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Was it really last May that the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which would have authorized (among many other things) a second round of economic impact payments?
It’s been, at the very least, a very bumpy road since May, and especially bumpy since President Trump’s surprise denouncement of the COVID-19 relief legislation finally passed by Congress last week. On Sunday, Trump surprised us again by signing the COVID-related Tax Relief Act of 2020 without much fanfare and without obtaining any changes to the law.
Thus, the federal government will not shut down tonight, unemployment benefits will resume for many workers, evictions will be prevented, and millions of families will receive a second round of economic impact payments (formally known as recovery rebates).
For adults, those payments could be as much as $600 ($1,200 for a married couple). That would be half the amount of the spring payments authorized by March’s Coronavirus Aid, Relief, and Economic Security (CARES) Act—but still very welcome news for many at the end of this nightmare year. On the plus side: the maximum amount for kids under the age of 17 would be $600 per child ($100 per child more than the CARES Act amount). The maximum payments would gradually decline as income rises above $75,000 ($150,000 for married couples).
According to the Tax Policy Center’s analysis, about 90 percent of households are eligible for the second round of economic impact payments, averaging $950 across all households. Forty-five percent of the total payments will go to households in the lower 40 percent of the income distribution.
This round of economic impact payments added to those provided in the CARES Act will increase after-tax income, on average, by $2,610. Overall, after-tax household income will rise, on average, by 3 percent. But households in the bottom quintile of the income distribution will receive a 17-percent average boost in their after-tax income.
Will there be a third round of payments? President-elect Joe Biden calls this legislation a down payment and promises another round of payments, with details to be negotiated with Congress in the new year. With a new President, but largely the same Congress, will the road to Round Three of economic impact payments be less bumpy than it has been during the past year? One can only hope.
Caveat alert: TPC’s analysis is based on 2019 income levels and thus does not include payments that would be paid after 2020 income tax returns are filed to people whose income took a deep dive this year. We also assume that all eligible people receive the payment, although many haven’t received their CARES Act payment yet. Those overlooked households often have very low incomes, don’t typically file income tax returns, and lack internet access and thus didn’t apply for their payment on the IRS website.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
Eric Gay, File/AP Photo