Claim: Americans could get a $4,000 tax credit for domestic travel as part of the next stimulus check.
It has been three months since Americans began receiving their $1,200 stimulus checks.
Lawmakers are now considering a second round of relief funding for Americans as coronavirus-related restrictions extend into the summer months and states across the country record climbing case numbers.
One proposal, which President Donald Trump briefly referenced during a roundtable discussion with restaurant executives on May 18, would give Americans willing to travel domestically over the next few months a tax credit to do so.
“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 at the meeting, before moving on.
An article on a website called The U.S. Sun headlined “FREE HOLIDAY: Americans may be given a $4,000 vacation credit and another check in next stimulus package,” referencing the Explore America tax credit has gained significant traction on Facebook.
The June 15 article, written by Janine Phakdeetham, states the plan could help reinvigorate the economy by giving people up to $4,000 in credits for domestic travel-related expenses, such as hotel bookings or meals at restaurants. The U.S. Sun is an American version of the British tabloid The Sun, published by News UK, a subsidiary of News Corp.
“The credit period would last up through the end of 2021,” the article said.
Where did the idea of an ‘Explore America’ tax credit come from?
The U.S. Sun’s claims the potential travel tax credit would be worth up to $4,000 and that it could be used until the end of 2021 are unsourced, but could have originated with a list of legislative priorities published by the U.S. Travel Association. USA TODAY reached out to the U.S. Sun and did not receive a response.
The U.S. Travel Association’s legislative priorities list, which was last updated on May 20, suggests a temporary travel tax credit could “incentivize a safe reopening of the travel economy.”
“To reduce the time it takes to get to full recovery, Congress should create a new tax credit to encourage domestic business and leisure travelers to travel within a specified time frame, similar to what was done through the homebuyer tax credit in the wake of the housing crisis,” the document stated.
Tori Emerson Barnes, executive vice president of public affairs and policy at the U.S. Travel Association, said her organization began investigating tools that could help the travel industry recover from a pandemic-related downturn in January and February, looking back to previous crises, including the Great Recession, for guidance.
Emerson Barnes said the travel industry is facing economic devastation nine times worse than the post-9/11 downturn. Americans are starting to venture out in cars for regional trips, she added, but as many as a third of travelers likely won’t feel comfortable traveling without a vaccine.
“In 2019, we had 15.9 million travel related jobs, and as of May 1st, we’ve lost 8.1 million jobs,” Emerson Barnes told USA TODAY. “So it’s quite, quite significant.”
A travel tax credit, she said, could push Americans on the fence about booking a trip over the edge, giving businesses on the brink of failure the revenue they need to weather the storm, or even hire back employees laid off in recent weeks.
In its legislative priorities document, the U.S. Travel Association proposes a tax credit worth 50% of qualified travel expenses incurred in the U.S. between the date of enactment and Dec. 31, 2021. Qualified expenses should include any expense over $50 made while traveling away from home that makes explicit reference to meals, lodging, recreation, transportation, amusement or entertainment, business meetings or events and gasoline, the document read.
The U.S. Travel Association suggested a maximum credit of $4,000 per household.
Are lawmakers considering a temporary travel tax credit?
Emerson Barnes said lawmakers on both sides of the aisle have expressed interest in the tax credit, including Senate Minority Leader Chuck Schumer, D-N.Y. USA TODAY reached out to Schumer’s office for comment and did not receive a response.
A June 16 article published by the McClatchy Washington Bureau said Democratic lawmakers contacted by reporters were unfamiliar with the proposal, but reporters confirmed that a temporary travel tax credit is “actively” being considered by the White House for inclusion in the next coronavirus stimulus package.
White House officials told McClatchy that the amount of the tax credit and the time frame during which Americans could use it remains undecided. “The tax break is still under discussion and is not guaranteed to be included in the legislative package the White House presents to Congress,” the article states.
Sen. Martha McSally, R-Ariz., proposed a bill on June 22 called the American TRIP Act that would grant vacation tax credits up to $4,000 per American adult or $8,000 per married couple, plus $500 for each dependent child, Forbes reported.
The most recent legislative economic relief package passed by the U.S. House of Representatives, which has a Democratic majority, included no such tax credit.
USA TODAY reached out to the White House for comment and did not receive a response.
Would a travel tax credit stimulate the economy?
Economic experts are skeptical of using a temporary tax credit for travel to stimulate the economy.
Chris Edwards, director of tax policy studies for the Cato Institute, a libertarian think tank, called it “a terrible idea,” adding that it would be a nightmare to implement.
“It would add complexity to the tax code,” Edwards told USA TODAY. “What is the definition of travel? It’s a good example of something that is far from black and white. Is it gas for your car? Is it car repairs? Is it food for the trip? You can imagine endless battles between the IRS and taxpayers claiming this.”
Though Emerson Barnes argues the travel industry was disproportionately impacted by the virus from the start of the crisis, when countries began closing their borders and banning large gatherings, Edwards cautioned against instituting a credit that benefits one industry over others.
“It’s unfair for the federal government to pick certain industries to bail out and other ones not to bail out,” Edwards said. “That’s an advantage of something like unemployment insurance compensation. Everyone who is unemployed gets it regardless of what industry they’re in. So if we’re going to do any aid, it should be that sort of simple and equal aid for everyone.”
Is a travel credit the best approach?
Garrett Watson, senior policy analyst at the Tax Foundation, a Washington, D.C.-based think tank, told USA TODAY he’s seen greater interest in making the Paycheck Protection Program available to more businesses and rethinking the next iteration of unemployment aid provided by the CARES Act, the first COVID-19 relief package. The idea of including rehiring bonuses in the second round of relief has also gained traction with lawmakers who believe enhanced unemployment benefits disincentivize work, he said.
Watson and Edwards also pointed out that a tax credit for travel could distort normal consumer behavior.
“The government shouldn’t be encouraging people to travel if they don’t want to,” Edwards said. “That doesn’t make any sense. If people feel unsafe, then they should stay home.”
Our ruling: True
The U.S. Sun article stated that Americans could get a $4,000 tax credit to spur travel to be used by the end of 2021, a plan that may help reinvigorate the economy and lift the tourism industry. It is TRUE that such a plan has been proposed. But experts are skeptical the credit will make it into the next pandemic relief package.
Our fact-check sources
Remarks by President Trump, May 18, 2020
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This article originally appeared on USA TODAY: Fact check: Americans may get $4,000 tax credit for travel in stimulus