(CBS Detroit) — A $1,400 third stimulus check is currently working its way through Congress as part of a $1.9 trillion relief package. The Biden administration’s American Rescue Plan, in its proposed form, also features better unemployment benefits, an improved child tax credit and a $15 minimum wage. These and other possible programs are meant to provide additional aid to millions of Americans dealing with economic hardship stemming from the ongoing COVID-19 pandemic. How it evolves will determine how much money actually reaches people’s bank accounts in the coming months.
President Biden and politicians from both sides of the aisle support giving Americans another stimulus check quickly. While Republicans have questioned other aspects of the plan — like the minimum wage hike — Democrats control both houses of Congress and are willing to pass stimulus legislation on a straight party-line vote. Budget reconciliation lets them sidestep the filibuster in the Senate and move the stimulus package to the President’s desk with a simple majority. Reaching 60 votes in this divided Congress would be unlikely.READ MORE: Stimulus Check Latest: What's The Timeline For Another Economic Relief Payment?
Why Your Stimulus Check Could Shrink
The topline $1,400 number that’s drawn so much attention seems destined to become a reality. But the actual amount that people receive could change based on the income threshold, the number of dependents and other factors.
The idea of lowering the annual income requirement has gathered some steam. In early February, Democratic Senator Joe Manchin of West Virginia and Republican Senator Susan Collins of Maine proposed an amendment aimed at “targeting economic impact payments to Americans who are suffering from the effects of COVID–19, including provisions to ensure upper-income taxpayers are not eligible.”
The previous two stimulus checks phased out for individuals with an adjusted gross income (AGI) over $75,000 per year and married couples with an AGI over $150,000. (AGI is the total of one’s wages, interest, dividends, alimony, retirement distributions and other sources of income minus certain deductions, such as student loan interest, alimony payments and retirement contributions.) For every dollar of income over the threshold, the previous two stimulus payments decreased by five percent. So the $1,200 payment from the CARES Act shrank to $0 for incomes over $99,000 ($198,000), and the $600 from the second stimulus shrank to $0 for incomes over $87,000 ($174,000).
Late last week, Treasury Secretary Janet Yellen assured CNBC that Biden is looking “to make sure that [the next stimulus check is] appropriately targeted so they go to people in need. You know, not to very high-income people who don’t need it.”
To that end, the Biden administration is considering lowering the income threshold to $50,000 ($100,000). Assuming the same five percent formula applied to the first two checks, a $1,400 ($2,800) payment would actually be $700 ($1,400) at an annual income of $64,000 ($128,000) and $0 at an annual income of $78,000 ($156,000).
However, Yellen remains firmly behind the American Rescue Plan. “The truth is, there are pockets of pain that go beyond what can be reached in those highly targeted ways,” she said at a recent event.
The thinking behind targeting stimulus checks to reach lower-income people is to ensure that more money gets spent in the broader economy rather than saved. According to a survey from the Federal Reserve Bank of New York, the average percentage of the first stimulus payment that a household spent on essentials decreased as income increased. The average percentage of the first stimulus payment that a household saved increased as income increased.
While reducing the income limit would better target the economy, it would also reduce the number of people receiving a third stimulus check and the amount received by others. Upwards of 30 million CARES ACT payments were received by households with incomes above $75,000. Most of those would not receive a check if a $50,000 threshold were implemented. Those earning between $50,000 and $78,000 would see their checks shrink.READ MORE: Stimulus Check Latest: Parents Could Receive Monthly Payments With Expanded Child Tax Credit
Why Your Stimulus Check Could Grow
Dependent children could also affect the size of your next stimulus check. The second stimulus check included $600 per dependent child. A dependent child was defined as anyone under the age of 17 living in your household. There was no limit to the number of children. And for the purpose of the phaseout, that $600 was added to the total for the adult(s). As an example, one adult, who had two kids, would have received $1,800 in January if her AGI was under $75,000. That amount would have decreased to $1,200 at an AGI of $87,000; $600 at an AGI of $99,000 and $0 at an AGI of $111,000.
The American Rescue Plan looks to expand the pool of eligible dependents to include those over the age of 16. In that group would be college students and older adults with certain kinds of disabilities. Such a change could make an estimated 13.5 million more people eligible to receive stimulus checks.
The amount of a third stimulus check could also be affected by a recipient’s taxes. To speed up distribution, the Internal Revenue Service has used the most recent tax filings to determine AGI and, therefore, eligibility. AGI changes from year to year, as people receive raises, switch jobs or become unemployed. The first relief payment was passed in March of 2020. At that point, some people had filed their 2019 taxes and some had not. So the check amount could have been based on 2018 or 2019 taxes. The second relief payment became law in December of 2020, after most everyone had filed their 2019 taxes. So that amount was determined by 2019 tax filings.
When Could You Receive Your Stimulus Check?
The third relief payment could be signed by early or mid-March of 2021. At that time, some people will have filed taxes for 2020. Others won’t have. That means a third payment could be based on 2019 or 2020 taxes. The past year has seen significant unemployment, which often hurts the finances of individual households. Many others have seen their hours reduced. If one’s AGI changes significantly from one tax filing to the next, so too could the amount of their next stimulus check.
When might that third stimulus check arrive? The administration’s goal is to sign the American Rescue Plan into law by March 14. That is also when the current $300 federal unemployment benefit bonus expires. Assuming President Biden is able to sign the relief package on March 14, direct deposits would likely start the week of March 22, with checks beginning to arrive the week of March 29.
But the House looks ready to pass the American Rescue Plan this week without changes. House Speaker Nancy Pelosi recently reiterated her more aggressive timeline, stating that the bill could pass by the end of February. The Senate could then pass it next week on a straight party-line vote. That assumes, of course, that Democrats can quickly work out their differences over the $15 minimum wage. (Manchin supports an $11 per hour minimum wage, and Republicans just announced a proposal for a $10 minimum wage by 2025.) If they do, the stimulus package could pass through Congress by March 5 and be signed into law on March 8. Direct deposits would start arriving in bank accounts by March 15, and checks would start being mailed on March 22. Either timeline could be extended for any number of reasons.
Why Stimulus Checks Are Still Needed
The economy shrank by 3.5 percent in 2020, the largest single-year decline since the end of World War II. Weekly unemployment figures remain historically high, with 861,000 people applying for unemployment insurance for the first time last week. An additional 516,000 sought Pandemic Unemployment Assistance. (A typical pre-pandemic week saw about 250,000 new unemployment applications.) At the end of January, approximately 18 million people were receiving unemployment benefits of one kind or another. That’s one out of every nine workers. While the official unemployment rate is 6.3 percent, the actual rate is probably closer to 10 percent, given all the people who have dropped out of the labor force.
An economic bounceback depends on the widespread distribution of a COVID vaccine. But efforts to inoculate the public have proceeded somewhat sluggishly. Shortages and winter weather have forced some areas to temporarily close vaccination centers and scale back administering the vaccine in recent weeks. Many who qualify have faced problems in scheduling appointments. On the bright side, the federal government started distributing the vaccine to certain pharmacies earlier this month. And Dr. Anthony Fauci, the country’s top infectious disease expert, believes vaccination will be open to everyone by July, when demand will no longer for outpace supply. But mask-wearing and a general lack of normalcy could continue into 2022. Currently, domestic COVID cases exceed 28 million, while deaths have surpassed 500,000.MORE NEWS: Stimulus Check Update: ‘I Believe We Have A Moral Obligation,’ Says President-Elect Joe Biden
Originally published at 2:46 p.m. ET on Thursday, February 11, 2021.