WASHINGTON – The economic relief plan that is being brought to President Biden’s table has been classified as the most ambitious anti-poverty initiative in the United States in a generation. But within the $ 1.9 trillion package, there are many advantages for the middle class as well.
Whether it be direct stimulus payments, a series of tax benefits or an expansion of the Affordable Care Act, the project will bring a major economic boost to middle-income families. In some cases, these families will have resisted the pandemic relatively unscathed, and those who are concerned about the cost of legislation have suggested that the definition of the middle class has expanded to include families who are really well off.
An analysis of the Tax Policy Center published this week estimated that middle-income families, those earning $ 51,000 to $ 91,000 a year, will see their after-tax income increase 5.5 percent as a result of tax changes and stimulus payments in the legislation. The increase for this income group is about twice as generous as what it received after the 2017 Tax and Employment Reduction Act.
Targeting an aid package more narrowly to solidly help the middle class has been a challenge, given that the cost of living varies widely in different parts of the United States.
“For much of the country, $ 160,000 buys the house on the hill,” said Howard Gleckman, a senior member of the Urban-Brookings Tax Policy Center, who pointed out that a couple on this income level in New York City, for example , would be stretched.
Marc Goldwein, senior policy director for the Federal Responsible Budget Committee, estimated that a family of five with a family income of $ 150,000 could receive about $ 10,000 from the federal government this year, suggesting that the stimulus package would do much more than alleviating poverty.
Many economists argue that targeting aid to the poorest will bring the greatest benefit, because they are more likely to recover quickly and spend money on groceries, rent and other necessities, stimulating the economy. However, after a year of avoiding travel and dining, middle-class families are likely to make a splash while the pandemic subsides.
The Biden government and the Democrats in Congress are betting that by flooding the economy with money, they can start a faster recovery.
Here are some of the ways in which the bill will help the middle class.
Direct checks
This time, Americans will receive stimulus checks of up to $ 1,400 per person, including dependents.
The size of payments is reduced for individuals who earn more than $ 75,000 and couples who earn more than $ 150,000. And they are cut for individuals who earn $ 80,000 or more and couples who earn more than $ 160,000.
These limits are lower than in previous relief bills, to better ensure that those most in need of checks receive them. But they will still be one of the biggest benefits enjoyed by those who are solidly in the middle class.
Tax credits for parents
The aid package, known as the American Rescue Plan, includes some important changes to the existing tax policy to help families with children struggling to care for them due to the closure of pandemic schools.
The most significant change is for the tax credit per child, which will increase to $ 3,600 (for children under 6) in 2021 from $ 2,000 per child. The credit, which is refundable for people with low taxes, is $ 3,000 per child for children ages 6 to 17.
The existing credit reaches people who earn more than $ 200,000 and couples who earn more than $ 400,000. As with stimulus payments, expanded credit will be phased out for individuals who earn more than $ 75,000 and couples who earn more than $ 150,000.
Frequently asked questions about the new stimulus package
Stimulus payments would be $ 1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for a total of $ 1,400, a single person would need an adjusted gross income of $ 75,000 or less. For heads of households, the adjusted gross income must be $ 112,500 or less, and for couples filing jointly, that number must be $ 150,000 or less. To be eligible for a payment, a person must have a Social Security number. See More information.
Buying insurance through the government program known as COBRA would temporarily be much cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally allows someone who loses a job to purchase coverage from the former employer. But it is expensive: under normal circumstances, a person may have to pay at least 102% of the cost of the premium. According to the relief bill, the government would pay the entire COBRA premium from April 1 to September 30. A person who qualifies for new employer-based health insurance elsewhere before September 30 would lose eligibility for free coverage. And someone who quit their job voluntarily would also not be eligible. Read More
This credit, which helps working families to offset the cost of caring for children under 13 and other dependents, would be significantly expanded over a single year. More people would be eligible and many recipients would have a greater chance. The invoice would also make the credit fully refundable, which means that you could charge the money as a refund even if your invoice was zero. “This will be useful for people at the bottom end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. See More information.
There would be a big problem for those who already have debts. You would not have to pay income tax on forgiven debts if you were eligible for forgiveness or cancellation of the loan – for example, if you have been on an income-based repayment plan for the required number of years, if your school has defrauded you or if O Congress or the president wipes $ 10,000 off the debt of a large number of people. This would be the case for debts forgiven between January 1, 2021 and the end of 2025. Read more.
The project would provide billions of dollars in rent and public service assistance to people who are struggling and at risk of being evicted from their homes. About $ 27 billion would go to emergency rental assistance. The vast majority would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed by state, local and tribal governments, according to the National Low Income Housing Coalition. That adds to the $ 25 billion in assistance provided by the aid package approved in December. To receive financial assistance – which could be used for rent, utilities and other housing expenses – families would have to meet several conditions. Family income cannot exceed 80 percent of the area’s average income, at least one family member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced difficulties (directly or indirectly) due to the pandemic. Assistance can be provided for up to 18 months, according to the National Low Income Housing Coalition. Low-income families who have been unemployed for three months or more would have priority for assistance. See More information.
The legislation also reinforces the tax credits that parents receive to subsidize the cost of daycare this year. The current credit is worth 20% to 35% of eligible expenses, with a maximum value of $ 2,100 for two or more qualified individuals. The stimulus account increases this amount to $ 4,000 for a qualified individual or $ 8,000 for two or more.
The credit amount will be calculated taking into account up to 50 percent of the amount of eligible expenses, up to certain limits, depending on the family income. The law would begin to reduce credit to less than 20% for families with an income in excess of $ 400,000.
Cheaper health insurance
After four years of life support, the Affordable Care Act is expanding, a development that will largely reward middle-income individuals and families, as those on the lower end of the income spectrum generally qualify for Medicaid. Relief legislation expands subsidies for the purchase of health insurance. As a result, a 64-year-old who earns $ 58,000 would see monthly payments fall from $ 1,075 to $ 412 under current law, according to the Congressional Budget Office.
The legislation will now make upper-middle-income Americans eligible for help buying plans on government grants, and the premiums for those plans will not cost more than 8.5% of an individual’s modified gross adjusted income.
Another benefit for the middle class is that the stimulus package makes it easier for unemployed workers to obtain insurance through a federal program called COBRA, which allows people to buy health benefits from their former employers. COBRA prizes will be paid in full by September.
A rescue for retirees
One of the most controversial provisions in the legislation is the $ 86 billion spent on correcting declining multi-sponsor pensions.
The money is a taxpayer ransom for about 185 union pension plans that are so close to collapse that without the ransom, more than one million retired truck drivers, clerks, builders and others could be forced to give up retirement income. . The plans cover about 10.7 million active and retired workers, many of whom are middle class and work in areas such as construction or entertainment, where workers move from job to job.
The legislation gives the weakest plans enough money to pay hundreds of thousands of retirees – a number that will grow in the future – their full pensions for the next 30 years.
But the move drew criticism because pensions were falling long before the pandemic.