to pay for Medicare and Social Security. There is a chance that accompanies would have to repay the money to Medicare and Social Security later.

Bailout for state, local governments

Democrats have been pushing for bailouts for state and local governments, but Trump said there will be no bailout for "poorly run states."

Democrats want to hand out $500 billion to state governments and perhaps more to local governments to support their pandemic responses. According to Fox News, House Speaker Nancy Pelosi suggested that there be one aid package for state governments and one for local governments. Later she called for $500 billion for states and "a very big figure for counties and municipalities."

Republicans have expressed concerns about such a plan because the bailout funds could be used by blue states that have increased their debt in pensions and other areas. Senate Majority Leader Mitch McConnell said he was open to providing assistance to stay and local governments after previously suggesting that states with huge budget gaps should be able to declare bankruptcy.

He noted that many states have "systemic long-standing challenges," many of which stem from their pension funds and overspending. He said they "are not interested in rescuing badly run states from the mistakes they've made [that are] completely unrelated to the coronavirus."

Trump also said he is open to talking about state and local government aid. However, he also said it should be restricted to COVID-19-related spending and not support long-running budget mismanagement.