THE $ 1.9 trillion stimulus package proposed by President Joe Biden, would provide significant financial assistance to the poorest households in the United States, which faced higher rates of income and job losses during the coronavirus pandemic, a new analysis finds.
According to the plan that advances in the Chamber’s Means and Means Committee, the next stimulus project would send US $ 1,400 to eligible people, in addition to expanding the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) ). In all, the three programs would provide a 33% increase in pre-tax incomes for the poorest 20% of Americans – or an increase of $ 3,590 per family – according to the Institute of Taxation and Economic Policy.
The three programs – a third round of stimulus checks, plus the two expanded tax credits – would provide a similar dollar amount of average benefits to 95% of US households, the ITEP analysis found. But the impact would be much greater for low-income families because the benefits would represent a larger share of their income. This is important because lower-income families are more likely to spend that money quickly, boosting the economy while stabilizing their own families, ITEP’s director of federal tax policy, Steve Wamhoff, told CBS MoneyWatch.
“There are reasons why this is important at the micro level – helping people in need – but also at the macro level, the best way to do this is to put money in the hands of those who are going to spend it,” he said.
Middle- and upper-income Americans recovered more quickly during the economic downturn caused by the pandemic than low-income families, in part because the latter are more likely to work in industries that have had the greatest impact, such as restaurants or retail.
This is creating different spending patterns, with families earning more than $ 78,000, mostly stocking your second stimulus checks, the $ 600 payments that the US began sending in December, according to a recent study. On the other hand, families below this income tend to spend the money.
A benefit of $ 3,590
The benefit of the three programs would provide a total income increase of $ 3,590 for the poorest fifth of Americans, who earn an average of $ 10,900 per year, concluded ITEP. The benefit for the middle 20% of households would be similar, at $ 3,370, but would have a lesser proportional impact because of their higher average income in that quintile, at $ 51,500 a year.
Another study by the Tax Policy Center found a similar boost with the proposed stimulus plan, with its analysis projecting that a fifth of the bottom part of American wage earners would see 20% post-tax earnings gains. Two-thirds of the proposed benefits would go to families earning $ 91,000 a year or less, the Tax Policy Center found.
About 11% of the benefits would be enjoyed by families that are part of the richest 20% or those with an income of $ 164,000 or more, the report said.
“The House Ways & Means Committee could have done a better job targeting economic impact payments and improved CTC,” wrote Howard Gleckman of the Tax Policy Center in a blog. “Still, his bill would provide substantial relief for low- and moderate-income families at a time when many are in deep economic crisis.”
Child tax credit
Among the significant changes in the stimulus effort would be a review of the Child Tax Credit. Under the plan, the CTC would be expanded to up to $ 3,600 for children under 6 and $ 3,000 for children under 17.
The current CTC limit is now $ 2,000 for many families, although benefits are limited for the poorest families. This is one of the reasons why some supporters of the fight against poverty have asked for a revision of the tax credit. For example, researchers at Stanford University and Syracuse University last year found that “the vast majority of children living in families in the lower decile [or bottom 10%] national [income] distribution are completely ineligible “for credit.
Under the Democrats’ plan to expand the CTC, another 4.1 million children would be lifted out of poverty, according to the Center on Budget and Policy Priorities, a center for left-wing studies. The plan would also make the tax credit payable monthly, instead of being requested annually when you file your taxes.
In other words, a family with three children under the age of 6 would receive an annual CTC of $ 10,800, which would be deposited in their bank account by the IRS in monthly payments of $ 900.
The proposal would also extend Earned Income Tax Credit to more workers without low-income children, increasing the maximum tax credit for childless adults from about $ 530 to about $ 1,500. It would also increase the income limit from about $ 16,000 to at least $ 21,000 to qualify, said the CBPP.
Overall, the biggest boost to a low-income family’s finances is likely to come from the proposed $ 1,400 checks, the ITEP analysis found. But for families with children, the benefit of expanded CTC can be significant – even in some cases, overcoming the impulse of a third stimulus check, his analysis found.