According to new estimates, President Joe Biden’s proposed third round of stimulus checks could result in more than 16 million people not receiving checks.
On Wednesday, Biden agreed to a new approach to the proposed $1,400 payments by maintaining the same income thresholds used for the first two checks. This time, however, payments above those lines are being phased out much faster.
Individuals making up to $75,000 a year would get full pay, but would end up for anyone making more than $80,000 a year under the compromise intended to allay the concerns of moderate Democratic senators.
“According to the Senate version of the bill, 158.5 million households will receive direct payments. That’s 98% of the households.’”
Couples making $150,000 a year would get the full check, but it stops at $160,000. People who have filed up to $112,5,000 as heads of household will also get the full check and their payments for anyone making more than $120,000.
White House Press Secretary Jen Psaki said in a news conference Thursday: “According to the Senate version of the bill, 158.5 million households will receive direct payments. That is 98% of the households that receive them in December.”
“In the previous round of relief, that 2% strip all received checks smaller than $600,” Psaki added. In some cases, those checks were as small as $100 due to the phase-out.
The previous version of the House would have covered 91% of adults — 212.1 million Americans — and 90% of children — another 84.7 million people, said Steve Wamhoff, director of federal tax policy at the Left Institute on Taxation and Economic Policy.
“It’s a difference, but it’s not a huge difference,” he said. “If you look at the people who really need help, they get all the benefits of both proposals,” he said.
‘Asinine and unacceptable’
Others have a more critical view. Former mayor of Stockton, California, Michael Tubbs, described it as “tasteless and unacceptable”. He spoke at a news conference this week about research showing the benefits of a $500 monthly guaranteed income for 125 Stockton residents.
The pandemic is especially hard on low-income families who were out of work, data shows. Other research suggests that people higher up the income ladder who received a second check for $600 spent it at lower rates than those who made less money.
““This is pure politics. What matters is that this bill is passed.’”
Policymakers and lawmakers in Washington DC can only make data-based assumptions about who actually “needs” the money, said Claudia Sahm, a senior fellow at the Jain Family Institute. That’s something people may lose sight of in the debate, she added.
A lower-income family may certainly need the money, but so will a wealthy family with a higher cost of living that has experienced a significant drop in income.
Still, Sahm is pleased the potential deal has not tinkered with full pay income levels. “This is pure politics. What matters is that this bill is passed.”
There could have been more targeted ways to use money to revive the economy and struggling households, said Kyle Pomerleau, a resident of the American Enterprise Institute, a right-wing think tank. ‘That ship has sailed. We are already talking about checks.”
‘Tax Planning Tricks’
“There’s a lot of different tax planning shenanigans that could encourage this,” he added.
For example, people approaching the incentive payments barrier could sell stocks to incur capital losses and lower their income. Or they could impose retirement contributions to lower their adjusted gross income, he noted.
It’s economically inefficient and unfair, Pomerleau said. “You don’t want the tax code encouraging such big behavior.”
Whatever the rules are for the checks, it’s a one-time deal, Wamhoff said. “We are talking about a one-off tax payment. I don’t know this that completely and totally changes people’s behavior.”