WASHINGTON — Democrats went big with the $1.9 trillion American Rescue Plan, not only in its overall size but in the sheer number of households who will benefit from its temporary checks and tax benefits.
The average household can expect $3,000 in direct tax benefits, according to an analysis by the nonpartisan Tax Policy Center, and about $6,000 if they have children. That doesn’t include the law’s boost to subsidies to buy insurance through the Affordable Care Act or its $300 weekly bump in unemployment pay.
While the top 1 percent of earners receive virtually no help, almost every income category below them qualifies for some type of benefit. The bottom 20 percent of earners are estimated to receive an average gain of $2,850, middle income earners $3,350, and even the top 20 percent will take in $1,900.
Despite a last-minute deal to limit the reach of the bill's signature one-time $1,400 stimulus checks, the White House estimates 85 percent of households will receive a payment.
Many households are likely to see even larger cash benefits from a one-year expansion in the child tax credit from $2,000 to $3,600 for children under 6 and $3,000 for children between ages 6 and 17, which also will be made newly available to the poorest families. A temporary increase to the child and dependent care tax credit also benefits households across a wide range of incomes.
A Columbia University study estimates the bill’s overall changes will cut child poverty by half this year.
Republicans have argued the benefits are not targeted enough given that many middle class Americans who maintained their job actually saw their financial picture improve during the pandemic.
Overall, household net worth has risen since the start of last year thanks to rising stock and home prices, according to Federal Reserve data. Total cash savings are also up 21 percent from a year ago after families both pocketed benefits from prior Covid-19 relief bills and reduced their spending on pre-coronavirus activities.
But millions are also struggling, and 9.5 million fewer people are working than when the pandemic began. Democrats argue widespread distribution of cash will help bring the unemployment rate down more quickly and make sure fewer people fall through the cracks in qualifying for help.
Here are some sample households and how they would fare based on independent studies of the new law.
Single parent of two, $15,000 income
A working mother raising a 5-year old and 2-year old would get a major infusion of cash this year, according to an analysis by the left-leaning Center for American Progress.
The $1,400 per person stimulus payments would add up to $4,200. But the family would benefit even more from the increase to the child tax credit, which would boost its benefits from $1,875 to $7,200. While it’s only for one year, Democrats want to make the child tax credit changes permanent later on.
Add it all up and you get $9,525 in temporary cash benefits this year.
Single worker, $15,000 income
A minimum wage worker would get $1,400 in stimulus. They would also benefit from a temporary boost to the earned income tax credit for childless workers, which CAP estimates at $909 in this case for a total of $2,309 in savings.
If they get insurance through the Affordable Care Act and aren’t covered by Medicaid, they might also see their premium disappear. Under the new subsidies, people making under 150% of the federal poverty level would pay $0 for a benchmark silver plan. Without the change, their annual contribution would be capped at about 2 percent of their income, in this case $300.
Family of four, $120,000 in income
For many middle class families, this is around the sweet spot before some benefits start to phase out for higher earners.
Let’s imagine a married couple with two children, a 9-year old and a 3-year old. Their household would receive a stimulus check for each member, for a total of $5,600. They also would receive the full $3,000 child tax credit for their older child, and $3,600 for their younger one, a bump from the current $2,000 each. Add it up, and you get $8,200 dollars more than they’d receive without the law.
But there’s still more potential savings as well, according to CAP’s analysis. Let’s say they have $10,000 in child care expenses between the two children: The temporary boost to the child and dependent care tax credit would add another $3,800 in benefits.
Put it together, and their income would go up by $12,000 total this year.
Single worker, $120,000 in income
Here’s where you see the phaseout hit. At this income, there’s no stimulus check — they start to phase out at $75,000 for individuals and $150,000 for married couples — or earned income tax credit. And without children or an elderly parent, there’s no gain from the expanded tax benefits for dependents, which also phase out at higher incomes.
But they still could see potential gains through a temporary bump to the Affordable Care Act, which will now provide subsidies to people at higher incomes for the very first time. The benefits are especially pronounced for older customers who are not yet eligible for Medicare and face the highest premiums. Democrats hope to make them permanent down the line.
Let’s say our hypothetical worker is a 64-year old novelist who brought in $120,000 in royalties last year. According to a calculator by the Kaiser Family Foundation, the new tax credits would bring their premiums for a silver plan down from $1,058 a month to $850 a month on average. Total savings: $2,498.