The House of Representatives passed the American Rescue Plan Act of 2021, a COVID-19 relief bill that includes direct payments (“recovery rebates”) to families. The rebate value is set to $1,400 per person (including dependents), phasing out over an income range of $75,000 to $100,000 for single filers ($112,500 to $150,000 for head of household filers and $150,000 to $200,000 for married filers). PWBM projects that this provision would cost $428 billion, with 93 percent of families receiving a payment.
Recovery Rebates in the American Rescue Plan Act of 2021 (Senate Version)
The Senate is currently negotiating its own version of the House-passed American Rescue Plan Act of 2021, a COVID-19 relief bill that includes direct payments (“recovery rebates”) to families. Reports indicate that the Senate version of the rebates will phase out more quickly than the House-passed version. The rebate value is set to $1,400 per person (including dependents), phasing out over an income range of $75,000 to $80,000 for single filers ($112,500 to $120,000 for head of household filers and $150,000 to $160,000 for married filers). PWBM projects that this provision would cost $416 billion, with 90 percent of families receiving a payment.
Epidemiological and Economic Effects of the COVID-19 Vaccine in 2021
Please see our previously published analysis.
Ways and Means Committee Child Tax Credit Expansion Proposal
In early February 2021, Congressman Richard E. Neal (D-MA), Chairman of the House Ways and Means Committee, released legislative proposals for COVID-19 economic relief to be considered under the budget reconciliation process. One major element of the proposal is an expansion of the Child Tax Credit (CTC), similar to the plan envisioned in President Biden’s stimulus proposal. The CTC proposal would make the Child Tax Credit fully refundable, and would provide annual benefits of up to $3,600 per child under age 6, and up to $3,000 for children 17 and under. The credit would begin phasing out in value at a rate 5 cents for each additional dollar of income above $75,000 for single filers, $150,000 for married filers, and $112,500 for head of household filers. For tax units with incomes above these phase-out thresholds, the value of the credit would remain unchanged from current law.
PWBM projects that this provision would cost $100 billion. Families in the bottom 80 percent of the income distribution would see an average benefit of over $3,100.
Biden Administration COVID Relief Payments
Among other provisions, the Biden administration’s proposed stimulus plan includes another round of Economic Income Payments (EIPs). The EIPs would provide direct payments of $1,400 per person (dependents would also receive the full value), phasing out at a rate of 5 cents per dollar above $75,000 in income ($150,000 for married filers). PWBM projects that this provision would cost $477 billion, with 95 percent of families receiving a stimulus check.
Congressional Democrats' COVID Relief Payments
Congressional Democrats released an alternative to the Biden administration’s proposed stimulus plan that would narrow eligibility of the stimulus checks. The plan would offer direct payments of $1,400 per person (dependents would also receive the full value), phasing out at a rate of 5 cents per dollar above $50,000 in income ($100,000 for married filers). PWBM projects that this provision would cost $439 billion, with 91 percent of families receiving a check.
GOP COVID Relief Payments
Several GOP senators have proposed an alternative to the Biden administration’s proposed COVID relief bill. Among other provisions, the plan would offer direct payments of $1,000 per adult (with an additional $500 for dependents), phasing out at a rate of 10 cents per dollar above $40,000 in income ($80,000 for married filers). PWBM projects that this provision would cost $225 billion.
Forgiveness of Deferred Payroll Taxes
We estimate the budgetary and distributional effects of permanently forgiving the September to December 2020 payroll tax deferral under President Trump's August executive order. We project that this forgiveness would cost $122 billion dollars.
The Impact of the Coronavirus Pandemic on Social Security’s Finances
PWBM projects that the ongoing coronavirus pandemic reduces the OASDI trust fund depletion date by four years, from 2036 to 2032, under the “U-shaped” recession projected by PWBM. If the recovery is faster (“V-shaped”), the trust depletion date falls by two years, from 2036 to 2034. The conventionally-measured OASDI 75-year actuarial balance worsens between 0.07 and 0.13 percent of future payroll.
The Long-Run Fiscal and Economic Effects of the CARES Act
PWBM estimates that the CARES Act increases GDP by about 5 percent in 2020 while lowering GDP by 0.2 percent in 2030.
Short-Run Economic Effects of the CARES Act
We estimate that the $2.3 trillion CARES Act will dampen the fall in GDP in the second quarter of this year (2020 Q2) from an annualized rate of 37 percent to 30 percent, and will produce around 1.5 million additional jobs by the third quarter (2020 Q3).
Recovery Rebates in the CARES Act: Update
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.)
Charitable Deduction in the CARES Act
The CARES Act establishes a new, temporary charitable deduction (limited to $300) in tax year 2020 for taxpayers who claim the standard deduction. PWBM projects that this provision would cost about $2 billion and would have little effect on total donations. More than half (53 percent) of the benefit would accrue to families in the 60th to 90th percentiles of the income distribution.
Economic Assistance Payments in the Take Responsibility for Workers and Families Act
Take Responsibility for Workers and Families Act would provide families with emergency “economic assistance payments”. The House's version of the bill as of Monday, March 23rd 2020 would provide individuals with an advance refundable credit worth $1,500 ($2,500 for married couples) plus $1,500 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). PWBM projects that the rebates would cost $400 billion.
Recovery Rebates in the CARES Act
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). PWBM projects that the rebates would cost $272 billion. (Note: this estimate was updated on 3/27/20 to correct a small modeling error.)
Options for Emergency Lump-Sum Cash Payments in Response to Coronavirus
We present budgetary and distributional estimates for three potential versions of the lump-sum payment that President Trump announced earlier today. All three options increase the after-tax income of low income households the most. However, higher-income households have more children on average and would receive larger cash payments unless additional adjustments are made.
President Trump’s Payroll Tax Holiday
In response to the economic effects of the coronavirus, President Trump has proposed a payroll tax holiday that would temporarily eliminate all Social Security and Medicare payroll taxes through December 31st, 2020. We estimate the budgetary, distributional and economic effects if the holiday were run from April 1 through December 31, 2020. Updated on March 17, 2020 to include two scenarios for how the employer side of the tax cut would be distributed: either to the full benefit of business owners and corporate equity holders (“profits rise”) or to the full benefit of workers (“wages rise”).