Congressional Research Service IN11261 (COVID-19 and Stimulus Payments to Individuals: Potential Impacts of Direct Payments on Family Incomes)
Summary
CRS Insight IN11261, COVID-19 and Stimulus Payments to Individuals: Potential Impacts of Direct Payments on Family Incomes, by Conor F. Boyle, Analyst in Social Policy, and Jameson A. Carter, Research Assistant, dated March 20, 2020. It discusses direct cash payment proposals in response to the COVID-19 pandemic and their effect on family incomes, noting earlier payments in 2001 and 2008. Proposals listed include a one-time payment of $1,000 per adult from Senator Romney, up to two payments of $1,000 per adult and $500 per child from the Trump Administration, and recurring payments of $2,000 per individual from Senators Bennet, Brown, Booker, King, Murphy and Schatz.
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INSIGHTi
COVID-19 and Stimulus Payments to
Individuals: Potential Impacts of Direct
Payments on Family Incomes
Conor F. Boyle
Analyst in Social Policy
Jameson A. Carter
Research Assistant
March 20, 2020
Several Members of Congress and the Trump Administration have proposed direct cash payments as part
of a fiscal response to the economic impacts of the COVID-19 pandemic. Direct cash payments have
previously been part of the federal government’s response to economic downturns, most recently in 2001
and 2008. In general, the purpose of direct payments is twofold: (1) they allow families to spend more,
and through a multiplier effect help to stimulate the economy; and (2) they provide resources to help meet
basic needs for those whose income has decreased due to COVID-19 infection or potential job loss. This
Insight discusses several current direct payment proposals and their impact on family incomes.
What direct payment proposals are currently being discussed?
Members of both parties, as well as the Trump Administration, have proposed some form of direct
payments. These proposals vary in terms of who is eligible to receive a payment, the per-person amount
to be paid, and whether payments would be one-time or recurring. Selected direct payment proposals
include the following:
a one-time payment of $1,000 per adult proposed by Senator Romney,
up to two payments of $1,000 per adult and $500 per child proposed by the Trump
Administration, and
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a proposal from Senators Bennet, Brown, Booker, King, Murphy, and Schatz to provide
recurring payments of $2,000 per individual (adult and child) that would gradually phase
down as economic conditions improve.
When considering direct payment proposals, one question is how payments would be delivered to eligible
Americans. In both 2001 and 2008, direct payments were provided as advance refundable tax credits
received as a direct deposit or a check in the U.S. mail. Because these payments were made through the
tax system, eligible individuals who did not file an income tax return the previous year did not receive a
payment. In the past, the federal government has also provided additional direct payments to individuals
who receive recurring benefits such as Social Security or pensions through the Department of Veterans
Affairs. (Note that while some proposals may provide payments to taxpayers, this analysis is of families,
which may include more than one taxpayer.)
How much would family incomes increase due to a direct payment?
Policymakers may wish to consider the extent to which a direct payment could increase family income.
To estimate the potential impact of a direct payment, CRS calculated the amount that families would
receive under each of the three proposals noted above. CRS then compared the estimated benefit a family
would receive to their estimated monthly income. Table 1 presents families’ median estimated monthly
income and the median percentage of monthly income that families would receive under the direct
payment proposals. These estimates are broken down by the ratio of family income to the poverty
threshold in order to show the impacts of direct payment proposals across the income distribution.
Table 1. Median Percentage of Estimated Monthly Income Families Would Receive under
Three Proposed Direct Payments
Median Percentage of
Median Percentage of Estimated Monthly Median Percentage of
Estimated Monthly Income Families Would Estimated Monthly
Ratio of Family Median Estimated Income Families Would Receive if Payment is Income Families Would
Income to Monthly Income Receive if Payment is $1,000 per Adult and Receive if Payment is
Poverty (current law) $1,000 per Adult $500 per Child $2,000 per Individual
Under 100% (below
$850 137% 153% 337%
poverty)
100%-199% $2,100 69% 80% 177%
200%-299% $3,570 44% 49% 105%
300%-399% $4,930 32% 36% 77%
400%-499% $6,240 26% 29% 60%
500% and above $10,440 16% 17% 36%
Total $3,600 42% 48% 104%
Source: CRS calculations via the TRIM3 microsimulation model using 2016 data.
Notes: Median estimated monthly income rounded to the nearest ten. Estimated monthly income was calculated by
dividing families’ annual income by 12. Income reported in this analysis reflects the Supplemental Poverty Measure (SPM)
definition of income, and includes a family’s after-tax wage income, self-employment income, the value of refundable tax
credits, Social Security, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), assisted
housing benefits, child care subsidies, and more. SPM poverty thresholds were used to calculate the ratios of family income
to poverty.
The estimates presented in Table 1 suggest that all three of the direct payment proposals would provide
families with a substantial amount of their prior estimated monthly income. This effect is particularly
strong for lower-income families. Table 1 presents estimates at a high level, and does not convey
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variations in the impact of direct payments based on factors such as family size, family structure, and age.
These estimates should be considered with a number of caveats in mind. This analysis (1) assumes that
every eligible family would receive exactly the benefit to which it is entitled, (2) does not phase down
payments to higher-income families, (3) estimates monthly income using an annual measure and does not
reflect potential month-to-month fluctuations in family income, and (4) does not estimate decreases in
income that families may experience as a result of COVID-19.
Other analysis of direct payment proposals returns estimates that are similar to the ones presented in this
analysis, but are methodologically different in several important ways. First, this analysis uses a broader
definition of family income that includes additional sources of income and benefits. Second, this analysis
breaks families into groups based on the ratio of family income to poverty rather than using deciles of
taxable income. Finally, this analysis estimates median increases rather than average (or mean) increases
in income.
What are the alternatives to direct payments?
Some commentators have noted that direct payments are not necessarily targeted at the families most
impacted by COVID-19. Social insurance programs such as unemployment compensation, workers’
compensation, and disability insurance are well established and may be more effective at targeting
benefits to families impacted by the virus or an associated economic downturn. The Temporary
Assistance for Needy Families (TANF) program has also been used in previous economic downturns to
provide short-term benefits to families with immediate needs.
IN11261 · VERSION 2 · NEW
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