Some economists, Republicans and moderate Democrats have argued that this third round of “economic impact payments” — more commonly referred to as “stimulus checks” or “relief payments” — should go only to the hardest-hit families. This new Democratic proposal is a compromise: The vast majority of people who received a prior stimulus payment will get one again, although the most affluent families would be left out.
Below are more details about the latest plan, which the House and the Senate would have to pass before it could be signed into law.
Who would get a $1,400 payment?
Individuals with adjusted gross incomes up to $75,000 would receive the full $1,400 payment. Heads of household earning up to $112,500 also would qualify, and married couples with adjusted gross incomes up to $150,000 would get a $2,800 payment.
Similar to the prior rounds of stimulus payments, people who earn slightly above those thresholds would qualify for a partial payment. But with this new proposal, fewer people would receive a partial payment because Democrats propose cutting off the checks entirely for individuals earning $100,000, heads of household earning $150,000 and married couples earning $200,000.
About 84 percent of American households would receive a full payment and an additional 6.8 percent would get a partial payment, said Kyle Pomerleau, a fellow at the American Enterprise Institute who specializes in tax policy. In Biden’s initial proposal, 84 percent of households would have received the full payments, but an additional 8.5 percent would have gotten partial payments.
How big would payments be for kids?
Under the House Democratic plan, parents of children would receive an additional $1,400 per child. That means a family of four would receive $5,600.
Democrats are separately pushing a child tax benefit that would provide over the course of a year $3,600 per child for those younger than 6, and $3,000 per child for those ages 6 to 17. A version of that plan is expected in the final agreement.
When could the payments start going out?
The new round of $1,400 payments would not go out until after Congress passes its broad relief package. The Senate and the House took the first step in that process by approving a budget resolution. Now Congress is working out the final details.
White House officials are determined to finalize the legislation before mid-March — when millions of jobless Americans would begin losing unemployment benefits if Congress does not act to prevent it.
Once the legislation is signed, payments should start going out in a matter of days. The bulk of the second round of payments worth $600 each went out within three weeks via direct deposit. Mailed checks take slightly longer.
The potential hitch is that the Internal Revenue Service typically sends out the payments, and the IRS will be in the middle of a busy tax-filing season from mid-February through mid-April. The IRS staff is stretched thin, meaning there could be delays as the agency juggles both tax filings and stimulus payments.
How much would this third round of stimulus payments cost?
This latest Democratic proposal for $1,400 payments for singles earning up to $75,000 and couples earning up to $150,000 would cost about $422 billion, according to the Joint Committee on Taxation, a nonpartisan arm of Congress that analyzes the costs of different legislation.
The Committee for a Responsible Federal Budget estimated that Biden’s initial proposal for the checks would have cost about $465 billion.
Will the payments be based on 2019 income or 2020 income?
The House Democratic plan calls for the IRS to use “the information on 2019 or 2020 tax returns.” What this means is the IRS will try to use people’s 2020 tax information ― if the person has already filed a 2020 return. Otherwise, the IRS will use 2019 information.
Taxpayers who have not filed for 2020 may receive a partial payment from the IRS based on their 2019 returns. However, many taxpayers may be owed bigger payments based on their 2020 returns than they received based on their 2019 returns. In the case of taxpayers whose 2020 returns entitle them to larger payments, the IRS will send taxpayers the remaining balance once those most recent returns are processed.
Would ‘adult dependents’ get a payment this time?
Adult dependents are eligible for stimulus payments under the Democrats’ latest plan, a relief to many families with college students and adults with disabilities living at home. That said, the payment will go to the parent or head of household who claims the dependent on their tax return.
In the two prior rounds of stimulus payments, people older than 17 who could be claimed as a dependent on someone else’s tax return — such as college students or adults with disabilities — were not eligible for any stimulus money. About 13.5 million adult dependents were excluded, according to the People’s Policy Project, a left-leaning think tank.
Will these payments help the economy?
There’s conflicting debate about the effectiveness of the direct payments. Most economists support giving more relief to Americans who are struggling to put food on the table or keep their small businesses from closing. But there’s concern that a lot of families are saving their stimulus money. When people save the money, it does not boost the economy. Economists see such savings as a sign that the family did not need the money for basic necessities.
A New York Federal Reserve survey found that 36 percent of the first-round stimulus payments was saved. An additional 35 percent was used to pay down debt. Only 18 percent was spent on essentials such as food and housing. The remaining 11 percent was either donated or spent on nonessential items such as video games.
An estimate of Biden’s proposed stimulus checks by the University of Pennsylvania’s Penn Wharton Budget Model predicted that 73 percent of the $1,400 relief payments “will go directly into household savings and produce limited stimulus effects.” The White House pushed back against that forecast, arguing that there would be a large, positive effect from the payments.
The best argument in favor of the checks is that they have kept many Americans out of poverty during the crisis. An analysis by the left-leaning Institute on Taxation and Economic Policy found that the bottom 20 percent of Americans — those earning less than $21,300 — would see their income rise nearly 30 percent, helping keep them out of poverty.
What happened to the $600 stimulus payments that just went out?
Americans started to receive the $600 stimulus payments in their bank accounts on Jan. 4. Economists at Opportunity Insights, a research center, tracked how many of the payments were saved vs. spent. They found that in January, people with incomes under $46,000 were quick to spend the money, while people with incomes over $78,000 much more likely to save it.
Opportunity Insights co-directors Raj Chetty and John Friedman have argued strongly for limiting a third round of stimulus payments to individuals earning less than $50,000 and couples earning less than $75,000. They say that the need is by far the greatest among these modest-income families and that the economic boost will be much larger if the money goes to lower-income families, because they are likely to spend it right away.
Are Democrats unified on the check proposal?
Senior Democratic officials have split sharply over the past several months on the need and structure of the stimulus payments.
Initially, during the 2020 presidential campaign, Biden gave only measured support for the idea, saying he would back another round of payments if economic conditions required. However, he enthusiastically endorsed the payments during two runoff Senate campaigns in Georgia, vowing that Americans would receive $2,000 stimulus payments if Democrats won those races.
Biden has since insisted on sending stimulus payments worth $1,400, to supplement the $600 payments sent in December (for a total of $2,000), while expressing openness to tightening eligibility surrounding who receives them. Sen. Joe Manchin III (W.Va.), a centrist Democrat, said he would like to see the checks phase out beginning at $50,000 for individuals and $100,000 for couples. Manchin is working with a bipartisan group of senators on this more targeted approach.
More liberal Democrats have called for the stimulus payments to be more generous. Sens. Edward J. Markey (D-Mass.), Bernie Sanders (I-Vt.) and then-Sen. Kamala D. Harris (D-Calif.) called for providing monthly checks worth $2,000 to Americans until the pandemic ends. Rep. Alexandria Ocasio-Cortez (D-N.Y.) and others on the left have also said Democrats should provide a new round of $2,000 payments.
What have Republicans said about the checks?
Republican policymakers have offered conflicting views about the stimulus payments.
As president, Donald Trump was a forceful advocate of the payments, which included his name on the earlier round of checks. Sen. Josh Hawley (R-Mo.) and a handful of Senate Republicans also expressed support for $2,000 payments, but other Republican lawmakers panned them as wasteful government spending.
A group of 10 GOP senators seeking a bipartisan deal with Biden pitched $1,000 stimulus payments. That group suggested significantly lowered income thresholds to $40,000 per year for individuals and $80,000 for couples. Many of the Republican lawmakers in the group — led by Sen. Susan Collins (Maine) — are skeptical of the merits of the payments but included them as a good-faith effort to show Biden that they were serious about negotiating, said one person familiar with the group’s discussions, who spoke on the condition of anonymity to describe internal dynamics.
What has the White House said about this proposal?
White House officials have been adamant that the $1,400 stimulus payments must be included in the relief plan, and that Biden is not open to lowering that amount.
White House press secretary Jen Psaki has said the administration is open to lowering the income thresholds on the payments. She has also declined to state the administration’s preferred position on the thresholds, appearing to defer to negotiations with Congress on the matter.
“There is a discussion about the phaseout and what that looks like,” Psaki said at Friday’s news briefing. “A full conclusion has not been made.”