In the movie “Fight Club,” the protagonist learns early that both the first and second rules of Fight Club are, “You do not talk about Fight Club”. It seems that the federal government’s current stab at coronavirus aid legislation should come with a similar sweeping disclaimer, except this one would read, “The Act is always subject to modification”. HEALS stands for “Health, Economic Assistance, Liability Protection and Schools Act and is designed to provide supplemental pandemic-related fiscal relief to individuals and businesses impacted by the COVID-19 pandemic and the country’s ongoing struggles to revive the economy and slow the spread of infection while awaiting some sort of standardized treatment or prophylactic options.
The HEALS Act has made headlines for weeks as members of Congress grandstand about various pieces of the legislation which they believe must be included or eliminated. The only thing we really know for sure about the HEALS Act is that it is a great piece of rhetorical leverage for whichever politician happens to be talking about it. We certainly do not know what exactly it will mean for real estate investors or small business owners in a tangible or practical fashion.
With this in mind, Good Success brings you the latest information about this act. Regardless of the fine print, there are certain things about the legislation that will impact your business and your investments. Even with nearly everything about the act in flux, there are still some things we can derive from the general melee that enable us to make some predictions about what might be coming down the pipeline.
HEALS Is Not An Extension of CARES
A lot of people believe that the HEALS Act is just an extension of the CARES (Coronavirus Aid, Relief, and Economic Security) Act. While there are similarities between the two, the HEALS Act will likely attempt to remedy some of the aspects of the CARES Act that did not necessarily work particularly well. For example, some aspects of the CARES Act prevented truly small, local businesses from accessing funding they needed. Other aspects incentivized workers to stay home (partly out of a desire to keep nonessential workers at home!) and now must be adjusted so that seeking employment is once again desirable.
CARES also did not deal with schools reopening and offices reopening, which is an important facet of the HEALS Act. The HEALS Act proposes allocating billions of dollars in aid payments to support education, reopening schools and businesses, and assisting other entities and organizations in reopening their doors to the public in a safe way. It also includes a tax credit program designed to support small businesses through expanded deductions, pandemic-unemployment benefits at a rate of $200 a week (that could change), and a new round of relief checks.
It’s easy to see why many people think HEALS will just extend CARES programs, but really a lot of things are different between the two acts. It remains to be seen what pieces of the current HEALS Act make it into the final legislation and what aspects are removed.
“Please, Just Send More Money”
One of the things that we believe you can probably count on remaining in place in the final edition of the HEALS Act is that there will be some form of stimulus check issued to most Americans and that there will likely be a limited form of ongoing unemployment benefits. However, those unemployment benefits are a topic of much debate. Here are a few of the questions circling about stimulus and unemployment benefits as they relate to coronavirus relief:
- At what point do unemployment benefits incentivize unemployment?
- Does Congress want to incentivize unemployment (and why)?
- At what point does the stimulus package actually prohibit the hiring of qualified workers?
- To what degree can (or should) Congress attempt to regulate how those unemployment and stimulus funds are spent?
If passed in its current form, the HEALS Act would automatically send Americans who are up-to-date on their taxes $1,200 for individuals ($2,400 for couples) and $500 per dependent regardless of the dependent’s age. This means that dependents can be college-aged or even older, while under CARES only kids under 17 qualified for those checks. Readers should note this is unlikely to remain in its current form. Some policymakers want to offer stimulus payments to people with incomes higher than $75,000 per individual ($150,000 per couple) and adjust the amount downward for higher earners, while others believe the best way to support out-of-work Americans and the small businesses who would like to hire them back is to base stimulus and unemployment payouts on former income.
Another facet of the bill that is currently a hot topic of debate is the “back-to-work bonus,” which is literally a cash bonus for newly hired workers. Some states have already begun offerings these bonuses (Idaho offered $1,500 to full-time workers and $750 to part-time workers) while the federal government is debating replacing the $600 weekly unemployment offered by the national government with some sort of weekly bonus for workers who have returned to the workforce. Readers must note, however, that at present this is only a topic for debate, not actually even in the bill! Most people think it is in the act already, but at present it is only a subject for discussion.
The HEROES Confusion Factor
In mid-May of this year, the House of Representatives passed a bill named the HEROES Act that provided $3 trill in total commitments in “economic support” across the country. The bill included:
- $915 billion in aid to state and local governments
- $1,200 in direct tax rebates to taxpayers (these are the individual stimulus checks) with “more generous” conditions so more people would receive them
- An extension of the $600-a-week unemployment supplement into January 2021
- $180 billion to boost the pay of essential workers
- $75 billion in additional funding for contact tracing and testing
- Automatic forbearance on delinquent mortgages
- Automatic moratorium on evictions
- $175 billion in rent-, mortgage-, and utility-relief to consumers
- Student loan forbearance through September 2021
- Student loan forgiveness up to $10,000
Here is the important thing to know about the HEROES Act, however: It never got passed into law. Furthermore, the Senate and the president both have been largely opposed to the HEROES Act because it has such a massive price tag and does little to actually move the needle when it comes to reopening the economy. Instead, it mainly keeps everything in stasis while hurting landlords and lenders who will not be able to collect rents or loan payments but will still owe their investors returns.
Unfortunately, many people have no idea that the many headline-attractive provisions of the HEROES Act are not actually law, and the grandstanding of politicians is not helping here. Many people believe their rents and mortgages are already in a state of forbearance because of the “automatic forbearance” language in the bill. Others believe they no longer have student loan debt! Savvy real estate investors and small-business owners must be alert to what is true about coronavirus legislation, what is potentially in the works, and what is simply media and policymaker hype on the topic.
Every Investor and Small-Business Owner Must Find Their Own Answers
Without a doubt, some sort of stimulus or support package will pass in Congress before the November 2020 elections. In all likelihood, it will be a far more expensive proposition than it should be (or than the country can afford) simply because the one thing everyone on both sides of the aisle can agree on is that they want to be reelected. Something will get passed so that everyone involved can say they were part of mailing checks directly to Americans in need.
The fallout of such policymaking will directly and disproportionately affect two pillars of our economy: real estate investors and small-business owners. Hopefully, some of the tax incentives and advantages currently in the HEALS Act will remain for us, but most of us will face huge obstacles as we attempt to stay in business while accommodating whatever the federal government decides to demand we do to help reelect its politicians. This could have devastating financial consequences for those who do not remain completely up-to-date at all times.
More than ever, small-business owners and real estate investors need sources of expert insight to help them predict what is coming and prepare for economic swings and changes. Richard Branson is famous for his observation, “In times of recession, there are massive opportunities and fortunes to be made.” While Branson himself is struggling in some arenas at present, in others he is certainly living by his own words. For example, while his airline is certainly in dire straits, his space travel business is literally heading for the stratosphere (and beyond). It takes a willingness to listen to other experts (sometimes even those in other fields) and be incredibly flexible and creative to thrive in uncertain times like these. Real estate investors and small-business owners who are willing and able to assemble a team of verified experts offering relevant insights and who have a source of solid, reliable coverage of current events will have a huge leg up in 2020 and beyond.