New Senate Bill Includes $4000 Per Person Domestic Travel Credit

The President has indicated support for a $4000 domestic travel credit where you’d get half your money back from airfare, hotels, restaurants and related spending on domestic trips.

That’s now morphed into Martha McSally (R-AZ)’s “American TRIP Act” which would provide a tax credit of $4000 per adult ($8000 to a couple filing jointly) and $500 additional per dependent child to spend in 2020 or 2021 on domestic travel 50 miles or more from home, as well as $50 million to Destination Marketing Organizations to promote tourism to their region.

This is insane, but they came up with a good legislative acronym, TRIP stands for Tax Rebate and Incentive Program. And the law would even allow you to take a standard mileage deduction for driving, not just count the cost of gas.

One Mile at a Time offers pros and cons. I say take a position!

Lucky offers, “I would assume there’s some multiplier effect here” suggesting that this is beneficial to the overall economy. Traditionally when looking at ‘multipliers’ the suggestion is that spending money in one area leads to greater economic activity as a follow-on. Here that would mean spending more on restaurants and hotels, who pay their employees and suppliers, who go on to spend money themselves and so on.

However to do this analysis you need to compare this to not spending the money and to alternative ways to spend it. There’s really no suggestion that we’re in a liquidity trap (economic recession is caused by the virus, people haven’t been out and about because we told them not to be and now some places where they are it’s actually a problem).

There’s some limit to how much government borrowing and spending can take place, both economically and politically. So should we borrow for this? Whether or not you favor the policy – there are reasonable arguments that it would slow economic recovery – surely enhanced unemployment has a higher multiplier.

Regardless, a tax credit doesn’t make sense for three basic reasons.

  1. The major problem facing the travel industry isn’t cost, it’s the virus. So subsidizing cost pushes the wrong string.

  2. Unemployment is too high, the people who can benefit from a tax credit – putting out significant spending and waiting until tax time to get it back – are among the most well off. This subsidizes upper middle class travel and that’s certainly concerning from an equity standpoint.

  3. If you’re looking for where to target government spending to help the economy and help travel, throw everything at a vaccine. We should have more vaccine candidates as part of Operation Warp Speed, accounting for different approaches. We should be not just tooling out production facilities for all of the candidates, we should be making sure we have the supplies necessary to produce and ship all of the candidates, and we should begin producing them en masse.

    If we can put the threat of the virus behind us several months sooner that will do more for travel than the American Trip Act.

The Real Clear Politics polling average currently has Senator McSally down 9.8 points for November’s election. Time to roll out the pork, this one though is a manifestly bad idea as much as I’d love for y’all to have to pay for me to renew airline status next year.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. This act is silly. We don’t need a program to get people to travel, most people can’t even safely leave their houses right now (see Texas that just told people the safest place for them is their homes).

  2. I would like to see a voucher for buying beer, lottery tickets, smokes, CBD oil and personal fitness training.

  3. Holy shit I agree with @Joelfreak here. Maybe he looked up the facts for himself and realized I was right on race relations.

  4. I can’t believe I’m looking a gift horse in the mouth, but I hope this dies a quick death. We need more equitable ways to distribute funds and jumpstart the economy.

  5. How would they administer this? I could book travel, show my receipts for air and hotel, then cancel, then submit the original receipt. 😉

    This would be a fraud cesspool.

  6. I forgot for a moment that Operation Warp Speed was a thing.

    Thanks for making this another grim day.

  7. Its just a tax giveaway for the well-off at a time when local governments are being forced to cut funding for education and social services.

  8. This sounds great! Show me the money! But they need to make it so we receive 100 percent reimbursement.

  9. “I would assume there’s some multiplier effect here”…”

    No surprise. Beyond his ability to detail the difference between Business Class and First, explain how to parlay an Open Jaw or score a suite on points from the Conrad in Bali, etc. his “expertise” in anything related to economics, politics or public policy is very deficient.

  10. @Dhammer53 – That could be said for just about any claimed expense on one’s income tax return. No difference.

    The amount is limited to $50,000,000 until it is exhausted. That equates to only 6,250 childless couples at $4,000/person. There would be a rush to file income tax returns to be one of the first 6,250 couples filing jointly!

  11. Disregard my $50 million comment as that would be the appropriation for the marketing, etc for the states. Sorry.

  12. @ controller1 – I’m pretty sure the $50,000,000 is for the marketing dollars to tourism groups, not the tax credit.

  13. I think the point is to prop up the travel industry so we don’t have waves of bankruptcies, unrecoverable job losses and asset impairments that could ultimately bring down broader segments of the economy like real estate, impaired bank balance sheets and bankrupt municipalities.

  14. I am sorry to hear so many negative comments. Having family spread out across the country this would be great for me. Especially in 2021 after either we’ll have a vaccine or we will all have had CoVid by then. Finally a stimulus I could use!

  15. Completely idiotic Anything not addressing covid and promoting travel or increased contact will ultimately make the situation worse.

  16. This act is a good idea. It gets middle class people and upper middle class people to spend their savings (savings are at a record high) to benefit the domestic travel industry that has suffered the most of any industry from the government ordered shutdown. One way or the other, government is going to have to pay for unemployed workers in the travel industry. It is cheaper and more effective for the government to provide a travel credit that will stimulate travel and provide demand for jobs in those industries. If travel businesses close, it will take a long time to recover. Government paying 50% of travel is better than paying 100% of expanded unemployment.

    If this credit can be used until December 31, 2021, it allows plenty of time to use when the virus situation abates. It is June. Let’s see what happens in September, December, or April next year. This credit would guarantee a great 2021 for the domestic travel industry.

    Regarding equity, the middle class and upper middle class pay the most taxes so the argument that the tax credit isn’t equitable is ignorant. It would most benefit hard working paid employees in the travel industry and companies that are struggling to stay afloat.

    Don’t be so enthusiastic about a vaccine. Spending more money on it won’t lead to quicker approval. It’s need to undergo testing. I fear that it will be approved too quickly without adequate analysis of risks. The flu vaccine has been around for years. A rushed vaccine is not my idea of confidence.

  17. 2 things:

    1-Most importantly, this is a poor way to spend my tax dollars…..really poor.

    2-If this dumb idea passes (and it wouldn’t be the first time), I was already thinking about what travel gift card hedge that I could use to cash out, while sheltering in place.

  18. So the theory is for our national government to borrow huge amounts of money so middle class to rich people can travel the country. During a pandemic. I’m beginning to understand why McSally keeps losing elections. This is an insanely stupid idea. If the federal government wanted to boost the economy, it could go with a guaranteed minimum income for a while or offer a tax credit toward rent or mortgages.

  19. As a practical incentive, it’s a terrible idea — there are so many better ways to help people out. Though it’s somewhat a compensation for the “EU is opening to everyone but those from the USA” problem, which is entirely a result of our administration’s mismanagement of the situation.

  20. Virus Economics 101

    If you want to restart the economy, you’ve got to stop the spread of the virus.

  21. @Seth

    Belgium is at 840 deaths per million. Over 600 for the U.K. and Spain. Over 500 for Italy.

    The U.S. has 363 deaths per million and Brazil 280. If you want to blame people for bad management, first turn to the leaders of Spain, Italy and Belgium. Then turn to Cuomo since NY is at 1700 deaths per million while Florida is at 150 (with an even bigger population and older population).

    The travel credit is a great way to stimulate domestic travel. I never travel domestic aside for Disney World, so this would definitely get me to spend more money domestically than I otherwise would and see sights I have put off seeing. Would you prefer direct subsidies for the travel industry? I think not.

  22. Firstly, @Gary, after months of coming here expecting idiocy, I actually find myself completely agreeing with you. There are many more industries that would fare better with being propped up. How about massive tax incentives for businesses that turn over less than $10 million a year? There’s many more ways you could pump money into the economy, and into the hands of people that need it.

    The proposal would primarily benefit the major airlines and hotel chains. There may be some supplemental spending in restaurants also, but not enough to keep them afloat

    @Jackson. I’m guessing geography is not your strong point, nor statistics:
    UK: 274 people per square kilometer
    Spain: 91
    Belgium: 378

    USA: 35

    Italy has a ageing population more susceptible to Covid-19. Italy, Spain and France all have much greater family bonds compared to the US. There are many communities where you’ll find at least 3 generations under one roof

    So, you really shouldn’t take just one measure. I mean, if we are going to do that, the USA is first with deaths. And it’s only a 1/3rd of the size of China, and of India.

  23. One of Gary’s best posts ever. Get that vaccine out, and we will not only be able to travel, but to go to festivals, sports, concerts, school, you name it. That’s all apart from the fact we’ll quit dying of COVID and can even end the acrimony over wearing face masks. Instead of tossing bandaids and pork out, focus every bit of energy that can be productive on getting the vaccine.

  24. @Jackson

    You either conveniently or ignorantly forget the SIZE of the geographic area MATTERS.

    For some educational mental exercise – overlay the state of Texas over the map of Europe and see for yourself.

    Population Density Matters. That actually is the least misleading metric when it comes to the measurement of infected cases and more importantly, the death cases.

  25. I totally agree with TRIP. We need to rest and to travel. People who only dreamed about vacation on Hawaii now will be able to afford it. And, hey, you don’t like it, don’t use it. It’s not a free money, you have to spend to get half back. This will be great for WORKING families and great for economy. The only negative thing I can see, not every state will benefit equally.

  26. I can drive 75 miles and stay in a $2000 a night suite at The Breakers Palm Beach no problem!

  27. You’re missing the point, Gary. Every other industry has received government assistance.

    But not hotels.

    This is a concession to the hotel lobby.

  28. With 5,500+ new cases reported for yesterday, Florida stands ready to accept everyone. Come to Florida, see the theme parks, beaches, etc and then go home with a complimentary sunburn and the coronavirus.

  29. Just qualify me, my wife, and children for those $1,200 payments, and I’ll call it even. Without ever leaving home.

  30. @Jackson Henderson –> Anyone who’s even once strolled the streets of Manhattan and has the audacity to compare NYC with its density and 3 airports to Florida or anywhere else in the nation, should have their HSED revoked, and quickly, until more damage is done.

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