He $ 1.9 trillion stimulus package proposed by President Joe Biden would provide significant financial assistance to the poorest households in the U.S., which have faced higher rates of income and job losses during the Coronavirus pandemic, finds a new analysis.
According to the plan put forward by the House Ways and Means Committee, the next stimulus bill would send $ 1,400 to eligible people, in addition to extending the Child Tax Credit (CTC) and the Tax Credit income (EITC). Taken together, the three programs would provide a 33% boost to pre-tax income for the poorest 20% of Americans, or a $ 3,590 rise per family, according to the Institute for Taxation and Economic Policy.
The three programs (a third round of stimulus checks, plus the two extended tax credits) would provide a similar amount in average profit dollars to 95% of U.S. households, according to the ITEP analysis. But the impact would be much greater for lower-income households, as the benefits would account for a larger share of their income. This is important because lower-income households are more likely to spend that money quickly, providing a boost to the economy while stabilizing their own households, CBW MoneyWatch, director of federal tax policy, told CBS MoneyWatch. ITEP, Steve Wamhoff.
“There are reasons why this is important at the micro level (helping people who need it), but also at the macro level, the best way to do that is to get money into the hands of people who will spend it,” he said. .
Middle- and high-income Americans have recovered more quickly during the economic downturn caused by the pandemic than lower-income families, in part because the latter are likely to work in more successful industries. such as restaurants or retail.
This is creating different spending patterns, and households are primarily earning more than $ 78,000 eliminating their second stimulus controls, the $ 600 payments the U.S. began shipping in December, according to a recent study. In contrast, families below this income have tended to spend the money.
A profit of $ 3,590
The benefit of the three programs would provide an increase in total income of $ 3,590 for the poorest fifth of Americans, who earn an average of $ 10,900 annually, according to ITEP. The median income for a household in 20% would be similar, at $ 3,370, but would have a proportionately lower impact due to their higher average income in this quintile, at $ 51,500 per year.
Another study by the Center for Tax Policy found a similar impetus to the proposed stimulus plan, with its analysis projecting that the bottom one-fifth of U.S. winners would earn income gains of 20% after taxation. Two-thirds of the proposed profits would go to households earning $ 91,000 a year or less, the Center for Fiscal Policy found.
About 11 percent of the benefits would be enjoyed by households of the top 20 percent of employees, or those with incomes of $ 164,000 or more, he said.
“The House Roads and Means Committee could have done a better job targeting both economic impact payments and the improved CTC,” Howard Gleckman of the Center for Fiscal Policy wrote in a blog post. “Still, his bill would provide substantial relief to low- and moderate-income households at a time when many are in deep economic hardship.”
Children’s tax credit
Among the significant changes in the stimulus effort would be a revision of the children’s tax credit. Under the plan, the CTC would be expanded to $ 3,600 for children up to 6 years old and $ 3,000 for children up to 17 years old.
The current CTC limit is now $ 2,000 for many families, although benefits are limited for poorer families. This is one of the reasons why some anti-poverty advocates have called for a review of the tax credit. For example, researchers at Stanford and Syracuse University last year found that “the vast majority of children living in lower decile households [or bottom 10%] of the national [income] distribution is not fully eligible “for credit.
According to the Democrats’ plan to expand the CTC, an additional 4.1 million children would be lifted out of poverty, according to the Center for Priority Budgets and Policies, a left-wing think tank. The plan would also pay the tax credit monthly, instead of claiming it 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 the IRS would deposit into their bank account in monthly payments of $ 900.
The proposal would also extend the tax credit for income earned to more low-income childless workers, raising the maximum tax credit for childless adults from about $ 530 to about $ 1,500. It would also raise the income limit from about $ 16,000 to at least $ 21,000 to qualify, the CBPP said.
Overall, the biggest boost to the finances of a lower-income household is likely to come from the proposed $ 1,400, according to the ITEP analysis. But for families with children, the benefit of extended CTC could be significant, even in some cases outweighing the impetus of a third stimulus control, the analysis found.