The Paycheck Protection Program: Progressivity and Tax Effects

The $800 billion Paycheck Protection Program (PPP) provided COVID-19 pandemic relief to businesses retaining employees. Prior research has not directly estimated the PPP’s distributional or tax effects. Linking PPP loans to tax records, we estimate progressive effects with respect to income for both workers and business owners. Bottom-quintile incomes increased 18 percent and top-quintile incomes increased 2 percent. About half of PPP relief benefited workers. The PPP also increased taxes and decreased unemployment compensation, reducing net program costs by one-quarter. Net costs could have been even lower (and progressivity higher) without the tax exclusion of PPP forgiveness.