CORONAVIRUS

Second stimulus check: $4,000 tax credit likelier? What Trump says about scheme

An 'Explore America' tax-credit scheme would bid to kick-start US tourism by allowing people in the country to claim back money on domestic travel.

$4,000 tax credit: what Trump says about coronavirus stimulus scheme
SAUL LOEB / AFP

A travel tax credit could feature in the United States’ next coronavirus stimulus package, as the country bids to boost a tourism industry that was among the sectors most affected by a pandemic that has officially left the US in a recession.

Indeed, travel-related businesses are reported to have accounted for almost 40% of the nearly 21 million jobs lost in America in April.

‘Explore America’: up to $4,000 back from US travel expenses

Under the proposed ‘Explore America’ scheme, households in the US could deduct 50% of their domestic-travel expenses on things such as flights, hotels and meals from their tax bill, up to a maximum of $4,000.

"Qualified travel expenses should include any expense over $50 that is incurred while traveling away from home in the US, with explicit reference to the expense of meals, lodging, recreation, transportation, amusement or entertainment, business meetings or events, and gasoline," says the US Travel Association (USTA).

Lasting until the end of 2021, such a credit would "encourage domestic business and leisure travelers to travel" and "reduce the time it takes to get to full recovery" in the industry, the USTA adds.

What has President Trump said about ‘Explore America’?

US President Donald Trump spoke favorably of the idea of a travel tax credit when he put it to restaurant executives and industry leaders at a White House round table in May, describing it as a "big deal".

"Create an 'Explore America' - that’s 'Explore', right? Explore America tax credit that Americans can use for domestic travel, including visits to restaurants. That’s a big deal," Trump said.

The USTA has welcomed the president's stance, declaring: "An 'Explore America' tax credit and campaign will do wonders to put America back on the path to prosperity. We applaud the president's support."

Travel tax credit likelier than second stimulus check?

The travel tax credit may offer the potential to significantly boost a household's finances, but people in the US are also eager to know whether future Covid-19 relief legislation will bring them another direct cash injection, having seen March's CARES Act provide millions of eligible Americans with stimulus checks of up to $1,200.

In an appearance at a Senate hearing this month, Treasury Secretary Steve Mnuchin said that the US government is open to sending out a second batch of stimulus checks, commenting: "I think we're going to seriously look at whether we want to do more direct money to stimulate the economy."

This week, meanwhile, Trump responded to questions about the possibility of another round of checks, officially known as Economic Impact Payments, by saying, per CNET: "I think we're working on something that's going to be very dramatic, very good.”

However, financial specialists Forbes note that a tax-credit scheme aimed at kick-starting the tourism industry would be more in line with the president's apparent preference for a stimulus package which, with the jobless rate in the US currently at 13.3%, concentrates on promoting employment.

The Trump administration appears most focused on stimulating the economy through job growth,” Forbes explains. “This includes a focus on manufacturing jobs, infrastructure spending, a payroll tax credit, a return-to-work bonus and other related incentives.”

"Less rescue and more incentive", says White House adviser

This ties in with comments made by White House trade adviser Peter Navarro, who told CNN last week that Trump is eyeing a spend of “at least $2tn” on legislation that specifically aims to create jobs by strengthening American manufacturing.

"The only way to fully rebuild the economy […] is to significantly expand and strengthen our manufacturing base,” Navarro said. "Put simply, we need to create more manufacturing jobs. Manufacturing jobs not only provide good wages but also create more jobs both up and downstream through multiplier effects." 

Another presidential adviser, US National Economic Council Director Larry Kudlow, has also signaled that re-employing Americans will be the priority, indicating that initiatives such as a return-to-work bonus should take precedence over direct financial assistance. "I think we need less rescue and more incentive," he told Fox Business this month.

Live coverage of the coronavirus crisis

As of Saturday evening CEST, the coronavirus pandemic had led to 2,228,368 cases and 119,241 deaths in the United States, making it by far the worst-hit country in the world.

You can follow live, America-focused coverage of the Covid-19 crisis with our US rolling feed.