House Speaker Nancy Pelosi at theHouse. (Photo: Sarah Silbiger/Bloomberg)

House Democrats proposed a $3 trillion virus relief billTuesday, combining aid to state and local governments with directcash payments, expanded unemployment insurance and food stampspending as well as a list of progressive priorities like funds forvoting by mail and the troubled U.S. Postal Service.

The bill comes afterCongress has already spent $3 trillion on four bills in response tothe economic downturn caused by the coronavirus pandemic.

"I can't remember a point in our history where we shut down theeconomy of our country," House Majority Leader Steny Hoyer saidTuesday. "As a result we need to respond in unprecedented ways withunprecedented resources."

While there is little chance of the aid package gaining Senateapproval and President Donald Trump's signature as written, passagein the Democratic-led House gives House Speaker Nancy Pelosi amarker to set down at the same time both parties are positioningthemselves for congressional elections less than six monthsaway.

The legislation, which is slated for a House vote on Friday, isthe opening bid in negotiations with the Trump administration andSenate Republicans.

It may take until June before any new deal is struck. No formalnegotiations have taken place since the last relief bill waspassed, though Trump chief economic adviser Larry Kudlow has saidhe's talking with lawmakers of both parties on priorities.

Trump said last week he's in "no rush" to get another aidpackage, but last week's jobs report that showed employers cut 20.5million jobs in April, and statements from the president's economicadvisers that the unemployment rate will hit 20% or more, arecertain to add urgency to talks. Senate Majority Leader MitchMcConnell on Tuesday dismissed the bill as a "big laundry list ofpet priorities" and indicated the GOP would ignore the Democraticproposal for now.

Among it's key provisions, the bill would provide almost $1trillion in aid for state and local governments as well as $1,200cash payments to individuals and $1,200 for dependent children —up to $6,000per household. It also would extend a $600 weekly increase tounemployment insurance into next January.

The bill also provides $200 billion to fund what it describes as"hazard pay" for essential workers who've had to risk exposure tothe virus as they stay on the job while much of the rest of thecountry has been shut down.

Another $75 billion would be allocated for virus testing andcontract tracing.

Tax changes

There are numerous tax provisions in the legislation.

The bill would greatly expand a tax credit included in the lastvirus relief bill that gives employers tax breaks for keepingworkers on the payroll. The new version would give employers acredit worth upto $12,000 per employee per quarter, an increase of $5,000per worker for the remainder of the year. The credit would be amore targeted way to help workers than Trump's idea to cut payrolltaxes, according to proponents.

The legislation also makes a technical tweak to the treatment offorgiven Paycheck Protection Program loans that could deliverbillions of dollars in tax savings to small businesses. Thelegislation would allow companies to deduct the payroll, rent andother costs which the PPP loans covered. The IRS had ruled thatthose expenses are not deductible if the loan is forgiven.

SALT cap

The plan also includes some political priorities for Democratsfrom before the pandemic. It would suspend the cap on state andlocal tax, or SALT, deductions for two years. Trump's 2017 tax lawimposed a $10,000 cap on those tax breaks, which Democrats,particularly those from high-tax New York and New Jersey, have beenseeking to repeal since the law passed. Republicans have resistedraising the cap, saying that would only help the wealthy.

The legislation would partially repeal a tax break included inthe last rescue plan that would allow businesses to use losses tooffset profits to generate a refund from the Internal RevenueService. That provision has since garnered scrutiny from someDemocrats who say it's a giveaway to corporations and the wealthy,though the measure wasn't controversial when it passed inMarch.

The bill would make payments for up to $10,000 instudent loans per individual through September 2021. The Censuswould receive a $410 million infusion to overcome delays caused byCOVID-19.

In one example of Democrats using the wide-ranging package toreach beyond the immediate response to the pandemic, it includes asafe harbor provision for banks that provide services to cannabiscompanies, something long sought by the industry. Banks would beshielded from prosecution under federal drug laws for serving thenow cash-based sector in states where the cannabis trade islegal.

The core of the bill is the state and local government aid.House Speaker Nancy Pelosi argues that state and local governmentsmust be aided in order to avoid layoffs offirefighters, paramedics and police.

But some Republicans have outright opposed aid to states, whileother GOP lawmakers have said they would back some assistance withlimits to ensure that mismanaged pension funds for state workersare not bailed out, a position that mostly targetsDemocratic-leaning states like New York and Illinois.

McConnell said Tuesday that as more states reopen, the Senatewill instead act on separate legislation intended to limit legalliability for businesses.

"Our legislation is going to create a legal safe harbor forbusinesses, nonprofits, governments, workers, and schools who arefollowing public health guidelines to the best of their ability,"McConnell said on the Senate floor.

The separate Senate bill could set the framework for acompromise between the parties, with Democrats saying the state andlocal aid as well as direct payments are their must-have items.

Pelosi in a Monday television appearance said that while theHouse will not be cavalier about granting legal protections, she iswilling to have a conversation about it as part of a negotiation onthe next stimulus deal.

– With assistance from BillyHouse.

READ MORE:

• COVID-19 health benefits resources for yourstate
• Advisors, now is the time to take youradvice
• 4 relief measures retirement & sponsor groupsare asking Congress for beyond CARES Act