Why a fourth stimulus check isn’t likely anytime soon

Biden
President Joe Biden.

  • A fourth stimulus check is unlikely given the accelerating pace of the recovery.
  • For now, Democrats have moved onto addressing evictions, among other things.
  • The White House has punted the issue and said it’s up to Congress to decide.
  • See more stories on Insider’s business page.

Stimulus checks remain popular with average Americans. Congress under both the Trump and Biden administrations issued three direct payments amounting to $3,200 for millions of Americans.

However, a fourth round is unlikely to be sent anytime soon as the economy continues regaining jobs. No lawmaker in Congress has pitched a plan so far, and congressional Democrats are squarely focused on approving President Joe Biden’s infrastructure plans this summer.

“I don’t see people advocating for another check at this moment,” Mike Konczal, director of macroeconomic analysis at the left-leaning Roosevelt Institute, said in an interview. “I think the big fights are about dealing with the legacy of the pandemic, both getting vaccination rates up, dealing with evictions and foreclosures, and making sure that bottlenecks in the economy are swiftly taken care of.”

It could also crash into resistance among most Republicans and some Democrats in Congress. During negotiations for the $1.9 trillion stimulus law in March, a bloc of moderate Democrats flexed its political muscle to cut who could get a $1,400 direct payment. Centrists balked at the prospect of government cash going to households that didn’t experience job losses during the pandemic or pulled six-figure incomes.

The Biden administration has punted on whether it would back more stimulus payments, throwing the issue to lawmakers. “We’ll see what members of Congress propose, but those are not free,” White House Press Secretary Jen Psaki said at a May press conference.

A White House official told Insider that the Biden administration is “committed to providing relief to the American people to recover from the impacts of the pandemic.” The official noted the stimulus law included various measures to shore up small businesses and provide rental aid, along with an expansion of the child tax credit.

“We look forward to continuing our work with Congress to implement ARP and pass the president’s full Build Back Better agenda,” the official said, referring to the American Rescue Plan.

The bulked-up child tax credit makes up a core part of Biden’s stimulus. The law transformed it into a monthly payment of either $250 or $300 for families, depending on the child’s age. Those are poised to go out on July 15 for nearly 90% of American families.

Konczal said the child allowance is capable of stabilizing incomes and cutting hunger rates once it starts reaching families. “It’s going to expand the notion of what social insurance is meant to do in a way that is profound,” Konczal said.

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Move aside, hot vax summer. Biden is bringing hot tax summer to the US.

Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.
Felipe Castro holds a sign advertising a tax-preparation office for people who still need help completing their taxes before the IRS deadline on April 14, 2010, in Miami.

  • This summer everyone in Washington will be talking about taxes, while parents will get a tax credit.
  • Biden wants to raise taxes to pay for a huge infrastructure bill that may be ready in July.
  • Meanwhile, millions of American parents will start getting checks from Biden’s expanded tax credit.
  • See more stories on Insider’s business page.

You’ve probably heard that it’s hot vax summer. Vaccination rates have climbed, mask mandates are lifting, and Americans are slowly starting to venture into the first semblance of the After Times. In anticipation of the US fully reopening, cooped-up Americans are buying new going-out clothes and getting ready for the intimacy they put on pause. Even brands are getting thirsty.

But another thing will be heating up this summer: tax policy. President Joe Biden has already shepherded a law through Congress that will change the tax code (for a few years) to send monthly checks to American families, and he’s hard at work on another that would raise taxes on corporations and families earning more than $400,000 a year.

The tax-credit checks will start going out in July, just when Speaker Nancy Pelosi has vowed to deliver Biden his infrastructure bill in the House.

The stakes are scorchingly high, because despite the reopening economy, the pandemic exacerbated preexisting inequalities, while millions of Americans remain unemployed and April’s surprisingly dismal jobs report showed an uneven labor-force recovery.

Enter the hot tax summer.

Biden wants to raise taxes on the wealthy and corporations to offset massive infrastructure spending

Some of the country’s highest earners will see tax increases if Biden gets his way. He’s proposed increasing the income tax rate to 39.6% for Americans earning over $400,000, and raising the capital gains rate to the same level.

That increase – targeted only at Americans earning $1 million or more – would hit wealthy investors who get the bulk of their income from assets like stocks. The capital gains rate is generally lower than the rate that income is taxed at. As Insider’s Liz Knueven reported, the change would affect just about 0.4% of American taxpayers.

Overall, only the top 1% of filers would be affected and have to pay $100,000 more a year in taxes.

“This is about making the average multimillionaire pay just a fair share,” Biden said in a fiery speech defending the increases. “It’s not going to affect their standard of living a little bit.”

Significantly, Biden also wants to close up some tax-code loopholes and to ramp up tax enforcement on the wealthiest American, who have been found to hide billions in income from the IRS. The IRS estimates that there’s a tax gap of $441 billion a year. But Charles Rettig, the agency’s commissioner, has told Congress that the number could actually be over $1 trillion.

The gap between taxes owed and taxes paid could grow only if left untouched, according to the Department of Treasury. Treasury estimates that Biden’s proposed $80 billion investment in the IRS could bring in an additional $700 billion over 10 years. That would still leave hundreds of billions in taxes going uncollected each year, as Insider’s Ayelet Sheffey reported.

Biden’s also proposed raising taxes on corporations, aiming to bring the corporate tax rate up to 28% from 21%, though it will likely end up closer to the international average rate of 25%.

Meanwhile, an expanded tax credit will start putting checks into families’ pockets

Regardless of what happens with the infrastructure negotiations, many Americans will start feeling the effects of new Biden tax policies this summer.

Beginning July 15, families will start receiving monthly checks of up $300 from the IRS. Every 15th of the month for the next year – unless it falls on a holiday – checks will come. Those checks come from the expansion of the child tax credit, which was revamped under Biden’s $1.9 trillion American Rescue Plan.

One of Biden’s proposals in the American Families Plan is extending those checks through 2025 (many Democrats want to make them permanent). The checks are, as Insider’s Aria Bendix reported, essentially akin to basic income, and most children in the United States are set to benefit from then.

Low-earning Americans will also see an income boost from the expanded Earned Income Tax Credit, which subsidizes wages. According to an analysis from the left-leaning Center on Budget Policy and Priorities, over 17 million adults will now be eligible for an expanded subsidy.

Biden’s proposed tax increases are already seeing pushback. Some businesses have come out against the corporate increase, and there’s likely to be a lot of back and forth over what can and cannot be included in Biden’s two-pronged infrastructure package.

As Politico reported, lobbyists and executives think that they’ll be able to kill off many of the tax hikes that the president is putting forward. That could put some of Biden’s promises in jeopardy.

So while it’s not clear what, exactly, taxes will look like on the other side of all of this, they’re already in the spotlight – and they’ll probably only become a hotter topic as the temperature goes up this summer.

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