Republicans and Democrats are both interested in including a second round of stimulus checks in the next coronavirus relief bill, but they are looking at different parameters for the payments.
House Democrats passed legislation in May that would keep the same income limits as the payments that have already largely been distributed, while Republicans have suggested that they may provide for lower limits in a forthcoming proposal.
Under the law passed in March that established the first round of payments, individuals with incomes of up to $75,000 and married couples making up to $150,000 qualified for the full amount, with the amount reduced for those with higher incomes. Individuals with incomes above $99,000 and married couples with no children and incomes above $198,000 are not eligible for any payment.
Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSenate GOP punts coronavirus package to next week Pelosi, McConnell announce John Lewis will lie in State Overnight Defense: Senate passes annual defense policy bill that sparked Trump veto threat | Military has considered two waivers for transgender troops since ban MORE (R-Ky.) made comments earlier this month suggesting that Republicans may seek to target a second round to the lowest-income households.
“I think the people that have been hit the hardest are people who make about $40,000 or less,” he said.
It’s unclear how committed Republicans are to lowering the income limits, and what exactly a lower ceiling would look like. But GOP lawmakers and the White House have indicated that they want to focus coronavirus relief efforts on those who have been most affected by the pandemic and that they want to limit the total price tag of the next coronavirus bill.
Treasury Secretary Steven MnuchinSteven Terner MnuchinSenate GOP punts coronavirus package to next week On The Money: Mnuchin says GOP has ‘fundamental’ deal on T coronavirus relief package | Inside the GOP stimulus proposal | Weekly jobless claims rise to 1.4 million Trump blames Democrats after GOP rejects payroll-tax cut MORE said Monday that Republicans are using a $1 trillion price tag for the overall package as their starting point. The Joint Committee on Taxation estimated that the first round of payments would lower federal revenue by nearly $300 billion, so a second round of payments that is identical in scope to the first would account for a significant percentage of Republicans’ desired total cost.
Democrats want to spend more, and the House has already passed a new $3 trillion relief bill.
House Speaker Nancy PelosiNancy PelosiPelosi says Trump decision to roll back fair housing rule is a ‘betrayal of our nation’s founding values’ Trump administration sending tactical border team to Seattle Trade negotiations mustn’t short-circuit domestic debate MORE (D-Calif.) criticized the McConnell’s suggestion of a $40,000 income limit.
“I think families making over $40,000 probably need assistance … depending on their family situation,” she said.
Conservatives have argued for a new limit.
Brandon Arnold, executive vice president of the right-leaning National Taxpayers Union, argued that “it’s definitely a step in the right direction to lower the income threshold.” He said that it doesn’t make sense to give payments to people who are well off because the payments are more about providing relief to taxpayers than they are about stimulus.
But Ernie Tedeschi, a former Treasury Department economist during the Obama administration who now works at Evercore ISI, said that he doesn’t see a good economic reason for reducing the income limits.
He said that the first round of payments “was already well-targeted at lower- and middle-income families” and that these families are likely to quickly spend the money.
Tedeschi analyzed a scenario in which individuals making up to $40,000 and married couples making up to $80,000 were eligible for the full payment amounts, and the phase-out rate was the same as with the first round of payments. He estimated that in this situation, 20 million fewer families would get payments than did under the first round, and many families who still did receive payments would get smaller ones. He also said that payments with these income limits would cost about $60 billion less than payments with the same limits as the first round, and argued that that amount of savings is insignificant in the context of a big stimulus bill.
It’s unclear when Congress will pass another coronavirus relief bill. Republicans and Democrats will have to reach an agreement on a number of other issues in addition to the design of a second round of direct payments. They hope to pass something before leaving for their August recess.
Economists and tax professionals across the ideological spectrum have praised the IRS for quickly getting out the vast majority of the payments provided for in late March, and think that the IRS could also distribute a second round of payments in a prompt fashion.
But some issues arose as the IRS issued the first round of payments. For example, lawmakers and tax professionals are concerned about the fact that the IRS has said that non-filers who receive certain federal benefits and missed deadlines to use a web tool won’t receive payments for their dependents until they file tax returns next year.
Nina Olson, the former national taxpayer advocate at the IRS who now is executive director of the Center for Taxpayer Rights, said that Congress should direct the IRS to issue dependent payments for affected households this year.
“In the second round, we want to make sure that Congress isn’t compounding the problems from the first round,” she said.
Some people are still waiting on their first payment, including a number of low-income taxpayers who aren’t required to file tax returns and don’t receive certain Social Security, Railroad Retirement benefits, Supplemental Security Income and veterans benefits.
Tedeschi said that the challenges in getting payments to non-filers is a reason why the next coronavirus response package shouldn’t just include another round of checks and should contain a number of other relief elements as well, such as extending the enhanced unemployment insurance and providing more relief to small businesses.
Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, said that Congress and the Treasury Department could take steps to help low-income taxpayers get their payments, such as by expanding the use of prepaid debit cards and providing relief from fees associated with the cards.
“The goal is to make it easier to apply for the payment, and then faster to receive the payment if they’re unbanked,” she said.
During a webinar on Tuesday, IRS Commissioner Charles Rettig called on tax professionals to help the agency get payments to people for whom it doesn’t have information.
“The underserved communities here need help,” he said.
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