- New analysis found the COVID-19 relief bill will primarily focus on low- and mid-income households.
- Direct stimulus checks and an expanded child tax credit will put extra money in Americans’ pockets.
- The House is set to vote on a final version of the bill this week and Biden will sign it soon after.
- Visit the Business section of Insider for more stories.
Under President Joe Biden’s $1.9 trillion pandemic relief bill, the poorest of the poor should expect to receive a significant boost to their incomes, while the richest of the rich should expect, well, not much.
According to a new analysis by the Tax Policy Center, the Senate-passed version of President Joe Biden’s coronavirus spending bill would give the poorest 20% of Americans a 20.1% income boost after taxes, while giving the richest 20% of Americans a 0.7% raise.
Most of that extra money will come from direct stimulus payments and monthly benefits stemming from the child tax credit included in the legislation. The earned income tax credit and the child and dependent care tax credit also play a role in the extra funds.
The White House is hailing The American Rescue Plan Act of 2021 as the most progressive piece of legislation in history and many progressives agree.
Democratic Rep. Pramila Jayapal of Washington, who chairs the Congressional Progressive Caucus, called the stimulus a “truly progressive and bold package that delivers on its promise to put money directly in people’s pockets.”
The Tax Policy Center’s data released Monday appears to confirm that sentiment.
The current version of the stimulus bill would reduce federal taxes by an average of $3,000 and raise after-tax incomes by 3.8 percent, with the majority of relief – nearly 70% – going to low and middle-income households that make $91,000 or less, according to the nonpartisan think-tank.
Families with children would get a tax cut of more than $6,000 on average, with low and middle-income families receiving nearly 75% of the benefit, according to the Tax Policy Center.
The most significant tax cut will likely come from the next installment of economic impact payments. In the current version of the bill, individuals earning below $75,000 annually can receive the entire $1,400 and couples making up to $150,000 also qualify for the full amount.
The checks represent more than two-thirds of the overall tax cut, according to the analysis, cutting household taxes by $2,300 on average.
One of the biggest wins for progressives is the bill’s inclusion of the beefed-up child tax credit, an expansion that Biden has said he supports making permanent. Currently, the credit is a one-year measure in the relief bill, and caretakers of 93% of children will receive the monthly benefits.
Howard Gleckman, a senior fellow at the Tax Policy Center, drew sharp comparisons between the coronavirus spending bill and the Republican-passed Tax Cuts and Jobs Act of 2017 in a Monday blog post for the think-tank.
While the coronavirus spending bill provides the majority of relief to low and middle-income households, “nearly half of the [Tax Cuts and Jobs Act’s] 2018 tax cuts went to households in the top 5 percent of the income distribution (who made about $308,000 that year).” Gleckman wrote.
While the 2017 Tax Cuts and Jobs Act heavily favored upper-middle and upper-class households, the American Rescue Plan Act of 2021 is focused on providing immediate aid to the Americans struggling most.
The richest 1% will receive a 0% income boost from the bill, according to the analysis.
The House is likely to take its final vote on the Senate version of the stimulus bill Wednesday, according to CNN. The chamber is expected to pass the bill and will send the legislation to Biden, who will sign it into law shortly thereafter, mere days before the December stimulus measures are set to expire.