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One of my nephews, a senior at a large midwestern university, raised the question last week during, of all things, a holiday Zoom gathering.
President Trump had just signed the legislation that allowed millions of Americans to receive their second round of economic impact payments. Eligible adults have started receiving their payments of up to $600 plus as much as $600 for each eligible dependent (qualifying child), depending on household income.
But last year, millions of dependents over the age of 16, like my 21-year-old nephew, were left out when Treasury distributed the first round of economic impact payments available through the CARES (Coronavirus Aid, Relief, and Economic Stimulus) Act. Taxpayers—like my nephew’s parents—could receive an additional $500 payment for each child only if the child was a dependent and was under the age of 17. And anyone who could be claimed as a dependent by another taxpayer was ineligible for the full $1,200 payment that the CARES Act provided to adult taxpayers. These dependents of other taxpayers are ineligible for the second round payments, too.
To my nephew and his similarly situated friends, missing out on financial help during an unprecedented pandemic and recession felt familiar. My nephew said that “People just expect college students to put themselves into debt.” So what’s a little more?
Of course, these payments for eligible dependents go to the tax filers who support them and claim them on their tax returns. My nephew, while ineligible to generate a payment for himself or his parents, is lucky. Employment or paid internship opportunities are absent where he lives and learns, but his parents—one retired and one a consultant—were still able to give him additional financial support during the year, thanks in part to pandemic assistance they received for themselves in 2020. But the estimated 20 percent of dependent college students whose families live in poverty—even before the pandemic—were not so fortunate.
Among all taxpayers, TPC estimates that if “eligible dependent” were defined as a “child under 19 or full-time student under 24,” an additional 15 million people would have been eligible for the dependent cash payments. And it’s not just families with college students who have ineligible dependents. If the rules for “eligible dependents” were not defined by age at all, another 5.3 million people would have been eligible for payments on their behalf.
That’s over 20 million people—dependents who are college students, adults with disabilities, or elderly parents cared for by their adult children—who were missed for payments not once, but twice.
Legislative language was already written.
My TPC colleague Janet Holtzblatt explains that the exclusion may reflect the speed with which the relief bills were drafted. Lawmakers assembled the CARES Act quickly and used the same age-threshold language found in the Economic Stimulus for the American People Act of 2008. That’s the law that allowed Treasury to issue economic stimulus payments during the Great Recession.
Congress drafted the 2008 stimulus legislation quickly, too and used the age-threshold language found in the Child Tax Credit (CTC) established in 1997. At the time, extending eligibility with a higher age threshold was considered too costly and Congress intended to focus support on families with younger children. (In 2016, my TPC colleague Elaine Maag suggested a $70 billion CTC reform that would raise the age threshold at which the credit is cut off to 19. Instead, the Tax Cuts and Jobs Act of 2017 temporarily doubled the amount of the credit from $1,000 and kept the under age-17 threshold.)
Congress tried to expand eligibility for cash payments but failed.
In their legislative proposals offered last spring and summer, both the Democratic-controlled House and Republican-controlled Senate extended eligibility for a second round of cash payments for all dependents, including those over the age of 16.
And last week, the House passed a $2,000 cash payment bill that would have eliminated the age threshold applied to dependents not only for a second round of payments, but also for first-round $500 eligible dependent CARES Act payments.
But in recent days, Democrats in Congress—and President Trump—have had no luck increasing the amount of cash that Treasury distributes to eligible recipients, let alone increasing the number of recipients.
Will the third time be the charm?
As Janet noted last week, President-elect Joe Biden calls the most recently enacted legislation—including its cash payments—a “down payment.” Biden has also called for a third round of recovery payments.
Perhaps those will be available to any dependent, regardless of age. Maybe extending eligibility would be more affordable if those payments were better targeted. My colleague Howard Gleckman suggests limiting payments to those making around $60,000 or less while increasing the size of the payments to those recipients. That makes sense to me. Now, would the 117th Congress agree?
Here’s to a better 2021… and happier Zoom topics.
The Tax Hound, publishing once a month, helps make sense of tax policy for those outside the tax world by connecting tax issues to everyday concerns. Have a question or an idea? Send Renu an email.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
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