Trump Likely to Reveal Sick Leave, Tax Extension Plan for Virus

(Bloomberg) -- President Donald Trump is expected to take a series of executive actions to deliver economic relief from the coronavirus outbreak, including paid sick leave for hourly workers and extending tax-filing deadlines for small businesses, according to two people familiar with the matter.

Trump is also weighing whether to restrict non-essential travel from Europe to the U.S. as the virus continues to spread on both continents, according to two other people. The restrictions would include some business travel, one of the people said.

The details could still change before Trump addresses the nation at 9 p.m.

The actions come as markets have continued to plunge. The S&P 500 closed Wednesday 19% lower than its February high, with every industry down at least 3.9% on the day.

Trump does not plan to announce any aid for some of the hardest hit sectors of the economy, including airlines, cruise companies and hotels, according two people.

But Trump has decided to provide relief to hourly earners who are either quarantined and unable to work or caring for someone with the virus, people familiar with the matter said.

He plans to provide a tax-filing extension of at least three months for small and medium businesses. He is also considering a three-month tax extension for individuals, the people said. Treasury Secretary Steven Mnuchin said he’s already begun to work on how to fund the tax-filing extension.

Speaking earlier Wednesday at the White House, Trump said he would announce decisions related to the virus in his Oval Office address, including some related to Europe, where cases of the virus are increasing dramatically and deaths are mounting.

The World Health Organization earlier Wednesday declared the outbreak is now a pandemic and urged governments to step up containment efforts as the number of worldwide cases topped 123,000 and deaths exceeded 4,500. The virus has spread particularly rapidly in Europe. In Italy, deaths jumped 31% in a single day, rising to 827 on Wednesday.

The Europe travel restrictions would be limited to the continental countries, excluding the U.K. The measure was recommended by members of the White House coronavirus task force, including Ambassador Deborah Birx; Robert Redfield, director of the Centers for Disease Control and Prevention; and Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases.

Trump is also considering invoking the Stafford Act, a law that unlocks emergency funds to help states and municipalities cope with a disaster. The measure could provide businesses access to funds, including disaster loans from the Small Business Administration to cover losses tied to a disaster declared by the president, the people said.

Senate Democrats lawmakers on Wednesday urged the president in a letter to use the Stafford Act to free up more than $40 billion.

Small businesses in areas covered by a presidential disaster declaration are eligible for federal loans of up to $2 million to provide operating funds until those companies recover. In addition, the coronavirus funding bill enacted earlier this month made small businesses negatively affected by the outbreak eligible for the loans.

Mnuchin, in a meeting Wednesday with Trump and bank executives said: “We’ve catalogued for the president all of his executive authorities, which are quite significant. So there’ll be various proposals.”

“He’ll be rolling out quickly on that front,” Mnuchin said. “And we’re also working with Congress on a bipartisan basis to be able to immediately help small- and medium-sized businesses as well.”

Mnuchin estimated at a House hearing Wednesday that delaying the tax-filing deadline would inject about $200 billion of liquidity into the economy. Business and individual taxpayers can already get automatic six-month extensions to file their tax returns, but they have to pay by the April 15 deadline or face interest and penalties on the late payments. Extending the due date three months is akin of the government extending those taxpayers an interest-free loan for three months.

Trump has also repeatedly mentioned his desire for a payroll tax cut to soften the economic fallout and market plunge. One of the president’s top advisers said they may propose suspending the payroll tax entirely -- a costly move, since the Congressional Budget Office estimates payroll taxes would bring in $1.3 trillion over the 2020 fiscal year.

“Temporarily eliminating the payroll tax for both workers and employers through the end of the year offers one of the clearest paths to a highly effective fiscal stimulus as we head toward that inevitable light at the end of the corona virus tunnel,” Peter Navarro, one of Trump’s trade advisers, said. “If enacted in full and promptly, the positive GDP growth impacts of the payroll tax cut has the potential to completely offset any of the negative growth effects of COVID-19.”

It’s not yet clear whether Trump’s announcement will pacify markets, which were in danger once again of triggering an automatic circuit breaker after freefalling Wednesday. Economists say that lump-sum payments are more helpful than any potential tax reduction or holiday in stimulating activity and keeping Americans spending.

Making direct payments to households is more immediate and effective at encouraging lower- and middle-income earners to continue shopping. It would also help the millions who are unemployed and not receiving a check.

The efficiency of the stimulus will hinge on the details. For example, Democrats are calling for paid sick leave for as many as 14 days -- the period of incubation for the virus. The U.S. remains the only developed country among its peers without such a policy, which enables people to stay home and not spread the disease without risking their livelihoods. Millions of Americans work in positions that do not allow them to work from home.

--With assistance from Justin Sink, Katia Dmitrieva and Laura Davison.

To contact the reporters on this story: Jennifer Jacobs in Washington at jjacobs68@bloomberg.net;Saleha Mohsin in Washington at smohsin2@bloomberg.net;Nick Wadhams in Washington at nwadhams@bloomberg.net;Ryan Beene in Washington at rbeene@bloomberg.net

To contact the editors responsible for this story: Alex Wayne at awayne3@bloomberg.net, Joshua Gallu

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