Summary: The Coronavirus Aid, Relief and Economic Security (CARES) Act would provide families with emergency “recovery rebates”. The bill would provide individuals with an advance refundable credit worth $1,200 ($2,400 for married couples) plus $500 for qualifying dependent children. These payments would begin to phase out starting at $75,000 in AGI ($150,000 for married couples and $112,500 for heads of household). Advance payments would be sent based on taxpayers' 2018 or 2019 AGI if available; for taxpayers who qualify with previous years' AGI but would not with 2020 AGI, no repayment is required. PWBM projects that the rebates would cost $285 billion. (Note: this estimate reflects PWBM's updated understanding of the bill's legislative language regarding advance payments; an earlier version of the estimate can be found here.)
Table 1: Distribution of Federal Tax Change Under The CARES Act
| Income group | Average benefit | Share receiving rebate | Percent change in after-tax income | Share of benefit | Share of federal taxes paid | |
|---|---|---|---|---|---|---|
| Under current law | Under the proposal | |||||
| Bottom quintile | $1,385 | 100.0% | 46.2% | 24.3% | 0.1% | -2.4% |
| Second quintile | $1,665 | 100.0% | 7.3% | 22.4% | 2.4% | 0.3% |
| Middle quintile | $1,765 | 100.0% | 4.1% | 22.9% | 10.3% | 9.0% |
| Fourth quintile | $1,990 | 95.5% | 2.6% | 22.3% | 19.1% | 18.8% |
| 80-90% | $1,485 | 78.6% | 1.2% | 6.8% | 15.0% | 15.8% |
| 90-95% | $450 | 27.9% | 0.3% | 1.0% | 10.9% | 12.0% |
| 95-99% | $155 | 8.0% | 0.1% | 0.3% | 16.3% | 18.0% |
| 99-99.9% | $5 | 0.2% | 0.0% | 0.0% | 12.8% | 14.1% |
| Top 0.1% | $0 | 0.0% | 0.0% | 0.0% | 13.0% | 14.4% |
Note: “Income” is defined as AGI plus: above-the-line deductions, nontaxable interest income, nontaxable Social Security benefits, nontaxable pensions and annuities, employer-side payroll taxes, and corporate liability. Note that this definition excludes transfer income and thus understates low-income tax units' income.