With just a handful of days left for Congress to pass theby a mid-month deadline, we thought we knew how lawmakers would target the , based on the House-approved plan. However, Senate Democrats decided to revisit and this week by tightening the income limits used to determine a payments.
The proposed Senate change could meanand nothing at all for nearly 17 million adults and children who would have qualified under the House plan, according to the Institute on Taxation and Economic Policy, a left-leaning think-tank.
Based on what Senate Democrats are considering, we’ll explain how factors likefit in, the equation’s and other calculations that could affect your next check. For more information, here’s , four ways and what happens if a . This story was recently updated.
What is happening now with the Senate and ‘targeted’ stimulus checks?
Senate Democrats are proposingthe House approved for individuals and families to qualify for a payment. By setting a hard income cap for the third check, those over the income limit would be excluded from a payment. If are agreed to, the bill would exclude the lawmakers define as higher-income earners.
According to the Institute on Taxation and Economic Policy, the bottom 60% of Americans would receive a full payment under both the House and the Senate plans. The Senate change, however, would be felt at the top end, where more than 11 million adults and over 4 million children would be shut out of a check. Here are the income limits from the Senate and the House plans, compared.
Senate vs. House income caps
|Senate check income limits||House check income limits|
|Single tax payer||Full payment below $75,000; cut off at $80,000||Full payment below $75,000; cut off at $100,000|
|Head of household||Full payment below $112,500; cut off at $120,000||Full payment below $112,500; cut off at $150,000|
|Married, filing jointly||Full payment below $150,000; cut off at $160,000||Full payment below $150,000; cut off at $200,000|
If the new income cap is approved for the third check, the limit would be lower than that for— at $87,000 for an individual, $124,500 for a head of household and $174,000 for families — but the amount people who qualify could receive might be more than twice the amount of that second check.
How a targeted stimulus check would work
The conversation around a targeted stimulus check seeks to send the payment to lower or middle income households, excluding upper income people from receiving any check at all, even a partial payment.
Specifically, the next check would accomplish this by:
- Enforcing an absolute cutoff to the for receiving a payment.
- Changing the so that dependents do not give households that exceed the income limit a partial payment, as they did before.
- Altering the “reduction rate” (also known as a “phase-out rate” to reduce the number of people receiving a partial payment.
What happens if a $1,400 stimulus check isn’t ‘targeted’
If the $1,400-per-person stimulus check followed the exact, people considered high income would get all or part of the maximum payment, in addition to all the people Congress actively wants to supply with stimulus money.
That all comes down to the way the mathematical equation works out. It’s complicated. In essence, you plug in the stimulus maximum ($1,200 for the first payment; $600 for the second), yourand the number of dependents you have. Interestingly, adding in dependents could make it possible for people who exceeded the income limit of the first two checks to still get a partial payment. Read more about .
Without changing any other variables, a much higher $1,400 maximum would make it so that even single people who earn $100,000 would get a partial check. The size of that payment would otherwise balloon with dependents involved. For example, using our, single taxpayers with an AGI below $75,000 would receive the full $1,400 check. At $85,000, they could receive $1,150; at $90,000 a year, they could get $650; and if they make $102,900, the Treasury would send a stimulus check for $5.
If lawmakers want to keep the $1,400 per-person maximum but ensure that people who make, for instance, $100,000 a year don’t get the payment, the formula would have to change. It would have to become more “targeted.”
Proposed: People who make more than this won’t get a check
One way to target a check is to exclude people who make over a certain sum. The new proposal would set a firm upper limit cutoff, making it impossible for single taxpayers, heads of household and their dependents, and married couples with or without children over a hard cap to receive any money.
If the proposal were to be adopted, a married couple with 10 dependents could earn $200,000 a year and never see a dime, to choose a extreme scenario. Changes to the formula would start here and work backward until the other parts of the equation fall into place.
would count for an , so long as the household doesn’t make above the absolute cutoff. Above the limit, no one in the family receives a payment.
Another way to limit a check: Set a lower cap for the full amount
An earlier proposal embraced by some Democrats, according to The Washington Post, would begin phasing out recipients who make $50,000 a year or more.
Say you have a $1,400 check and people who make less than $50,000 are the only ones who’d receive the full amount. People with an AGI of more than that (up to a certain limit) would get a partial payment — which would also peter out more quickly for people with relatively higher incomes. That calculation could potentially mean a little bit of money for middle income earners, but it would still exclude the highest earners from receiving a stimulus check for any quantity.
Far fewer people would receive stimulus money with a formula that phases out starting at $50,000 than one that phases out starting at $75,000.
Drop the per-person maximum to cut the check overall
Let’s say for the sake of argument that a $1,000 stimulus check were adopted instead of $1,400. (This isn’t likely to happen after Biden confirmed he’s dead set on a $1,400 maximum.) Even if no other changes were made to the formula or to the income limit, lowering the amount would automatically disqualify more people simply because of the way the math works out.
For example, the drop from the first $1,200 stimulus payment to the $600 second stimulus checkwho had otherwise qualified for the first stimulus check. Simply using a $600 base instead of $1,200 reduced the cutoff point for receiving a partial payment.
Said another way, the smaller the per-person maximum, the sooner people who made more than $75,000 a year hit the limit for receiving any money.
With the first check, single taxpayers — no spouse or kids — could get some amount of stimulus money if they made less than $99,000. With the second check, that vanishing point dropped to $87,000. The only difference in that part of the equation was the maximum per-person payment. (Separately,counted for $600 in the second check instead of $500.)
As another illustration of the effects of the base payment, the first stimulus check went out to around 160 million people, and the second payment reached an estimated 147 million households, despite more groups of people qualifying for the second check. Likewise, a hypothetical $1,000 payment would reacheven if that were the sole change to Biden’s proposal.
How new qualifications could factor in
In addition to supporting larger stimulus checks,two previously excluded groups: (not just children under 17) and all . Combined, that could potentially extend stimulus funds to nearly 20 million people who previously might not have been counted toward the family total. The Senate may also look restrictions around .
If passed, the outcome would most likely be a larger stimulus check for families that previously qualified (in the case of 17-year-olds anddependents), and some mixed-status families qualifying for a new check for the first time. In all cases, families would have to meet all other eligibility requirements — like an income limit — to receive a future stimulus check.
Until negotiations begin in earnest, we’ll have to see how the stimulus bill and third stimulus check develop. For more information, here’s theand here’s what to know about . Here’s what to do if .