Signs calling for more relief, a second Paycheck Protection Program and more as part of a campaign by Goldman Sachs supporting small businesses near the U.S. Capitol on Jan. 5, 2021.
BRENDAN SMIALOWSKI | AFP | Getty Images
Millions of Americans who want to see more direct aid from the federal government amid the Covid-19 pandemic may be relieved to hear that Washington lawmakers want to distribute a third round of stimulus checks.
But a question has emerged this week: Will those payments be $1,400 or $1,000 per person?
That’s as 10 Republican Senators have put forth their own stimulus proposal. Their plan, which would cost about $618 billion, would significantly reduce the $1.9 trillion in spending President Joe Biden has proposed.
Why payments would be higher under Biden’s plan
Biden’s checks would be for $1,400 per individual, as well as $1,400 per child or adult dependent. If the income thresholds stay the same as for the first two rounds of payments, individuals who earn up to $75,000 and married couples who file jointly earning up to $150,000 would be eligible for the full amounts.
The third stimulus checks would be higher under Biden’s plan for two reasons, according to Erica York, economist at the Tax Foundation.
First, the base totals are higher for individuals.
Second, the checks would also be bigger for dependents.
So far, both sides of the aisle have included adult dependents in their proposals, York noted. Those individuals were left out of the first and second rounds.
How direct payments would be reduced under the GOP plan
The GOP plan calls for $1,000 checks for adults, plus $500 per child or adult dependent. 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. The payments would also phase out faster, with caps at $50,000 for individuals and $100,000 per married couple.
“The GOP proposal would provide benefits to far fewer households,” York said.
But the Republican plan would also reduce total spending on direct payments dramatically, to an estimated $220 billion, from $465 billion in Biden’s.
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 meet with a group of Republican senators to discuss coronavirus federal aid legislation inside the Oval Office on Feb. 1, 2021.
Tom Brenner | Reuters
Biden reiterated his commitment to the $1,400 sums on a call with House Democrats on Wednesday, according to reports.
The president did, however, say he may be willing to narrow the requirements under which individuals and families would qualify for the money.
If Biden modifies his plan in order to get both sides of the aisle to agree, there are a ways he could do it, according to the Tax Foundation.
First, he could apply the same phase outs the GOP calls for — by reducing the $1,400 stimulus checks starting at $40,000 for individuals and $80,000 for couples.
That change would bring the average payment down to $1,920, with 87.1% of taxpayers eligible. Those payments would cost about $361 billion, according to the Tax Foundation.
Alternatively, the president could opt to make it so that the $1,400 payments phase out at a faster rate while keeping the original income thresholds the same.
If the payments phased out at a rate of 10% rather than 5%, the average payment would be $2,219, with 92.1% of taxpayers eligible, according to the Tax Foundation. The total cost would be an estimated $429 billion.
“It makes sense to narrow down the group of people that receive the third payment,” York said.
That could help the government target those who are struggling the most until vaccine distribution and the economic recovery gain greater momentum, according to the Tax Foundation.
How soon the money could arrive
Based on the timing, the third stimulus checks may be based on 2020 tax returns, which could help target those who have suffered most from the financial fallout of the pandemic.
How soon the money could arrive could be complicated by the fact that the IRS may be in the middle of tax season when checks are deployed.
“It could be a real stress on the IRS, getting these payments out,” York said, as the agency also grapples with new changes from the CARES and Consolidated Appropriations Acts.
Still, the agency has come a long way from the two months it took to send direct payments out back in 2008, York noted.
When the $600 payments were authorized 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 do think they’ll be relatively quick compared to what we’ve seen in the past,” she said of the third checks.