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Third Stimulus Check: Why Your Next Relief Payment May Not Be $1,400

(CBS Detroit) -- A third stimulus check, as part of the Biden administration's $1.9 trillion relief package, is set to be discussed in the Senate. Aside from a $1,400 relief payment, the American Rescue Plan also features higher 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 and support the economy as vaccinations continue. How the bill evolves in the coming days will determine how much money actually reaches the public.

The President and politicians from both parties favor another stimulus check. And they want to do it quickly. However, Republicans and some conservative Democrats have pushed back against the overall price tag and other specific aspects of the plan, like the minimum wage hike. Democrats control both houses of Congress and are willing to pass stimulus legislation on a straight party-line vote. Budget reconciliation lets them sidestep the filibuster in the Senate and move the stimulus package to the President's desk with a simple majority. But the process also limits what can be included. The minimum wage hike has been ruled off-limits and seems likely to become a casualty of the process.

Why Your Stimulus Check Could Shrink

The topline $1,400 number that's drawn so much attention seems destined to become a reality. But the actual amount that people receive 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).

The idea of changing the annual income requirement has gathered some steam. In early February, Democratic Senator Joe Manchin of West Virginia and Republican Senator Susan Collins of Maine proposed an amendment aimed at "targeting economic impact payments to Americans who are suffering from the effects of COVID–19, including provisions to ensure upper-income taxpayers are not eligible."

To that end, the Biden administration has reportedly agreed to phasing out checks more quickly. So while the threshold would remain at $75,000 ($150,000), those earning $80,000 ($160,000) or more would 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 would better target the economy, it would also reduce the number of people receiving a third stimulus check and the amount received by others. Upwards of 30 million CARES ACT payments were received by households with incomes above $75,000. Most of those would not receive a check if a faster phase out were implemented. Those earning between $75,000 and $80,000 would not receive the full $1,400.

Why Your Stimulus Check Could Grow

Dependent children could 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 looks to expand the pool of eligible dependents to include dependents over the age of 16. In that group would be college students and older adults with certain kinds of disabilities. Such a change could make an estimated 13.5 million more people eligible to receive stimulus checks.

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 isn't far away, and neither is the tax deadline (April 15, unless you live in Texas).

The amount of the next stimulus check will depend on the latest tax filing the IRS has received. If the stimulus package is signed by mid-March of 2021, some people will have filed their 2020 taxes and others won't have. That means a third payment could be based on 2019 or 2020 taxes. 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 Could You Receive Your Stimulus Check?

The administration remains focused on signing the American Rescue Plan into law by March 14. That is the day when the current $300 federal unemployment benefit bonus expires. Assuming President Biden can sign the relief package on March 14, direct deposits would likely start the week of March 22, with checks beginning to arrive the week of March 29.

There's a good chance that the March 14 target date will slip, however. The House passed the American Rescue Plan early Saturday morning with minimal changes. But the bill faces a rockier road in the Senate when debate starts this week. The body's official parliamentarian recently ruled that the minimum wage hike isn't related to the budget and therefore can't be passed using reconciliation, the process that allows bills to proceed with a simple majority. It will have to be reworded or stripped out. The latter is much more likely, given the reservations of centrist Democrat Joe Manchin of West Virginia. Senate Democrats have also questioned other aspects of the stimulus package, such as the framework for extended unemployment benefits and the money allocated for states and localities.

If the upper chamber passes the relief package with any amendments, it would return to the lower chamber for another vote. Supposing the stimulus package leaves Congress by March 22, it would likely be signed into law on March 23. Direct deposits would start arriving in bank accounts by March 29, and checks would start being mailed on April 5.

The House could have its own issues with the Senate's amendments, further delaying the process. If the stimulus package makes it out of Congress by April 5, the President would probably sign it on April 6. Direct deposits would start arriving in bank accounts by April 12, and checks would start being mailed on April 19. The timeline could be extended for any number of reasons.

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 730,000 people initially applying for unemployment insurance in the third week of February. (For reference, a typical pre-pandemic week saw about 250,000 new unemployment applications.) An additional 451,000 sought Pandemic Unemployment Assistance. Another 1 million people received Pandemic Emergency Unemployment Compensation, benefits for those whose unemployment aid has otherwise run out. That group now totals 5 million people.

At the start of February, approximately 19 million people were receiving unemployment benefits of one kind or another. That's one out of every nine workers. While the official unemployment rate is 6.3 percent, the actual rate is probably closer to 10 percent, given all the people who have dropped out of the labor force.

An economic bounceback depends on the widespread distribution of a COVID vaccine. But efforts to inoculate the public have proceeded sluggishly at times. Shortages and winter weather have 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, over 50 million people have received at least one dose of a vaccine.

The Food & Drug Administration just authorized Johnson & Johnson's one-shot vaccine. Four million doses shipped on Monday. Biden stated yesterday that the country will have enough doses to vaccinate all Americans by the end of May. But mask-wearing and a general lack of normalcy could continue into 2022. Currently, domestic COVID cases exceed 28 million, while deaths have reached 517,000.

Originally published at 2:46 p.m. ET on Thursday, February 11, 2021.

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