Tag: closed business

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The Big Jobs Squeeze of 2020

By Eric Fruits, Ph.D.

This is a terrible time to own and run a business. While the past three months have been dismal, the next few months could be even worse. Worse because no one knows what’s coming next. Even though many businesses have been allowed to reopen, many others have hesitated out of fear for the health of themselves, their employees, and their customers—and the fear of overbearing regulators and overeager plaintiff attorneys. No one should be surprised that so many businesses have decided to close permanently.

Reopening “the economy,” or even a single business, is a tough decision that can’t be boiled down to a FOX News or MSNBC talking point. It’s not as simple as, “We gotta open now!” or “You’re gonna kill grandma!” The world is much more complicated; and the coronavirus spread is so complex and uncertain that, put simply, no one knows what’s next. Anyone who says the science is settled one way or the other is gaslighting themselves and others.

Aside from the health and liability risks, CARES Act policies designed to protect family finances have made it especially challenging for firms to get back to work. Businesses that want to reopen have found it difficult to bring back their furloughed employees. Those employees who have successfully obtained unemployment benefits have also received a $600-a-week bonus provided by the CARES Act. When public health risks point to a policy of keeping people away from work, a government-funded bonus provides a financial incentive to stay away from work. That’s good policy, but there are side effects.

For millions of out-of-work Americans, the bonus has been a lifeline, allowing them to safely distance themselves without falling into destitution. For others, however, the bonus has been a windfall. For example, Portland Public Schools carefully structured its furlough program so that nearly every furloughed employee made more money being furloughed than they would if they continued working full time. Research from University of Chicago economists estimates 68% of unemployed workers eligible for CARES Act benefits would have lower incomes if they return to work.

This isn’t just theory or wild-brained economics estimates. Portland restaurateur Kurt Huffman has said he doesn’t plan on opening his restaurants any sooner than August 1, because the bonus payments have made it so difficult to bring back and hire employees. Kyle Freres, vice president of operations at Freres Lumber, says his company has 30 job openings that cannot be filled because of the pandemic and the CARES Act’s incentives to stay away from work. At Cascade Policy Institute, an intern turned down our summer job offer in part because she would make more money collecting unemployment.

The CARES Act’s $600-a-week bonus runs out at the end of July, and Congress is considering an extension to the program. Senate Majority Leader Mitch McConnell predicted, “If there’s another [stimulus package], it will come together in July.” Some members want the extra benefits to expire as scheduled. Others want to extend the current provisions through the end of the year. A proposal from Sen. Rob Portman (R-Ohio) would pay people who return to work an extra $450-a-week “back-to-work” bonus.

Hoover Institution economist John Cochrane suggests Congress tighten restrictions on who qualifies for bonus payments. For example, if a laid-off employee is called back by her former employer, then the bonus payments dry up. Or, if a county or metro area has a sufficient number of job vacancies, then workers in that area would no longer qualify for bonus payments. Proposals such as these allow flexibility across regions roughly in line with how well those regions are recovering.

Every policy has its problems or unintended consequences. That’s a big reason why we should limit the number of government regulations, policies, and programs we have in place. It’s like squeezing Jello. Squeeze it one place, and it squirts out another. A lifeline to help out-of-work employees can squeeze the life out of struggling employers. Any unemployment benefits must be tied to incentives to return to work safely as soon as possible.

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Tax Relief Can Slow the Spread of COVID-19 Financial Panic

By Eric Fruits, Ph.D.

The coronavirus is already taking a toll on our pocketbooks. Families are facing layoffs. Businesses are closing—and some may never reopen. Our elected leaders are urging everyone to do their fair share. Property owners have been asked to give tenants a six-month grace period to pay their rents. They’re considering forcing small businesses to provide paid sick leave to their employees. That means property owners won’t have the money they need to pay their mortgages and property taxes. That means small businesses will be spending money on workers who aren’t working.

Oregon politicians have been silent on how government is going to do its fair share to relieve the burden of COVID-19. They need to do more than just promise more facemasks and testing kits.

People need cash, but they don’t want handouts. And that’s where state and local governments can help out. Now.

For years, Oregon politicians have been loading new and higher taxes on its people and businesses. They had a permanent prosperity mindset. They believed employment would always increase, wages would always grow, and the stock market would always rise. Year after year, more and more taxes were added—just the price of a latte a week, they’d tell us. But, it all adds up. Property taxes, gas taxes, business taxes, and payroll taxes are just a few of the nibbles that over time have added up to a big bite out of our wallets. It’s time to let us keep some of that money until this crisis passes.

First, the state and local governments must give everyone an automatic six-month extension to file—and pay—their income taxes. Families need that money more than the government.

Next, the Kicker. Oregonians are due for $1.5 billion in Kicker refunds this year. That’s about $350 for the average taxpayer. Instead of waiting to get a credit on this year’s tax return, the state should send out Kicker checks. That’s what the state used to do. Plus, it’s not new spending, it’s money that’s already owed to taxpayers.

As an emergency measure, the governor should order the Oregon Department of Revenue to delay implementation of the Corporate Activities Tax (CAT) for another year. The CAT’s implementation has been chaotic, and many businesses don’t know if they owe money or how much they owe. The first of the quarterly CAT payments are due April 30. Businesses struggling to survive the virus outbreak can’t afford to spend the time and money it takes to figure out this complex and uncertain tax.

Portland should suspend the Clean Energy Fund’s gross receipts tax on retailers. Portlanders need cash on hand now and businesses need to stay solvent. Solar panels can wait until the pandemic passes.

Now’s the time for Portland to kill its Arts Tax and stop its collection efforts. In this time of worry, the city can bring a small piece of relief to the region by ending its hated Arts Tax. The first mayoral candidate who promises to get rid of the Arts Tax has a good shot at being Portland’s next mayor.

Metro should pull its May 2020 ballot measure that would impose two new income taxes on families and businesses. Portland Public Schools should stop the clock on its $1.2 billion school construction bond. Multnomah County should realize the folly in raising taxes for free preschool when students across the state are on a near-permanent Spring Break.

The age of permanent prosperity has come to a quick and unexpected end. Who knows when prosperity will return? Our leaders need to adopt a crisis mentality and work hard to make sure citizens stay solvent and businesses survive. Providing tax relief isn’t “austerity;” it’s action. Action that informs voters that the politicians they vote for care about them when leadership is needed most.

Government is rarely the solution to a crisis, but it can take concrete steps to stop today’s health care scare from turning into a financial panic.

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

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