There’s a lot to consider in the new American Rescue Plan bill, beyond the fact that the government is sending checks to some American families. Although the bill is called a stimulus measure, it is better characterized as disaster relief. The goal is to help relieve economic suffering caused by the COVID pandemic in a variety of sectors and help keep the U.S. economy on track to fully recovery.
Most of the press coverage has focused on the $1,400 checks that are being sent to many Americans as part of the relief bill. But, there is much more to the new law than just the $1,400 checks. The law also extends unemployment benefits for an additional 25 weeks, until September 6, and maintains the $300 per week supplemental benefit. It also makes the first $10,200 of those benefits tax-free for people reporting less than $150,000 in income, and the extra $300 federal supplement doesn’t count when calculating eligibility for Medicaid and the Children’s Health Insurance Program.
Under current government provisions in COBRA health insurance, people laid off from their jobs can continue buying health insurance through their former employer but must pay full-price rather than the subsidized price companies offer to their employees. In the new relief bill, the government will pay the entire COBRA premium from April 1 through September 30, making health insurance much cheaper for those laid off than those who are still working. (This generous subsidy is not available for persons who left their job voluntarily.) Finally, the law imposes a cost cap on health insurance policies purchased through a government exchange; the premiums cannot exceed 8.5% of a person’s adjusted gross income, which will benefit low-wage workers.
Families with children will receive additional benefits—but only families whose income qualifies them for the $1,400 checks. For qualifying families, the bill raises the child tax credit from $2,000 to $3,000 ($3,600 for children ages 5 and under), and it raises the age limit for qualifying children to 17. These amounts could be received as a tax refund even for people whose tax bill is zero; that is, those who don’t have reportable income to offset.
A bigger set-aside for qualifying families with children is a monthly child allowance—that is, monthly checks from the government—of $300 for each child under the age of 6, and $250 for each child between the ages of 6 and 17.
Additionally, the bill sets aside $27 billion for financial assistance for individuals whose household income does not exceed 80% of the area median income, to offset rent, utilities and other housing expenses. $10 billion is set aside to help homeowners struggling to make mortgage payments, and $5 billion is allocated to help the homeless.
Finally, if the Biden Administration decides to cancel student loan debt (which is not a given), the Act specifies that the borrowers wouldn’t owe income taxes on the forgiven debt.
As you can see from the chart below, with figures compiled by the nonpartisan Congressional Budget Office, there is also money set aside to keep restaurants and bars afloat, help schools better control the risk of infection so they can reopen, and help state and local governments prevent layoffs and continue providing essential services.
While the bill does not solve all pandemic-related damage to people and our economy, it is intended to reduce some of the pandemic’s most damaging effects.
Remember that everyone at LongView is dedicated to helping you understand the financial implications of national and world events and what they mean for your personal goals. Do not hesitate to call on us at any time with questions or concerns.