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.
Continue Reading Below
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.
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.
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.