1 1 (March 20, 2020)

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               Researh Sevice

Targeted Tax Relief for Industries Impacted

by the Coronavirus: Selected Policy Issues

March 20, 2020
One of the policy options being considered to minimize the damage to the U.S. economy from the
domestic spread of the coronavirus is tax relief targeted at industries that have experienced substantial
drops in revenue. To date, growing numbers of cruise lines, airlines, hotels, restaurants, retailers, and
energy producers seem to have been hit the hardest by the economic impact of the virus. Depending on
what happens to the spread of the coronavirus within the United States in coming weeks, other industries
could be similarly affected. The prospect of a prolonged domestic coronavirus outbreak raises concerns
about the solvency of severely affected companies and the job security of their employees. This is a
particular concern for smaller firms. Without lines of credit, many of them may find it difficult to stay in
According to the Congressional Budget Office, fiscal policies for reviving a slumping economy can be
evaluated on the basis of their timing and cost-effectiveness. Timing refers to the period when a fiscal
stimulus would have the greatest effect. Cost-effectiveness refers to the cumulative growth in output and
jobs created by a particular stimulus measure per dollar of budgetary cost. Timely and cost-effective fiscal
stimulus measures are seen as recommended ways to boost an economy at a relatively low revenue cost.
The same considerations may be useful in assessing the potential benefits from proposals to provide
federal tax relief for industries directly affected by the coronavirus pandemic. Lawmakers may want to
focus on proposals that would be likely to deliver the maximum benefit when it is most needed, at a
relatively low revenue cost.

Tax Policy Options
There are several policy options for granting federal tax relief to U.S. industries that have been hit hard by
the coronavirus pandemic. One option is to defer payment of federal employment, income, and excise
taxes by eligible companies for a period that coincides with the time it takes for the coronavirus outbreak
to run its course. Most companies are required to deposit the federal income, Medicare, and Social
Security taxes they withhold from employees' paychecks biweekly or monthly with the U.S. Treasury
Department. At the moment, it is unclear how long it will take for the current outbreak to run its course.

                                                                Congressional Research Service

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