US chamber for payroll tax break, quick loans to offset coronavirus impact

The U.S. Chamber of Commerce is advocating a raft of swift relief measures including a three-month freeze on employers’ payment of payroll taxes and quick disbursement of loans to businesses to mitigate coronavirus-triggered job losses, and keep the economy going.

In a letter addressed to President Donald Trump and Congressional leaders, the Washington-based ace business body appreciates the recent Administration steps but says more aggressive action is needed to ensure American businesses of all sizes can mitigate the potentially devastating economic effects from the  coronavirus outbreak.

“We are pleased that Congress has taken some steps in the right direction. Let’s keep going. No business or family should go bankrupt from the temporary but significant disruption caused by the coronavirus,” says Tom Donohue, CEO of the U.S. Chamber of Commerce.

The Chamber’s call follows Federal Reserves decision to slash interest rate to zero and injection of half a trillion dollars into the market to shore up liquidity. Trump has also allocated an additional $50 billion for Small Business Administration to aid entrepreneurs and companies hurt as a result of COVID-19 spread in the country.

Public fear and efforts to contain the spread of the deadly virus have led to a halt in the economic momentum with shuttered down restaurants, schools, colleges, clubs, bars and several public places. After a brief respite, stocks against dipped on Monday with the Dow Jones Industrial Average falling nearly 3,000 points, or 12.94%, at the close of the day.

COVID-19 Outbreak Cases in the United States (Density).svg Image: Wikimedia Commons

The Chamber says more steps be taken to ensure that coronavirus effect does not weigh on the economy for longer time. 

“Similar to major natural disasters of the past, the coronavirus will have a significant economic impact—and we must act accordingly. We must not let this public health emergency leave a lasting, permanent impact on our economy, small businesses, and American workers. We urge Congress and the president to move swiftly to enact these three solutions to help American businesses respond to the virus so they can continue to support their workers and serve their communities.”

The chamber is lobbying for three major steps:

1. Legislation canceling payment of all payroll taxes paid by employers for the months of March, April, and May. Employers send more than $100 billion to the federal government monthly in the form of Social Security, Medicare, and unemployment taxes. Collectively, these taxes add just over 15% to the cost of employing the average employee. Temporary relief from these taxes would give businesses more breathing room and operating capital to keep paying their employees and avoid layoffs.

2. Legislation expanding and streamlining loan programs for small businesses experiencing revenue loss from coronavirus. The Small Business Administration (SBA) disaster loan program for those impacted by the coronavirus should be immediately made available nationwide, eliminating the complex and time-consuming local certification processes. The SBA also should be given the authority to streamline its disaster-loan approval process for amounts below $350,000 in order to provide emergency capital more quickly. This should include removing the requirement that small businesses demonstrate that they cannot access credit elsewhere before turning to the SBA. These loans may be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the virus’s impact. The interest rate is 3.75% for small businesses and 2.75% for non-profits.

3. Legislation enabling the creation of credit facilities to provide loans and loan guarantees to employers with more than 500 employees experiencing significant revenue loss from the coronavirus. Specifically, legislation should expand the use of the Federal Reserve Discount Window through the easing of restrictions of Section 13-3 of the Federal Reserve Act. The U.S. Treasury, the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation should also work in combination with banks to establish a system of credit facilities to provide loans and loan guarantees that can be accessed by businesses with more than 500 employees to address disruptions from the coronavirus.

Taken together these three steps, in addition to other actions recommended by the U.S. Chamber and those already initiated by the federal government, will ensure that businesses have increased liquidity, access to financing, and the ability to pay their employees as they weather the temporary loss in revenue from the virus , the Chamber said releasing the statement on Monday.

The biggest issue facing businesses now is a lack of revenue due to a sudden and sharp drop in demand. Without assistance, that likely will force some businesses to choose among difficult options: pay workers less, not at all, or shut down altogether, it adds.