In a victory for moderate Democratic senators seeking to rein in the $1.9 trillion Covid relief bill, President Joe Biden agreed on Wednesday to tighten the income limits for the next round of individual payments.
According to the new plan being circulated in the Senate version of the Covid relief bill, the full payments of $1,400 would still be provided to individuals earning up to $75,000 and married households earning up to $150,000, as laid out in the recently passed House bill. But individuals earning more than $80,000 and couples earning more than $160,000 per year would not receive any assistance. In the House version of the bill, those cutoffs are $100,000 and $200,000, respectively.
In essence, the payments would phase out much faster under the new Senate version of the bill, reducing the total number of people who will get a check.
A closer look: Kyle Pomerleau, a tax expert at the right-leaning American Enterprise Institute, estimated that nearly 9 million households that received a payment during the Trump administration would not receive one through the Biden bill, according to The New York Times. The narrower income limits would save between $15 and $20 billion on the total cost of the bill, Pomerleau said.
Steve Wamhoff of the liberal-leaning Institute on Taxation and Economic Policy said that about 5% of Americans, or 17 million people, would lose benefits under the new plan. “The Senate bill would benefit 86 percent of adults and 85 percent of children, compared to 91 percent of adults and 90 percent of children under the House-passed bill,” Wamhoff wrote. “But among the bottom 60 percent of Americans, those who most need help, both versions of the proposal would benefit 100 percent of adults and children.”
Moderates flex their muscles: Driven by concerns among moderate Democratic senators about providing aid to households that may not need it, Biden’s decision to limit the payments reflects the remarkable power centrists including Joe Manchin (WV) and Jeanne Shaheen (NH) now have in the upper chamber, where party control is split 50-50 and just one defection can make or break a bill. Manchin “basically has veto power over everything the party wants to do,” Jake Sherman of Punchbowl News tweeted.
Manchin expressed approval of the payment limits and praised the overall package, even though it will increase enhanced unemployment payments to $400 a week instead of keeping them at $300 as he suggested. “It’s going to be a good package that’s going to help an awful lot of people. And it’s targeted. The main thing is, it’s targeted to get to people in need,” he told Politico.
Questions about the politics: Critics questioned the wisdom of Biden’s decision, which creates a politically awkward situation in which millions of people who received Covid relief payments under former President Trump will not receive payments from the bill Biden hopes to sign soon.
“Conservative Dems have fought so the Biden admin sends fewer & less generous relief checks than the Trump admin did,” Rep. Alexandria Ocasio-Cortez (D-NY) tweeted. “It’s a move that makes little-to-no political or economic sense, and targets an element of relief that is most tangibly felt by everyday people. An own-goal.”
From a fiscal perspective, the savings are modest — the Senate bill would be 0.63% cheaper, according to New York’s Eric Levitz — and the sharp phase-out risks creating a punitive marginal tax rate of over 50% for some households earning incomes close to the cutoff point, according to the Progressive Policy Institute’s Ben Ritz. “If I were a worker making $80k I would be furious about this in a way I would not have been as a $100k worker under the House framework,” Ritz tweeted. “This really dumb change makes checks more rather than less inequitable & saves hardly any money.”
Accepting the political reality: In comments Wednesday, White House Press Secretary Jen Psaki acknowledged the power that moderates now have in the Senate, while making clear that Biden is focused on doing what it takes to get the relief bill passed. “Sen. Manchin and others in the Senate are negotiating with each other about what package they can support moving forward as it relates to the American Rescue Plan. That’s ongoing now,” Psaki said. “But Sen. Manchin has been clear that he supports a big package. He believes it should meet the moment. And so we’re looking forward to working with him and getting this across the finish line.”