Would $2,000 Stimulus Checks Go to Six-Figure Households?
The House approved the CASH Act Monday to increase recently enacted stimulus checks from $600 to $2,000 per person. Some of those hesitant about the bill have pointed out that this legislation would send checks to those making well over $100,000 per year, while some supporters have countered that the checks would begin to phase out above $75,000.
The opponents are correct that payments would be made to higher earning households. Because of the slow pace of the phaseout, families making $200,000 a year, $300,000 a year, or more would receive benefits under the House plan. The size of the payments are reduced at higher incomes, and very few households in the top 1 percent or making over $400,000 per year would receive any benefits.
The recently passed Relief & Response Act would send most families payments of $600 per taxpayer and $600 per child at a cost of $166 billion (similar payments enacted last March sent families $1,200 per taxpayer and $500 per child).
The CASH Act would increase these payments to $2,000 per taxpayer and child and expand them to include adult dependents. That proposal would cost an additional $464 billion, bringing the total cost of the $2,000 per person checks to $630 billion. We estimate the proposal would boost economic output by an additional $300 billion (almost $450 billion total) and help boost disposable income to 25 percent above pre-pandemic levels.
The checks phase out beginning at $75,000 of adjusted gross income for single taxpayers and $150,000 for couples. However, the phaseout is gradual – 5 percent of income above these thresholds. In other words, each additional $100 of earnings reduces rebates by $5.
With the current law $600 per person payments, this slow phaseout eliminates payments for most higher earners. For example, payments would cut off completely at $174,000 for a childless couple and $210,000 for a couple with 3 children.
|Single Adult||Married Couple
|Income Where Checks Are Fully Phased Out|
|CASH Act ($2,000/person)||$115,000||$230,000||$270,000||$310,000||$350,000||$430,000||$232,500|
|Response Act ($600/person)||$87,000||$174,000||$186,000||$198,000||$210,000||$234,000||$148,500|
|CARES ($1,200/adult, $500/child)||$99,000||$198,000||$208,000||$218,000||$228,000||$248,000||$156,500|
|Size of Rebate under CASH Act|
However, increasing payments to $2,000 per person without changing the phaseout results in a substantially higher income cut off. Under the CASH Act, a childless couple making up to $230,000 would collect some benefits. A family of five would receive a payment as long as they made less than $350,000. In fact, a family of five making $250,000 would receive $5,000 under the CASH Act. That’s more than was paid to a middle-class family of five under the March CARES Act ($3,900), the recent Relief & Response Act ($3,000), and more than will be paid to one worker in supplemental unemployment benefits under the Relief & Response Act ($3,300).
Even though higher earning households would be more likely to receive payments with $2,000 per person checks, the size of those payments would decline at higher incomes. Checks would rarely be available for families at the very top of the income spectrum. For example, a household with income of $500,000 would need to include nine people to collect $500 in benefits, for example. The Tax Policy Center estimates the average rebate would increase with income up to households between the 80th and 90th percentile due to family size, but decline after that so that few in the top 1 percent receive any rebate.
Policymakers could adjust the phaseout in any number of ways to reduce benefits for higher earning households. For example, the checks could begin to phase out sooner, reduce at a faster rate, or each person’s payment could be phased out concurrently rather than consecutively.
As passed, the House proposal to expand checks to $2,000 per person would, in fact, offer substantial payments to higher earning households.