Democrats (Mostly) Reject “Targeting” of $1,400 Stimulus Checks

Despite all the talk of “targeting” third-round $1,400 stimulus checks so that fewer Americans would get them, House Democrats release a new bill Monday evening that adopts the same phase-out thresholds used for first- and second-round payments. The bill, which was drafted by the House Ways and Means Committee, will become part of the larger House budget reconciliation bill that is being cobbled together to enact President Biden’s $1.9 trillion stimulus plan. If this version of a third stimulus check plan is passed, most Americans who received an earlier stimulus payment will also receive a third stimulus check.

Under the House bill, stimulus checks would not be reduced for single Americans earning up to $75,000, head-of-household filers making up to $112,500, and married couples with a combined income up to $150,000. As with previous stimulus checks, they would get a full payment – in this case, $1,400 per person ($2,800 for couples), plus an additional $1,400 for each dependent.

For singles with an adjusted gross income (AGI) above $75,000, their stimulus payment would be gradually phased-out until it reached zero for those making $100,000 or more. For head-of-household filers, the phaseout range would be from $112,500 to $150,000. For married couples filing a joint return, the phase-out range would be $150,000 to $200,000. Plus, the phase-out range’s ceiling is a hard cap that applies to all people, regardless of how many dependents they have. As a result, stimulus checks are reduced to zero for all taxpayers at or above the $100,000, $150,000, and $200,000 AGI levels (depending on your filing status).

The proposed phase-out rate would also be slightly faster than it was for the first two rounds of stimulus payments. If the previous rate were applied, the phase-out ranges for $1,400 checks would be $75,000 to $103,000 for singles (no dependents), $112,500 to $168,500 for head-of-household filers (one dependent), and $150,000 to $206,000 for joint filers (no dependents).

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A Win or Compromise for Progressives?

The decision to maintain the previously used phase-out thresholds is certainly a victory for the progressive wing of the Democratic Party. Some moderate Democrats, like Sen. Joe Manchin (D-W.Va.), want any additional stimulus relief to target those most in need. Manchin recently told CNN that he supports “helping people that need help, people that really can’t make it, people that don’t have a job.” But he added that “it’s time now to target where the money goes” and “make sure that people in need” get stimulus checks first. President Biden also said he was “open to negotiate” ways to target stimulus checks.

One way to target stimulus checks to Americans who are struggling the most is to lower the phase-out thresholds so that people with higher incomes don’t qualify for a payment. And, in fact, that was on the table. Plans to reduce the thresholds as low as $40,000 for singles and $80,000 for couples were being considered at the urging of Sen. Manchin and moderate Republicans. Under those plans, far more people would have their stimulus check reduced to zero than before.

However, progressives successfully fought back against plans to lower the phase-out thresholds. They argued that the middle-class Americans who would have their payments reduced or eliminated through lower thresholds need help, too. Sen. Bernie Sanders (I-Vt.) sarcastically tweeted, “working class people who got checks from Trump would not get them from Biden. Brilliant!” Rep. Alexandria Ocasio-Cortez (D-N.Y.) said the lower-threshold proposals were “totally disconnected from the reality of tens of millions of people.” And Rep. Cori Bush (D-Mo.) described targeting stimulus checks as “just a fancy way of saying means testing. Give all of the people all of the relief they need.” But this is just round one, and things could change before the final reconciliation bill is assembled and passed. Yet, if the House bill holds up through the reconciliation process – which is not guaranteed – maintaining the higher phase-out thresholds will be a significant win for progressives.

Nevertheless, despite the win on phase-out thresholds, there is some compromise in the House bill. In December, the House passed the CASH Act, which also would have authorized another round of $1,400 stimulus checks, plus an additional $1,400 per dependent. That bill was blocked by Republicans in the Senate. The primary reason cited by Republicans for killing that bill was that it would have sent thousands of dollars to people who didn’t need the money. Sen. Mitch McConnell (R-Ky.) noted at the time that “a family of five where the parents earn $250,000 and have not seen any income loss” during the pandemic would still receive a $5,000 stimulus check under the CASH Act.

That won’t happen under the new House bill. No one, regardless of how many dependents they have, will get any third-round stimulus money if their AGI is above the $100,000 (singles), $150,000 (head-of-household), or $200,000 (joint filers) cut off. Will this be enough to satisfy moderates like Sen. Manchin? We’ll have to wait and see.

$1,400 for All Dependents

One important change in the House bill is that all dependents would qualify for the extra $1,400 payment – regardless of their age.

For both the first- and second-round stimulus payments, families received an additional $500 or $600, respectively, only for dependent children age 16 or younger. Families with older children, including college students age 23 or younger, or with elderly parents living with them, didn’t get the bonus money added to their earlier stimulus payments.

Third Stimulus Checks Based on 2019 or 2020 Tax Returns

Another interesting difference between the House bill and previous stimulus checks concerns how the IRS would determine your eligibility for and the amount of your payment. First-round stimulus checks were generally based on either your 2018 or 2019 tax return, whichever was most recently filed when the IRS began processing your payment. Second stimulus checks were mostly based on your 2019 return.

Under the House bill, eligibility and stimulus check amounts will be based on either your 2019 or 2020 return. If your 2020 tax return isn’t filed and processed by the IRS by the time the tax agency starts processing your third stimulus payment, then the IRS will use information from your 2019 tax return. If your 2020 return is already filed and processed when the IRS is ready to send your payment, then your stimulus check eligibility and amount will be based on what’s on your 2020 return. If your 2020 return is filed and/or processed after the IRS sends you a stimulus check, but before July 15, 2021 (or September 1 if the April 15 filing deadline is pushed back), the IRS will send you a second payment for the difference between what your payment should have been if based on your 2020 return and the payment actually sent based on your 2019 return.

As with first-round payments, this would create some opportunities to “game” the system if you don’t file your 2020 return early. For instance, if you’ll get a larger check based on your 2020 tax return, than you might be able to quickly file your 2020 return electronically and have your third stimulus check based on that return. If you’ll get a bigger check if it’s based on your 2019 return, then just wait until after your payment is sent to file your 2020 return.

How Much Would You Get?

Use the tables below to see how larger or small your third stimulus check would be under the House bill.

SINGLE PEOPLE ($75,000 THRESHOLD)

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HEAD-OF-HOUSEHOLD FILERS ($112,500 THRESHOLD)

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MARRIED COUPLES FILING A JOINT RETURN ($150,000 THRESHOLD)