The $ 1.9 billion stimulus package proposed by President Joe Biden, will provide significant financial assistance to the poorest households in the US, which during the coronavirus pandemic, find a new analysis.
Under the House Ways and Means Committee plan, the next stimulus bill will send $ 1,400 to eligible people, as well as the Child Tax Credit (CTC) and the Earnings Income Tax Credit (EITC). Taken together, the three programs will boost the pre-tax income of the poorest 20% of Americans – or an increase of $ 3,590 per family – according to the Institute for Taxation and Economic Policy.
The ITEP analysis found that the three programs – a third-round stimulus test, plus the two extended tax credits – would provide a similar amount of average benefits in dollars to 95% of U.S. households. 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 the households with the lowest earnings are more likely to spend the money quickly, which boosts the economy and stabilizes their own households, Steve Wamhoff, director of federal tax policy, told ITS.
“There are reasons why it is important at the micro level – to help people who need it – but also at the macro level. The best way to do that is to get money in the hands of people who are going to spend it,” he said. said.
Middle- and high-income Americans recovered faster during the economic downturn caused by the pandemic than lower-income households, in part because the latter are more likely to work in industries that have suffered a greater blow, such as restaurants or retail.
It creates different spending patterns, with households earning more than $ 78,000 most of the time their second stimulus checks sock away, the $ 600 payments that the U.S. began sending out in December, according to a recent study. In contrast, families below this income tended to spend the money.
A $ 3,590 benefit
The benefit of the three programs would yield a total revenue boost of $ 3,590 for the poorest fifth American, who earns an average of $ 10,900 annually, ITEP found. The benefit for the middle 20% of households would be equal to $ 3,370, but would have a smaller proportional impact due to their higher average income in that quintile, at $ 51,500 per year.
In another study by the Tax Policy Center, a similar boost was found in the proposed stimulus plan, with the analysis that the bottom fifth of U.S. earners would achieve an income gain of 20% on an after-tax basis. The Tax Policy Center found that two-thirds of the proposed benefits go to households earning $ 91,000 a year or less.
About 11% of the benefits will be enjoyed by households in the top 20% of earners, or those with incomes of $ 164,000 or more.
“The House Ways & Means Committee could have done a better job targeting both economic impact payments and the improved CTC,” Howard Gleckman of the Tax Policy Center wrote in a blog post. “Yet the bill will provide significant relief to low- and moderate-income households at a time when many are in severe economic distress.”
Child tax credit
Among the important changes in the stimulus effort is the revamping of the child tax credit. Under the plan, the CTC will be expanded to $ 3,600 for children up to 6 years old and $ 3,000 for children up to 17 years old.
The CTC’s current limit is now $ 2,000 for many families, although the benefits are limited for the poorest families. This is one of the reasons why some anti-poverty advocates are pushing for the revaluation of the tax credit. Last year, researchers at Stanford University and Syracuse University found that ‘the vast majority of children live in lower decile households. [or bottom 10%] of the national [income] distribution is completely “not eligible” for the credit.
According to the Democrats’ plan to expand the CTC, a further 4.1 million children would be rescued from poverty, according to the Center for Budget and Policy Priorities, a left-leaning think tank. The plan will also make the tax credit payable monthly, rather than being claimed annually when you file 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 monthly by the IRS into their bank account.
The proposal would also extend the earnings-related income tax credit to more low-income childless workers, raising the maximum tax credit for childless adults from about $ 530 to about $ 1,500. It would also increase the income tax 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 checks, the ITEP analysis found. But for families with children, the benefit of the extended CTC can be significant – even in some cases surpassing the boost of a third stimulus test, the analysis found.