Late last week, the forthcoming “Phase III” coronavirus economic stimulus proposal was relabeled as an economic stabilization bill. The name change was a subtle but extremely helpful clarification during a crisis brimming with uncertainties. During abrupt economic shock and disruption, halting economic decline takes precedence to growth, so stabilization must be the priority. Today, after a week-long negotiated travail, the House of Representatives approved the latest version, after passage in the Senate yesterday.
Soon after, the president signed it into law. It has been said that “The Coronavirus Aid, Relief, and Economic Security (CARES) Act (HR 748)” will be the first of perhaps two or three more relief measures to come.
Understanding the Tax Implications
Tax and business executives will need to make similarly crucial clarifications as they parse economic relief measures put forth in the coming days, weeks and months by federal, state and local legislators. These new projected relief laws and economic adjustments will contain temporary fiscal measures and tax provisions specifically designed to improve the weakened economy.
However, while the intention of those provisions will be to deliver tax relief to businesses and individual taxpayers, there will be unintended consequences, many foreseeable and others unexpected — some with short-term impact, but others with longer-range implications. Tax executives will need to understand these regulations, as all fiscal relief generally comes at a higher price down the road.
Although economic relief is now a forgone conclusion, as it is an unquestionable necessity at present, we should not doubt that economic and social stabilization and the subsequent recovery will be very expensive.
Practical Questions to Help You Better Understand the Impacts
I’ll refrain from examining the CARES Act, as a stimulus package, and instead share with you a set of practical questions to ask about economic relief measures to better understand their impacts, positive and negative, to your business, your industry and the larger economy over time.