It’s Time to End the Employee Retention Tax Credit

The bipartisan Employee Retention Tax Credit Repeal Act was introduced this week by Senators Mitt Romney (R-UT), Thom Tillis (R-NC), and Joe Manchin (I-WV). In response to massive cost overruns and fraud associated with the pandemic-era Employee Retention Credit (ERC), the bill would repeal the credit for any claims after January 31, 2024, while expanding penalties for fraudulent claiming. A similar policy in the House-passed Tax Relief for American Families and Workers Act was scored to reduce deficits by roughly $80 billion over a decade, and savings could prove even larger given ERC applications since then.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

Fixing the national debt will require a lot of tough choices…but this isn’t one of them. Congress should promptly address the massive fraud and cost overruns facing the Employee Retention Credit, and Senators Romney, Tillis, and Manchin deserve credit for putting forward a bill to do just that.  

The Employee Retention Credit was supposed to help struggling small businesses retain their workforce, at a cost of $80 billion. Thanks in part to predatory grifters and scam artists, costs could exceed $550 billion, with little of that money helping its intended targets.

Addressing these cost overruns already has bipartisan support and was part of a bill that passed the House by a 357 to 70 vote this January.  

The House intended to use this repeal to pay for new tax cuts and credit. But failure to reach agreement on those tax cuts shouldn’t justify making payments that don’t make any sense.  

There is simply no justification for continuing this credit, especially now that we are several years out from the worst of the pandemic while a cottage industry marketing ways to claim it continues to work on defrauding the government.

With the national debt on course to reach a new record as a share of the economy in just three years, it should be a common-sense measure to repeal this credit, use the savings to reduce the deficit, and save the American taxpayers $80 billion over a decade.

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For more information, please contact Matt Klucher, Assistant Director for Media Relations, at klucher@crfb.org.

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