Congressional Research Service IN11256 (COVID-19 and Direct Payments to Individuals: Historical Precedents)
Summary
A Congressional Research Service Insight, IN11256, by Gene Falk, dated March 19, 2020, on historical precedents for direct payments to individuals in response to the COVID-19 outbreak. It notes that such payments are sometimes framed as "universal basic income" proposals, while past payments were framed as economic stimulus. It states that the Internal Revenue Service sent checks to taxpayers in 1975, 2001 and 2008, and that payments made through the IRS have generally been restricted to people who file federal income tax returns. It notes that the 1975 legislation included direct payments to retirees receiving Social Security and Railroad Retirement, and that in 2009 payments also went to recipients of Supplemental Security Income (SSI).
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INSIGHTi
COVID-19 and Direct Payments to
Individuals: Historical Precedents
Gene Falk
Specialist in Social Policy
March 19, 2020
Members of Congress and the Trump Administration have signaled their support for making direct
payments to individuals to address the economic fallout from the COVID-19 outbreak. In current
discussions, these payments are sometimes framed in terms of “universal basic income” or UBI proposals.
In the past when these proposals were made—and sometimes enacted—they were framed in terms of
providing economic stimulus.
Historical Precedents
There are historical precedents for such payments; most of these were done through the federal income
tax code. The Internal Revenue Service (IRS) sent checks to taxpayers in 1975, 2001, and 2008. An issue
with using the IRS to make payments to individuals is that payments generally have been restricted to
those who file federal income tax returns. Those who do not file tax returns generally include populations
such as retirees, disabled individuals, and low-income individuals who have no earnings. The 1975
legislation included direct payments to retirees receiving Social Security and Railroad Retirement. In
2009, direct payments were also made to retires, recipients of Supplemental Security Income (SSI), and
recipients of certain veterans’ benefits.
Table 1 provides an overview of laws enacted since 1975 that provided for one-time payments to
individuals to address economic downturns.
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IN11256
CRS INSIGHT
Prepared for Members and
Committees of Congress
Congressional Research Service 2
Table 1. Selected Law Providing Direct Payments to Individuals: 1975 to Present
Law Description CRS Products
Tax Reduction Act of 1975 (P.L. 94-12) Tax rebate: 10% of taxes paid in 1974. Maximum CRS Report 92-20E
payment of $200 (phased down to $100 for higher (available to
income taxpayers). congressional clients
upon request).
Direct payment: $50 for Social Security and Railroad
Retirees and recipients of Supplemental Security
Income (SSI).
The Economic Growth and Tax Relief Advance payment of a tax rate reduction. Maximum CRS Report RS21171,
Reconciliation Act of 2001 (P.L. 107- credit of $600 for married couples filing jointly and The Rate Reduction Tax
16) $300 for others. Credit - “The Tax Rebate”
- in the Economic Growth
and Tax Relief
Reconciliation Act of 2001:
A Brief Explanation
Economic Stimulus Act of 2008 (P.L. Advance payment of a refundable tax credit. CRS Insight IN11255,
110-185) Maximum credit of $1,200 for joint filers, $600 for COVID-19 and Stimulus
others, and an additional $300 per dependent. Payments to Individuals:
Credits phased out for higher income taxpayers. How Did the 2008
Recovery Rebates Work?
American Recovery and Reinvestment Payment of $250 for certain recipients of Social CRS Insight IN11254,
Act of 2009 (P.L. 111-5) Security, Supplemental Security Income (SSI), COVID-19 and Stimulus
Railroad Retirement, and veterans’ compensation or Payments to Individuals:
pensions. How the 2009 Economic
Recovery Payment
Worked.
Source: Congressional Research Service (CRS).
The economic effects of past direct tax payments have been studied (see summaries here and here). Also
see here for a discussion of how direct payments may compare with an alternative to provide payroll tax
relief.
Relationship to Universal Basic Income and Automatic Payments
The current discussions about these payments are sometimes framed as a “universal basic income” or
UBI. UBI is a form of guaranteed income that would provide a payment to individuals or families at
regular intervals. The United States does not have an income guarantee other than the Supplemental
Security Income program (SSI), which is restricted to the needy aged, blind, and disabled. SSI was
created in 1972 in legislation related to President Nixon’s proposal to create a guaranteed income for
families with children, his Family Assistance Plan (FAP).
Social insurance benefits—particularly unemployment compensation—provides partial wage replacement
for some workers who lose their jobs. Need-tested programs provide benefits to low-income individuals
and families, though benefits are restricted to certain categories of low-income persons, and not all
persons who are eligible receive aid. The programs that aid the largest number of low-income persons—
the Supplemental Nutrition Assistance Program (SNAP) and Medicaid—provide in-kind rather than cash
aid. Cash aid provides families and individuals with the greatest flexibility to address their individual
circumstances, whether that is paying rent, bills, child care, or other necessities.
Congressional Research Service 3
Prior to the current situation, Claudia Sahm, formerly an economist at the Federal Reserve
Board, proposed in May 2019 automatic direct payment in the event of a recession. She proposed
that direct payments be triggered by a rise in the unemployment rate by a sufficient amount.
IN11256 · VERSION 1 · NEW
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