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