Third Stimulus Check: Your Next Relief Payment May Not Be $1,400
(CBS Detroit) -- A third stimulus check is part of the $1.9 trillion economic relief package signed into law by President Biden. Aside from the $1,400 payment, the American Rescue Plan also includes extended unemployment benefits, a bigger child tax credit and billions more dollars to stop the spread of COVID-19. These and other programs aim to support millions of Americans dealing with financial troubles brought on by the pandemic. They're also designed to support the economy as vaccinations continue.
The third stimulus check polls very well among the public, as does the third stimulus package in general. However, Republicans and some centrist Democrats pushed back against the overall price tag and other specific aspects of the plan. Democrats, who control both houses of Congress, passed the stimulus legislation with narrow majorities. Budget reconciliation let them sidestep the filibuster in the Senate. But the slim majority gave moderate Democrats like Joe Manchin of West Virginia more power to make changes. That led to the elimination of the minimum wage hike and the unemployment benefit increase.
Why Your Stimulus Check Could Shrink
The topline $1,400 number that's drawn so much attention won't necessarily be what people receive. The actual amount could change based on income restrictions, the number of dependents and other factors.
The previous two stimulus checks phased out for individuals with an adjusted gross income (AGI) over $75,000 per year and married couples with an AGI over $150,000. (AGI is the total of one's wages, interest, dividends, alimony, retirement distributions and other sources of income minus certain deductions, such as student loan interest, alimony payments and retirement contributions.) For every dollar of income over the threshold, the previous two stimulus payments decreased by five percent. So the $1,200 payment from the CARES Act shrank to $0 for incomes over $99,000 ($198,000), and the $600 from the second stimulus shrank to $0 for incomes over $87,000 ($174,000).
This stimulus package phases out checks more quickly. So while the threshold remains at $75,000 ($150,000), those earning $80,000 ($160,000) or more will receive nothing. If the phase out progresses at a constant rate -- in this case, 32 percent -- that would mean people would receive $.32 less for every $1 they earned over the limit.
The idea behind targeting stimulus checks to reach lower-income people is to better ensure that the money gets spent in the broader economy rather than saved. According to a survey from the Federal Reserve Bank of New York, the average percentage of the first stimulus payment that a household spent on essentials decreased as income increased. The average percentage of the first stimulus payment that a household saved increased as income increased.
While speeding up the phase out better targets the economy, it also reduces the number of people receiving a third stimulus check and the amount received by others. Upwards of 30 million CARES ACT payments went to households with incomes above $75,000. Assuming they have the same income, most of them will not receive a check with a faster phase out. Those earning between $75,000 and $80,000 will receive less than the full $1,400.
Why Your Stimulus Check Could Grow
Dependents may also affect the size of your next stimulus check. The second stimulus check included $600 per dependent child, defined as anyone under the age of 17 living in your household. There was no limit to the number of children. For the purpose of the phaseout, that $600 was added to the total for the adult(s). As an example, one adult, who has two kids, would have received $1,800 in January if her AGI was under $75,000. That amount would have decreased to $1,200 at an AGI of $87,000; $600 at an AGI of $99,000 and $0 at an AGI of $111,000.
The American Rescue Plan expands the pool of eligible dependents to include dependents over the age of 16. In that group are college students and older adults with certain kinds of disabilities. Such a change makes an estimated 13.5 million more people eligible to receive stimulus checks.
To expand upon the previous example, what if that same adult with two kids and an income under $75,000 also has a third dependent in college? She would receive $5,600 this time around. Assuming the new faster phaseout, that amount would decrease to $4,200 at an AGI of $80,000; $2,800 at an AGI of $85,000; $1,400 at an AGI of $90,000 and $0 at an AGI of $95,000.
The amount of a third stimulus check could also be affected by a recipient's taxes. To speed up distribution, the Internal Revenue Service has used the most recent tax filings to determine AGI and, therefore, eligibility. AGI changes from year to year, as people receive raises, switch jobs or become unemployed. The first relief payment was passed in March of 2020. At that point, some people had filed their 2019 taxes and some had not. So the check amount could have been based on 2018 or 2019 taxes. The second relief payment became law in December of 2020, after most everyone had filed their 2019 taxes. So that amount was determined by 2019 tax filings.
The third relief payment was signed over a month before the tax deadline (April 15, unless you live in Texas). The amount could be based on an individual's 2019 or 2020 taxes, depending on when they file. The past year has seen significant unemployment, which often hurts the finances of individual households. Many others have seen their hours reduced. If one's AGI changes significantly from one tax filing to the next, so too could the amount of their next stimulus check.
When You Could Receive Your Stimulus Check
The administration signed the American Rescue Plan into law ahead of the March 14 deadline. That is the day when the current $300 federal unemployment benefit bonus expires. Because Biden signed the stimulus package before the weekend, direct deposits could start arriving in bank accounts by March 17, and checks could start being mailed on March 24. With the second stimulus check, direct deposits were initiated within two business days and paper checks began hitting the mail within three business days. So a similar timeline could play out this time too.
That leaves an outside chance that people start receiving money even sooner. The White House press secretary Jen Psaki stated that stimulus payments could start arriving by the weekend.
What Could Delay My Stimulus Check?
The House didn't have any issues with the Senate's amendments that extended the timeline. How progressives in the House might react to changes from the Senate was a concern. A higher minimum wage, which the Senate removed from the bill, has long been a priority of the Democratic party's progressive wing.
Senate Democrats also changed other aspects of the stimulus package, such as the amount of extended unemployment benefits and how the money allocated for states and localities could be spent. Concern about who receives stimulus checks led to an agreement between the President and centrist Democrats to phase out stimulus payments more quickly. That also had the potential to stir up progressives, who previously opposed cutting the income cap on checks.
But the Congressional Progressive Caucus backed the bill nonetheless. According to a recent statement, "The American Rescue Plan is a truly progressive and bold package that delivers on its promise to put money directly in people's pockets and decisively crush the coronavirus's spread, which is responsible for our economic crisis. Compared to the response to the Great Recession, this package meets the scale of this unprecedented crisis, delivering the equivalent of seven percent of GDP for the coming year – exactly what economists say is needed to jumpstart our economy and the labor market."
As the statement continues, "...despite the fact that we believe any weakening of the House provisions were bad policy and bad politics, the reality is that the final amendments were relatively minor concessions."
Distributing the third stimulus check could create delays however. The Internal Revenue Service (IRS), the agency charged with sending out payments, is right in the middle of tax season. While CARES Act checks went out around the same time last year, the tax deadline was pushed from April 15 to July 15. (No extension has been announced this year.) The second stimulus check was distributed before the 2020 tax season began. This time, though, the IRS will have to handle the dual burden of sending out millions of relief payments while accepting and processing millions of tax returns.
Distributing periodic Child Tax Credit checks is another task that will fall to the IRS. But that isn't due to to start until July.
Why Stimulus Checks Are Still Needed
The economy shrank by 3.5 percent in 2020, the largest single-year decline since the end of World War II. Weekly unemployment figures remain historically high, with approximately 712,000 people initially applying for unemployment insurance last week. (For reference, a typical pre-pandemic week saw about 250,000 new unemployment applications.) An additional 478,000 sought Pandemic Unemployment Assistance.
Approximately 20 million people were receiving unemployment benefits of one kind or another as of late February. That's about one out of every nine workers. While the official unemployment rate is 6.2 percent, the actual rate is probably closer to 10 percent, given all the people who have dropped out of the labor force. On the bright side, employers added another 379,000 jobs last month.
An economic bounceback depends on the widespread distribution of a COVID vaccine. And efforts to inoculate the public are starting to improve. Shortages and winter weather forced some areas to temporarily close vaccination centers and scale back administering the vaccine in recent weeks. Many who qualify have faced problems in scheduling appointments. Nevertheless, Americans have received over 98 million doses, with 19.3 percent of the population having received at least one dose and 10 percent completely vaccinated. Vaccination numbers continue to increase at a rate of about 2.2 million doses per day.
The Food & Drug Administration just authorized Johnson & Johnson's one-shot vaccine. Four million doses shipped on last week. Biden has recently stated that the country will have enough doses to vaccinate all Americans by the end of May. Actually putting needles in arms will likely take longer. Mask-wearing and a general lack of normalcy could continue into 2022. Currently, domestic COVID cases have surpassed 29 million, while deaths have climbed past 531,000.
Originally published at 2:46 p.m. ET on Thursday, February 11, 2021.
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