The travel industry has been one of many sectors hit hard by the COVID-19 crisis, and it’s easy to see why. Airline travel, staying in hotels, eating in restaurants, going to amusement parks, and other travel related activities are high-risk, and many people are avoiding them at all costs.
Until recently, the primary plan to help this industry has been direct stimulus, through programs like the Paycheck Protection Program (PPP), which is set to expire at the end of this month.
However, instead of simply renewing that program, which both helped businesses stay open and incentivized them keeping staff on payroll, Senator Martha McSally (R-AZ) has introduced the American Tax Rebate and Incentive Program Act, or the “American TRIP Act.”
Essentially, the bill offers a non-refundable tax credit of up to $4,000 for individuals ($8,000 for couples, and an additional $500 for dependent children), to spend money on domestic lodging, travel, or entertainment costs at least 50 miles from their primary residence.
The way Senator McSally would like it presented, her bill gives Americans $4,000 to take a vacation, but the reality is much more complicated. Spoiler alert: it ends up just subsidizing rich people’s vacations, and their trips to their beach houses.
First off, this stimulus doesn’t come in the form of a check in the mail. Since it’s a tax credit, you wouldn’t see the benefits until you went to file your 2020 taxes. So, unless you have $4,000 stowed away to take a vacation in the first place, you’re not able to use it. Considering that 40% of Americans couldn’t even cover a $400 emergency expense, most people aren’t in a position to benefit.
Secondly, since it’s a non-refundable tax credit, it only benefits people who pay more than $0 in federal income tax. Currently, about 44% of Americans don’t earn enough to pay income tax, so this benefit wouldn’t apply at all to almost half the population, and most people who do pay income tax don’t make enough to take advantage of the full $4,000.
Thirdly, the bill goes out of its way to say that it can apply to people who are simply staying at their second residence. While it would not cover their housing cost, it would cover food, beverages, transportation, and entertainment. Essentially, if you’re lucky enough to have a second home and to be working remotely through the crisis, you could relocate there and earn a huge tax break at the end of the year. (The bill would be retroactive to January 1st, 2020, so it would also cut taxes for people who have already moved out of large cities into their vacation homes during the crisis).
In theory, you could say that while most of the working class would not benefit directly from the tax break, many service industry workers rely on the travel industry for employment, so there could be some trickle down benefit. Except that this bill, unlike the PPP, incentivizes reckless behavior that could increase the spread of infection and lengthen the public health emergency. In the long term it could actually worsen the travel industry’s crisis.
If you want to actually help workers and businesses that are struggling during COVID-19, you would ensure the PPP benefits don’t expire, maintain the expanded unemployment benefits, increase hazard pay for essential workers, increase direct payments (it’s worth noting that $4,000 in tax credits is significantly more than the one time $1,200 payment they went out in April), and incentivize safe behaviors that do not exacerbate the public health crisis. Sen. McSally’s plan does none of those things, and is nothing more than another big tax break only for the rich.