Will direct payments to Americans improve economy?
FOX Business’ Blake Burman breaks down the options the White House is considering to combat the economic impact of the coronavirus.
As lawmakers and the Trump administration look for ways to mitigate the economic effects of the spreading coronavirus on the average American household, they are advancing a proposal to give direct cash payments to families.
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According to a new report from The Penn Wharton Budget Model, the plan would provide a more substantial benefit to lower-income families than higher-income households.
Researchers based their analysis on a proposal to give $1,000 payments to American adults and $500 to children next month.
Since a formal bill has not yet been released, researchers worked through three different potential scenarios. Under each, the bottom quintile of households would see after-tax income increase by nearly 40 percent.
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Under the first, payments would be distributed to all families but would not be taxable – costing the government about $276 billion. Of all three options, this scenario would give the highest benefit to richer households but would still help the lowest-earning individuals the most.
The second option considers the payments taxable as adjusted gross income, which would disproportionately benefit low earners who – due to the standard deduction – have a marginal tax rate of 0 percent. Individuals in the highest tax bracket would see their net benefit reduced to $630. This method would cost the government $235 billion.
And the final scenario structures the payments as a fully refundable tax credit that phases out for those with adjusted gross income of more than $75,000 – meaning these people would still get the cash but would owe it back next year. This option, which gives virtually no benefit to the top 5 percent of the income distribution, would cost an estimated $233 billion.
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However, payments may wind up being even higher than $1,000.
Sources familiar with the matter told FOX Business on Thursday that lawmakers on Capitol Hill are looking at giving $1,200 to the average American family and $500 for children. The payments would begin to taper in size for income levels of $75,000 – and would likely disappear entirely for those earning more than $99,000. They are still looking at two payments. While the first payment is scheduled for April, the process may be repeated in six weeks if conditions do not improve.
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