How to best perform $ 1,400 stimulus checks based on previous payments
Sarah Casillas | DigitalVision | Getty Images
A new coronavirus relief bill could give millions of Americans $ 1,400 in stimulus checks.
Congress stands ready to pass the legislation in March. At this point, individuals and families could see the money in the following days or weeks.
In the further course of the negotiations, however, an argument emerged: is the amount too high or too low? And who exactly should be eligible?
The current proposal is to send $ 1,400 to individuals or $ 2,800 to married couples filing their taxes together. Your children and adult loved ones would also be entitled to $ 1,400.
More from Personal Finance:
While Washington debates over $ 1,400 checks, who qualifies may change
The child tax credit proposal could be more of a help than an incentive for families
8 million miss unemployment benefits
As with the first two federal economic reviews approved last year, those eligible for full payments must meet certain income thresholds: $ 75,000 for individuals, $ 112,500 for heads of household, and $ 150,000 for married couples filing together.
However, the discussions on Capitol Hill have resulted in lowering these thresholds, as well as the ceilings below which payments will expire, in an attempt to lower income levels.
A Republican plan was to lower the bar on full payments to $ 40,000 for individuals and $ 80,000 per couple, and cap payments to $ 50,000 and $ 100,000, respectively.
Senator Joe Manchin, DW. Va. Has also raised concerns that people on high incomes may qualify.
Still others, such as Senator Bernie Sanders, I-Vt., And Treasury Secretary Janet Yellen, have said they are against lowering the thresholds.
“It’s difficult to identify the cutoff,” said John Leer, an economist at Morning Consult, who recently published research on how the final controls were spent.
“There are risks for both sides: the risk of giving money to people who don’t need it and the risk of not giving money to people who need it,” said Leer.
Data on the most recent reviews could provide information on how future payments could be better targeted.
What data shows about the $ 600 stimulus checks
Millions of Americans needed more financial aid, according to a Morning Consult survey earlier this month.
Around 30.2 million adults failed to pay their bills in January, the results show.
Most Americans fell behind by less than $ 300, according to the survey of 2,200 adults.
After lawmakers argued over how much to send by direct check – from $ 600 to $ 2,000 – that could raise questions about whether payments should have been higher.
But really another problem caused the Americans, according to Leer, to come up short.
“It is proof that the payment should have been made earlier in January,” said Leer.
The December Coronavirus Ease Act came after eight months of negotiations on Capitol Hill. Progress has been delayed in part by a “wait and see” approach that some Washington leaders had to send in more aid.
“This approach is a really bad policy, especially for the financially most vulnerable Americans,” Leer said.
How the $ 1,400 checks could be targeted
One challenge with the stimulus checks is getting the money to the people who need it most.
In general, payments are based on previous tax returns, which means that the government cannot accurately assess whose income is directly affected by the pandemic.
Research by Morning Consult shows that only 50% of high-income recipients of the $ 600 check spent the money, while 67% of those on lower incomes did.
However, the expenditure data does not take into account all possible uses of the money, e.g. B. the repayment of credit card debt. But it’s an indication of whether the money was needed.
I’d rather be on the wrong side of being more generous with these checks.
Economist, Morning Consult
“High-income people save the money. They don’t need it, so save it,” said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center.
“And lower-income people who really need it are spending it,” he said.
However, there is a risk of lowering the thresholds and thereby limiting the number and amount of people who are entitled to payments.
“I would rather put myself on the side, be more generous with these checks and give money to people who may not need it,” said Leer. “I think it will ultimately benefit everyone and the economy as a whole.”
Why unemployment and stimulus checks go together
New $ 1,400 stimulus checks could help 22.6 million adults pay their bills over the next four and a half months or by mid-July without increasing their debts or forcing them to save. (Assuming payments are sent on March 1st, which is optimistic based on the current congressional schedule.)
One of the reasons the stimulus tests are necessary is inconsistencies with unemployment benefits, Leer said. Some people may have expired those unemployed checks at that point they need to use savings. Stimulus checks offer an instant cash injection to fill in gaps while people wait for their unemployment to kick in, Leer said.
President Joe Biden’s coronavirus relief proposal calls for unemployed workers to receive an additional $ 400 a week in federal aid for their unemployment controls and to extend those benefits through September.
“A really well-designed policy recognizes that these two forms of incentives complement each other,” said Leer.
However, other experts believe that strengthening unemployment benefits should take precedence over sending new direct payments.
“The increase in unemployment insurance would have been more optimal given the constraints we have in fine-tuning the objective,” said RA Farrokhnia, associate professor of business at Columbia Business School.
Unlike stimulus checks, unemployment benefits can target precisely who has been excluded from the workforce due to the pandemic, such as hotel or restaurant workers, Farrokhnia said.