Economic Recovery from COVID | Short-Term Relief & Long-Term Reforms

Share on Facebook

Share on Twitter

Share on

LinkedIn

Pioneer Institute calls for combination of rent relief, tax credits and deductions, regulatory reform, infrastructure investment and fiscal resilience measures

BOSTON — As the initial economic recovery from the COVID-19 pandemic has slowed, a new study from Pioneer Institute finds that governments must continue to provide short-term relief to stabilize small businesses as they simultaneously consider longer-term reforms to hasten and bolster recovery – all while facing a need to shore up public sector revenues.

“This study focuses on what the state can do to ensure that our hardest-hit industries can survive and avoid massive unemployment,” said Pioneer Executive Director Jim Stergios. “These are real lives — 800,000 of them employed in the restaurant, retail, and travel and leisure industries alone – and thousands more who put their livelihoods at risk creating these jobs.”

Rent Relief, Tax Credits/Deductions, Regulatory Reform, and Infrastructure Investment

Rent Relief

Aid for regularly scheduled rent payments improves cash flow and allows small businesses to rehire employees, but relief should also extend to commercial landlords who need to recoup their costs.

“A combination of rent relief, tax credits and deductions, regulatory reform and infrastructure investment, together with fiscal resilience measures are among the actions needed if we are to emerge successfully from the current economic crisis,” said Greg Sullivan, who co-authored “The Long View: A Public Policy Roadmap for Saving Small Businesses During the COVID-19 Recovery Period,” with Andrew Mikula and Rebekah Paxton.

One potential guide is the loss-sharing model used in Canada’s Emergency Commercial Rent Assistance program. There, loans to commercial landlords covered half the rent owed by small businesses in April-June of this year. The loans were eligible for forgiveness if the landlords enacted agreements with small businesses that included a 75 percent rent reduction and a non-eviction clause. The tenant would then pay 25 percent of the normal rent. Canadian provinces and territories were responsible for a quarter of the government’s costs.

Here, the authors recommend a graduated system of rent relief loans based on the size of the tenants.

Tax Credits/Deductions

The authors recommend expanded tax credits for consumer spending in particularly hard-hit areas, such as brick-and-mortar retail and independent restaurants. They also urge that credits be made available to small businesses for the purchase of pandemic safety equipment such as barriers, cleaning materials and PPE for employees. Two bills to create the credits have been proposed in Congress.

Congress should also extend a measure slated to expire in 2023 that provides immediate 100 percent tax deductions for small business capital expenditures until at least 2026.

Regulatory Reform and Infrastructure Investment

State and local governments should replace burdensome occupational licensing regulations for service occupations with inspection regimes. Currently, too much occupational licensing is designed to benefit the politically connected by preventing competitors from entering the market, not to protect public safety.

Governments should also loosen land use restrictions to allow more office-like home businesses and permit minimally disruptive retail such as barber shops in detached garages, backyard sheds or even basements.

The authors call for national investment to extend the availability of broadband, particularly to rural areas. This would improve business competitiveness and help connect disadvantaged individuals with rural work and educational opportunities.

Fiscal Resilience

The study also explores ways in which the state can steward the stabilization, or “rainy day,” fund during this health, economic and fiscal crisis.

Massachusetts should raise the limit on how much money can be annually transferred into its rainy-day fund and consider adding new revenue streams that flow directly to the fund. The Commonwealth currently has $3.5 billion in its stabilization account, while the budget deficit for the coming year is estimated to be $6 billion.

The authors also call for more flexibility when it comes to how rainy-day fund money can be used during times of hardship.

“Every additional dollar added to the stabilization fund during prosperous times is another dollar that can be used to stimulate the economy and prevent families from falling into poverty during times of crisis,” said Pioneer’s Research Assistant Andrew Mikula.

About the Authors

Andrew Mikula is a Research Assistant. Mr. Mikula was previously a Lovett & Ruth Peters Economic Opportunity Fellow at Pioneer Institute and studied economics at Bates College.

Rebekah Paxton is a Research Analyst at Pioneer Institute. She first joined Pioneer in 2017 as a Roger Perry intern, writing about various transparency issues within the Commonwealth, including fiscal policy and higher education. Since then, she has worked on various research projects under PioneerPublic and PioneerOpportunity, in areas of state finance, public policy, and labor relations. She recently earned an M.A. in Political Science and a B.A. in Political Science and Economics, from Boston University, where she graduated summa cum laude.

Gregory Sullivan is Pioneer’s Research Director. Prior to joining Pioneer, Sullivan served two five-year terms as Inspector General of the Commonwealth of Massachusetts and was a 17-year member of the Massachusetts House of Representatives. Greg is a Certified Fraud Investigator, and holds degrees from Harvard College, The Kennedy School of Public Administration, and the Sloan School at MIT.

About Pioneer

Mission

Pioneer Institute develops and communicates dynamic ideas that advance prosperity and a vibrant civic life in Massachusetts and beyond.

Vision

Success for Pioneer is when the citizens of our state and nation prosper and our society thrives because we enjoy world-class options in education, healthcare, transportation, and economic opportunity, and when our government is limited, accountable and transparent.

Values

Pioneer believes that America is at its best when our citizenry is well-educated, committed to liberty, personal responsibility, and free enterprise, and both willing and able to test their beliefs based on facts and the free exchange of ideas.

Get Our COVID-19 News, Tips & Resources!

Name
First Last
Email
Email
This field is for validation purposes and should be left unchanged.

Related Posts:

COVID-19 will likely lead to a recession. Can Massachusetts municipal budgets handle one?

0 Comments

May 6, 2020

Using municipalities' experiences during the Great Recession, a new policy brief examines the likely impact of COVID-19 on local property taxes, as well as political implications for state aid. We list the municipal revenues by category among the least tax-reliant communities in Massachusetts, show the trajectory of tax revenue growth rate in Massachusetts state and local governments, and rank stabilization fund assets per capita among Massachusetts Gateway Cities.

The past six weeks of Massachusetts unemployment claims total 24.0 percent of civilian workforce

0 Comments

April 30, 2020

The U.S. Department of Labor released its weekly report on jobless claims this morning at 8:30 a.m., reporting that Massachusetts received 70,714 initial unemployment insurance (UI) claims during the week ended April 25. This brings the total of unemployment claims filed in Massachusetts since March 14, the beginning of the unemployment surge, to 725,018.

Re-opening for business: What should employers and commercial real estate managers do to prepare?

0 Comments

April 30, 2020

Weeks away from re-opening, now is a time when employers and real estate managers must act. To assist our community in doing a great job of preparing, Pioneer Institute, in partnership with the law firm of Verrill, is sharing two checklists that will help you keep your employees safe, anticipate challenges, and develop feasible and useful methods to successfully deal with those challenges when they do.

Report Finds “Reopening Day” in the Commonwealth Will Likely Include Phasing in Businesses and Contact Tracing

April 30, 2020

New study compares the reopening of three European countries – Austria, Denmark, and Germany – to highlight approaches that could inform the Commonwealth’s reopening strategy.

States across the country have enacted eviction moratoriums. What does this mean for the housing market in the long-term?

April 28, 2020

Last week, Massachusetts Governor Charlie Baker signed a bill…

New jobless claims data shows that Massachusetts unemployment has grown from 2.8% to at least 20.4% in five weeks

0 Comments

April 23, 2020

Based on today’s jobless claims report, Pioneer Institute projects that the current unemployment rate in Massachusetts is at least 20.4 percent, with a minimum of 762,299 currently unemployed individuals.

Coronavirus & Contracts – Protecting Massachusetts Attorneys & Clients from Risk

0 Comments

April 21, 2020

In this episode of "Hubwonk," host Joe Selvaggi and Pioneer’s Chief Financial Officer & Director of Government Transparency, Mary Connaughton, speak with attorney and entrepreneur Kosta Ligris about how Massachusetts’ requirement for live attestation for many vital contracts is putting attorneys and clients at risk of exposure to coronavirus.

Hospitality, Retail Trade, Healthcare Among ‘Most Vulnerable Industries’ in Terms of Unemployment due to COVID-19

April 20, 2020

Recent data provided by the Massachusetts Executive Office of Labor and Workforce Development show that hospitality, retail trade, healthcare and social assistance, and construction are the industries that have suffered the most unemployment as a result of the coronavirus outbreak, according to the new Pioneer Institute report, “A Look at the Massachusetts Industries that are Most Vulnerable Due to COVID-19.”

COVID-19’s Impact on Rental Housing

0 Comments

April 16, 2020

The Massachusetts Legislature is currently debating a rental housing bill. What impact will it have on the many landlords for whom rental income is their only source of income?

Which industry’s workforce has been hurt the most from the COVID-19 outbreak?

0 Comments

April 15, 2020

Unemployment claims have reached all-time highs in the U.S. recently…

Will the COVID-19-related economic recession cause a spike in crime?

0 Comments

April 13, 2020

Intuitively, it makes sense that people replace legitimate business…

State Ranking: Michigan, Hawaii, Rhode Island, Pennsylvania, and Nevada have been hardest-hit by COVID-19 jobless claims so far. Massachusetts ranks as 9th hardest-hit.

0 Comments

April 9, 2020

The U.S. Department of Labor reported today that in the week ended April 4, the advance number of seasonally-adjusted initial jobless claims was 6,606,000. This follows 6,867,000 initial claims filed in the week ended March 28 and 3,307,000 in the week ended March 21.

COVID-19 unemployment surge is on pace to wipe out the MA Unemployment Reserve Fund within three months

0 Comments

April 8, 2020

The unprecedented surge of COVID-19- related unemployment claims that began two weeks ago is on pace to wipe out the MA unemployment Reserve Fund within three months, which will force state leaders to turn to the federal government for a bailout loan.

Report: MA Likely to See Sharp Spike in Unemployment Rate

April 8, 2020

The COVID-19 recession could cause Massachusetts’ unemployment rate to skyrocket to 25.4 percent by this June, according to a new policy brief published by Pioneer Institute. The authors recommend that the state join others in lobbying Congress for large block grants to avoid a severe fiscal crisis.

Pioneer Launches Report Series Highlighting Massachusetts Job Growth and Business Trends Since 1998

April 1, 2020

In “Some Big, Broad Economic Trends in Massachusetts,” Pioneer analysis of two decades of data shows fluctuating employment changes across the state, as well as firm size information and the largest employers. The report is part one of aa series that aims to provide deeper insight into COVID-19's economic impact.