Sen. Martha McSally (R–Ariz.) wants to use the tax code to subsidize middle-class Americans' cross-country travel during the COVID-19 pandemic.
On Monday, the Arizona senator released the text of her Tax Rebate and Incentive Program (TRIP) Act, which would provide every American adult with a $4,000 tax credit they could spend on domestic vacations. Married couples who file jointly would qualify for an $8,000 tax credit, plus $500 for each child under 17.
"The tourism and hospitality industries were among the hardest hit sectors across the country and their revival is critical to our economic recovery," McSally said in a press release. "My legislation will help boost domestic travel and jumpstart the comeback of our hotels, entertainment sectors, [and] local tourism agencies."
The TRIP Act would allow taxpayers to write off money they spend on food, lodging, transportation, and live entertainment events, including sporting events for vacations they take between January 2020 and January 2022. This means McSally's bill would subsidize vacations taken before the first COVID-19 lockdowns went into effect.
McSally's bill also provides $50 million to support state and non-profit tourism marketing boards.
The travel tax credit would be nonrefundable, which means someone with no federal tax burden wouldn't be able to make use of it. That limits the costs of the tax credit but also ensures that its benefits will accrue mostly to wealthier taxpayers.
Bloomberg reporter Steven Dennis notes that the credit doesn't come with an income cap either, meaning even the highest income earners could claim it.
Unlike a lot of tax credits (children, the pandemic stimulus checks, etc.) which phase out at higher incomes, I don't see an income cap in the bill.
— Steven Dennis (@StevenTDennis) June 23, 2020
The bill has received some qualified support from former Democratic presidential candidate Andrew Yang.
I like it if it's a staycation. Or visiting family in the next state over. Money in people's hands is a good thing.
— Andrew Yang???????????? (@AndrewYang) June 23, 2020
President Donald Trump expressed support for an "Explore America" tax credit last month, although he gave few details about the policy.
The idea for a travel tax credit appears to be the brainchild of the U.S. Travel Association. The trade lobby has proposed a temporary $4,000 tax credit per household that could be spent on qualifying travel expenses like rental cars and restaurant meals.
Given how long everyone has been cooped up inside, the idea of a little getaway sounds pretty nice. Nevertheless, there's something for everyone to hate in McSally's proposal.
The fact that it'd effectively subsidize only middle- and upper-class tourists should irk progressives, who'd rather see the government spend money on unemployment benefits and other programs. Paid vacations, progressives argue, should be the mandated responsibility of employers.
Just so we're all clear: McSally wants to give an $8000 tax cut to rich people (low-income people don't qualify) at the same time that she also wants cut the pay of people who got laid off by about $12,000. https://t.co/n6nqH81CWx
— Michael Linden (@MichaelSLinden) June 23, 2020
Sen. McSally's American Trip Act got me to thinking about a bill I worked on when I was in the Senate. It was Sen. Sanders' Guaranteed Paid Vacation Act. It's nice to have $$$ to take a vaca, but people need vaca days. Our bill did both.https://t.co/pmiNbztD3p pic.twitter.com/AQBnuLZsTa
— Stephanie Kelton (@StephanieKelton) June 23, 2020
Deficit hawks, meanwhile, should oppose a massive new tax credit that comes with no spending offsets, given the trillions in new spending Congress has already approved to combat the economic impact of COVID-19.
Public health scolds would be on solid ground when criticizing the TRIP Act for subsidizing non-essential travel in the middle of a deadly pandemic.
Critics of crony capitalism should be aghast at the idea that McSally's travel tax credit is double what the travel industry itself has proposed.
While libertarians might like the idea of a tax cut in the middle of a recession, the TRIP Act contains too much behavioral micromanagement: Taxpayers could only reclaim some of the money they owe the federal government if they take a vacation before January 2022, and if that vacation takes them farther than 50 miles from their home but not outside the U.S.
No matter your politics, McSally's TRIP Act is a terrible idea. Taxpayers should tell her to take a hike.