Signs calling for more aid, a second Paycheck Protection Program and more as part of a Goldman Sachs campaign to support small businesses near the US Capitol on January 5, 2021.
BRENDA SMIALOWSKI | AFP | Getty Images
Millions of Americans looking to see more direct aid from the federal government amid the Covid-19 pandemic may be relieved to learn that Washington lawmakers are planning a third round of stimulus checks.
But this week a question has surfaced: Will those payments be $1,400 or $1,000 per person?
That’s how 10 Republican senators put forward their own stimulus proposal. Their plan, which would cost about $618 billion, would significantly reduce the $1.9 trillion in spending proposed by President Joe Biden.
Why Payments Should Be Higher Under Biden’s Plan?
Biden’s checks would be $1,400 per person, as well as $1,400 per dependent child or adult. If the income thresholds remain the same as for the first two rounds of payment, individuals earning up to $75,000 and married couples filing joint incomes up to $150,000 will be eligible for the full amounts.
The third stimulus checks would be higher under Biden’s plan for two reasons, said Erica York, an economist at the Tax Foundation.
First, the base totals are higher for individuals.
Second, checks would also be greater for dependents.
So far, both sides of the aisle have included adult dependents in their proposals, York noted. Those individuals were omitted from the first and second rounds.
How direct payments would be reduced under the GOP plan?
The GOP plan calls for checks for $1,000 for adults, plus $500 per child or dependent adult. However, the income thresholds would be much lower, with individuals earning up to $40,000 and couples with up to $80,000 eligible for full payments. Payments would also expire faster, capped at $50,000 for individuals and $100,000 per married couple.
“The GOP’s proposal would benefit far fewer households,” York said.
But the Republican plan would also drastically cut total spending on direct payments, to an estimated $220 billion, from Biden’s $465 billion.
Excluding non-filers, the cost would be $184 billion for the GOP plan versus $441 billion under the White House proposal, the Tax Foundation found.
How Biden Could Compromise?
President Joe Biden and Vice President Kamala Harris will meet with a group of Republican senators on Feb. 1, 2021 to discuss federal legislation on coronavirus relief in the Oval Office.
Tom Brenner | Reuters
Biden reiterated his commitment to the $1,400 amounts during a meeting with House Democrats on Wednesday, according to reports.
However, the president said he may be willing to limit the requirements under which individuals and families qualify for the money.
If Biden changes his plan to get both sides of the aisle to agree, there are ways he could do that, according to the Tax Foundation.
First, he could apply the same phase-out that the GOP is asking for — by reducing the $1,400 incentive checks, starting at $40,000 for individuals and $80,000 for couples.
That change would reduce the average payment to $1,920, qualifying 87.1% of taxpayers. Those payments would cost about $361 billion, according to the Tax Foundation.
Alternatively, the president can choose to have $1,400 phased out more quickly, while keeping the original income thresholds the same.
If payments are phased out at a rate of 10% instead of 5%, the average payment would be $2,219, with 92.1% of taxpayers eligible, according to the Tax Foundation. The total cost is estimated to be $429 billion.
“It makes sense to limit the group of people who receive the third payment,” York said.
That could help the government target those who struggle most until vaccine distribution and economic recovery gain momentum, the Tax Foundation said.
How fast could the money arrive?
Based on the timing, the third stimulus checks could be based on 2020 tax returns, which could help address those who have suffered most from the financial impact of the pandemic.
How quickly the money could arrive can be complicated by the fact that the IRS is in the midst of tax season when the checks are deployed.
“It could be a real stress for the IRS to get these payments out,” York said, as the agency also grapples with new changes to the CARES and consolidated credit laws.
Still, the agency has come a long way since the two months it took to send direct payments in 2008, York noted.
When the $600 payments were approved in December, the money started going out two days later. Within 10 days, the IRS had sent more than 100 million payments, York said.
“I think they will be relatively fast compared to what we’ve seen in the past,” she said of the third checks.