There is a case for targeting coronavirus relief at the individuals and areas that have the greatest need or have been directly affected. There is also a case for providing relief indiscriminately, just to get the checks out the door as quickly as possible.
There is no case for giving smaller checks to poorer people, which is what the new Senate GOP bill does. As Senator Josh Hawley has already called for and the Democratic House will likely demand, it needs to be fixed.
Relief to families in this emergency shouldn’t be regressive. Lower-income families shouldn’t be penalized
— Josh Hawley (@HawleyMO) March 19, 2020
The baseline scenario under the bill is that each person gets a $1,200 check, with the amount phasing out for incomes between $75,000 and $100,000. (Double those amounts for married couples.) $500 will be added for each child. So far, good enough, though it could be a problem that incomes will be based on 2018 tax returns.
But there’s a big catch, which the official section-by-section summary explains this way:
Taxpayers with little or no income tax liability, but at least $2,500 of qualifying income, would be eligible for a minimum rebate check of $600 ($1,200 married). Qualifying income includes earned income, as well as Social Security retirement benefits and certain compensation and pension benefits paid to veterans.
To use the tax-wonk term, the benefit “phases in” at lower incomes, because it’s based on tax liability. To put it bluntly, poor workers can see their checks cut in half, and Americans with hardly any income will get squat.
There’s a time for this kind of policy design. In a normal economy, it can ensure that people receive benefits only if they work to bring in money of their own, which is a good incentive. But we are not in a normal economy, and thus now is not the time.