The coronavirus pandemic has laid much of the American economy on its back—but a bright spot has made the disaster less crippling than it might have been. That is the Paycheck Protection Program, which funneled money back to workers through small businesses.
Four and a half million small businesses took the PPP loans, representing 50 million jobs, Treasury Secretary Steven Mnuchin told Congress in June.
The program was about to run out at the end of June. Congress moved, if somewhat slowly, to extend the deadline for spending PPP funds to the end of the year. There are still loans available, but the program has many flaws. One is that businesses are allowed only one loan, even if their money runs out before their customers return.
One serious issue is that Congress is about to take away much of the money that it gave businesses to hang on to those 50 million jobs. It plans to tax the businesses on the payroll, rent and other expenses that they paid out with the PPP money during the April to December period. The Treasury Department so far has said it will not allow businesses to deduct payroll and other costs as they normally would if PPP money was used. To tax traditionalists, that is considered “double dipping,” but to others, it is the left hand trying to undo the good work of the right hand.
A powerful group of senators takes issue with Mnuchin telling the Treasury Department that taxing the expenses is going to undermine those 50 million workers and 4.5 million businesses. But Treasury has declined to change the tax rule without Congressional action.
“When we developed and passed the Paycheck Protection Program, our intent was clearly to make sure small businesses had the liquidity and the help they needed to get through these difficult times. Unfortunately, Treasury and the IRS interpreted the law in a way that’s preventing businesses from deducting expenses associated with PPP loans. That’s just the opposite of what we intended and should be fixed. This bill will do just that,” Senator Charles Grassley, R-Iowa, said when he introduced the Small Business Expense Protection Act, S 3612, with a bipartisan group of senators.
The original co-sponsors were Senators John Cornyn (R-Texas), Ron Wyden (D-Ore.), Marco Rubio (R-Fla.) and Tom Carper (D-Del.). The bill has picked up 23 sponsors in all. Unfortunately, neither Senator Ron Johnson nor Senator Tammy Baldwin have yet expressed support.
But a small group of senators is exercising power to bottle up the bill, just at a time when employers and their workforces need maximum assurance that they may safely begin to reopen. The additional tax is a new liability that PPP borrowers had not expected to pay.
Unemployment is currently running over 13 percent, the highest the nation has seen since the Great Depression. The economy is poised on a knife’s edge as the nation struggles to get back to its feet. Senators who do not yet see the wisdom of S 3612 may turn out to be responsible for businesses once again having to back off on rehiring and developing their new post-pandemic business plans. If so, it would be a shame.