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Stimulus deal will include payroll tax holiday for small business

Stimulus deal will include payroll tax holiday for small business
© Greg Nash

Senate negotiators have agreed to provide a payroll tax holiday for small businesses as they hope to complete the tax-related portion of the fast-growing stimulus package Saturday afternoon.

“We’re going to try to finish up the tax stuff up today,” said National Economic Council Director Larry KudlowLarry KudlowMORE while heading into a meeting with Senate negotiators Saturday morning. Small businesses are “going to get a payroll tax holiday.”

As a result of this and other concessions, the stimulus plan is now expected to cost $1.3 trillion to $1.4 trillion, but that number could grow further as both sides race to add major benefits, such as tens of billions of dollars in emergency aid to states and an expansion of Social Security benefits. 

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Kudlow initially estimated that the total package would cost about 10 percent of U.S. gross domestic product, which would be more than $2 trillion; however, he and White House Legislative Affairs Director Eric Ueland later revised that estimate to $1.3 trillion or $1.4 trillion.

The payroll tax compromise strikes a balance between President TrumpDonald John TrumpPennsylvania Supreme Court strikes down GOP bid to stop election certification Biden looks to career officials to restore trust, morale in government agencies Sunday shows preview: US health officials brace for post-holiday COVID-19 surge MORE's request earlier this month to zero out the payroll tax for employers and employees through the election and Democrats' staunch opposition to the idea.

The Senate Republican stimulus plan released Thursday afternoon proposed letting employers and self-employed individuals defer payments on the employer share of Social Security taxes beyond the election, with half being due by Dec. 31, 2021, and the other half by Dec. 31, 2022.

Democrats warned earlier this month that they would block any effort to cut payroll taxes.

Sen. Ron WydenRonald (Ron) Lee WydenTwo more parting shots from Trump aimed squarely at disabled workers On The Money: Push for student loan forgiveness puts Biden in tight spot | Trump is wild card as shutdown fears grow | Mnuchin asks Fed to return 5 billion in unspent COVID emergency funds Grassley, Wyden criticize Treasury guidance concerning PPP loans MORE (Ore.), the senior Democrat on the Senate Finance Committee, warned earlier this month that cutting payroll taxes would be a “huge mistake” that would “amount to hundreds of billions of dollars in tax cuts for big corporations.”

Limiting the benefit to small businesses would ameliorate Democrats' criticism that the GOP plan is too tilted to big corporations.

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The Senate GOP plan also includes $208 billion in loans for distressed industries, including $50 billion for U.S. passenger airlines and $8 billion for air cargo carriers. 

The cost of the package is fast ballooning as both sides are racing to wrap up talks on the bill Saturday in time for a procedural vote scheduled for Sunday.

Negotiators on Friday tentatively agreed to slightly decrease the size of rebates sent to middle-income adults earning up to $75,000 and couples earning up to $150,000 from $1,200 to around $1,000, bringing the total cost of that item to $250 billion instead of $300 billion, according to two persons familiar with the talks.

To secure that centerpiece of Trump’s stimulus proposal, Republicans will agree to a massive increase in unemployment benefits, which would roughly match the amount being spent on rebates, although as of Friday evening, negotiators were still waiting on a budgetary projection from the Congressional Budget Office.

Democrats are also asking for a major infusion of cash to help states that have been hit especially hard by the pandemic, such as New York, and hospitals.

The governors of New York, New Jersey, Connecticut and Pennsylvania wrote a letter to Trump and congressional leaders Friday requesting direct cash assistance of $100 billion “for our region alone.”

U.S. hospitals, meanwhile, are lobbying congressional negotiators for a $100 billion stabilization fund to prepare for what could be a massive influx of patients over the next few weeks.

In White Plains, N.Y., an epicenter of coronavirus infections, at least one hospital is already at full capacity, according to a doctor who works there. 

Researchers at Columbia University estimate that even if infection rates are cut in half, as many as 650,000 people may become infected in the United States over the next two months, The New York Times reported Friday. 

Jordain Carney contributed.

Updated: 11:55 a.m.