Coronavirus stimulus phase 4 could exceed $1 trillion and include negative payroll tax 

Negative payroll tax is wage subsidy government would give to employers who would pass it on to employees

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Congress and the White House are mulling a fourth phase of stimulus, which could exceed a trillion dollars, as they continue to combat the economic recession caused by the coronavirus lockdowns, people familiar with the negotiations tell FOX Business.

Under discussion are two key proposals: A payroll tax holiday, which is an elimination of the payroll tax, and a so-called negative payroll tax, a wage subsidy the government would give to employers who would pass it on to their employees.

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Missouri Sen. Josh Hawley (R) has advocated the concept of a negative payroll tax in his Phase 4 Relief Plan, which would cover 80 percent of payroll costs for most employees. Under the plan, the government would send businesses 80 percent of employees' salaries; the businesses in turn would pay their employees the government money. As part of the legislation, there would be limits to how much money they can receive.

Lawmakers advocating the plan believe the negative payroll tax is similar to the Paycheck Protection Program (PPP), in that it makes it possible for employees to stay on company payrolls.

Hawley’s staffers have been in talks with officials from both the White House and the Treasury Department about the negative payroll tax in the last week, people close to the discussions tell FOX Business.

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A spokesman for Treasury declined to comment. A spokesman from the White House did not respond to a request for comment. A spokeswoman for Hawley declined to comment.

The talks about how to disburse another round of stimulus come amid widespread criticism that PPP is too small to match the economic realities of businesses closing down and millions of people losing their jobs. PPP, a key element of previous coronavirus stimulus bills, has been slammed for distributing funds to public companies, financial firms, and not giving enough money to real small businesses that are desperately in need of the loans to survive the economic crisis.

Proponents of the negative payroll tax believe it is an easier way to funnel money to people who need it because there is less bureaucracy and it eliminates the need to deal with banks that are directly involved with PPP lending. “There’s no application process and it’s broadly available,” one person with knowledge of the proposed legislation tells FOX Business. “It’s similar to PPP but faster, broader and more efficient.”

And the bill may receive bipartisan support. Democrats are said to be warming to the idea. In fact, Rep. Pramila Jayapal (D-Wash.) has proposed a bill that would cover 100 percent of salaries for at least three months. This proposal is similar to policies implemented across Europe and Canada.

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In recent weeks, op-eds advocating the tax cut have appeared in conservative-leaning publications, including the Wall Street Journal opinion page and National Review. And Kevin Hassett, a top White House economic adviser, had been a vocal supporter of payroll tax cuts before he rejoined the administration in March.

The Tax Foundation, which looks at the cost of various costs of tax proposals, is going through Hawley’s proposal and is expected to issue a review of the plan soon. Many GOP legislators rely on the Tax Foundation's guidance before making a decision about whether to support a bill.

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