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1 The Budgetary Effects of the Employee Retention Tax Credit during the Coronavirus Pandemic 1 (July 16, 2021)

handle is hein.congrec/cboefemtx0001 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Phillip L. Swagel, Director U.S. Congress Washington, DC 20515 July 16, 2021 Honorable Kyrsten Sinema United States Senate Washington, DC 20510 Re: The Budgetary Effects of the Employee Retention Tax Credit During the Coronavirus Pandemic Dear Senator: As you requested, I am writing to provide information about the budgetary effects of the employee retention tax credit. Original Cost Estimates The Coronavirus Aid, Relief, and the Economic Security (CARES) Act established a tax credit for wages paid from March 13, 2020, through December 31, 2020, by employers that were subject to a governmental order restricting their businesses as a result of the coronavirus pandemic or that had experienced a significant decline in revenue. The tax credit equals 50 percent of qualified wages plus the employer's contributions for health insurance premiums, subject to specific limits, and it is allowed against the employer's share of payroll taxes. Near the time of enactment, CBO and the staff of the Joint Committee on Taxation (JCT) estimated that the provision would increase federal deficits by $55 billion over fiscal years 2020 to 2031.' Subsequent legislation-the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act of 2021-expanded the credit and extended 1. That cost was expected to be incurred mostly as a reduction in revenues, but also in part as an increase in direct spending. See Congressional Budget Office, letter to the Honorable Mike Enzi providing a preliminary estimate of the effects of H.R. 748, the CARES Act, Public Law 116-136, revised, with corrections to the revenue effect of the Employee Retention Credit and to the modification of a limitation on losses for taxpayers other than corporations (April 27, 2020). www.cbo.aov/publication/56334. www.cbo.gov

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