Congress wants to send Americans money. Turns out it's complicated.
One proposal would send up to $1,200 in “recovery rebates” to those who qualify. But there are plenty of wrinkles to iron out.
How do you send money en masse to people in the midst of a pandemic?
In a world roughly remade by virus every few days, the federal government’s desperate attempt to shore up a plummeting economy changes shape by the hour. But one partial solution has surged to the fore: sending money directly to Americans.
There’s precedent for the idea: The U.S. sent money out to most households during the 2001 and 2008 recessions. But as the government tries to move at warp speed this time around, plenty of question marks remain about the tradeoffs between rapidity and accuracy. Every day it takes to pass the bill matters. And no one really knows what new wrinkles the coronavirus might add.
A Treasury Department spokesman declined to comment for this article, and negotiations are still in flux. But here’s how former officials and experts expect the process to work — and how you might end up with thousands more dollars in your bank account within weeks.
In the Republicans’ initial bill text, the IRS would take the lead, tapping a master file of this year’s and last year’s tax filers’ personal and bank information. Unlike in 2008, most people now get their refunds via electronic direct deposit, so sending them money is simple. Once the IRS sends its file to the Bureau of the Fiscal Service, the payments can move fast, said Dick Gregg, a former fiscal assistant Treasury secretary and head of what’s now the Fiscal Service.
But the GOP proposal tanked Sunday night over Democratic opposition to other provisions of the bill. Senate Minority Leader Chuck Schumer and Treasury Secretary Steven Mnuchin are now working on a new version. Even if they preserve the new payments, there are still a few wrinkles to iron out.
“All of this is nifty,” said former IRS Commissioner John Koskinen, “but you don’t get the people who don’t file.”
Coordinating across agencies, the government can also access information for people who haven’t filed taxes but already receive payments in the form of Social Security or Veterans Affairs benefits.
A trickier task is reaching the portion of Americans who neither make enough money to file taxes nor receive those other benefits — “the new working class,” as Chuck Marr, senior director of federal tax policy at the Center on Budget and Policy Priorities, put it. A single dishwasher without kids, a home health aide: Not only are these people among the most vulnerable to the current economic shock, they’re also easier to miss.
Electronic benefits transfer cards for people who receive food stamps and other cash assistance are one way to find them. That could require coordination with state governments to deliver the payments, said Jack Smalligan, a senior policy fellow at the Urban Institute who spent nearly three decades at the Office of Management and Budget.
But too much delay in figuring out who should get a check could hold up the entire process.
“Speed is of the essence at this time,” argued Michael Graetz, a law professor at Columbia and Treasury official in the George H.W. Bush administration. “And then if there are gaps or people didn’t get it, there should be a number to call that allows you to say that you didn’t get it.”
Starting payments by April 6, as Mnuchin originally proposed, would be much faster than in 2008, when the IRS took two months to send out the first checks. That’s assuming, of course, that the president signs the bill this week.
And how the coronavirus will affect the process remains to be seen. At the IRS, where budget and staff cuts have shrunk the agency over several years, social distancing measures for employees could slow things down more. The agency announced Friday it was closing Taxpayer Assistance Centers until further notice, which could impede elderly and low-income people’s ability to file taxes quickly.
If Americans are stuck at home, those who receive physical checks may be less likely to cash them. That’s one reason sending prepaid debit cards might be a better alternative, said David Kamin, an NYU law professor and Obama OMB official.
Many outstanding questions remain about Congress’ bill and the administration’s implementation of it.
How will the IRS manage the payments while also handling a filing season that just got extended three months?
Will the payments happen in both April and May, as Treasury proposed? Or just once, in April, as Senate Majority Leader Mitch McConnell’s original package envisioned?
Will they be tiered based on income (one of the most politically contentious elements), or universal?
And in the face of new opposition last week from Sen. Lindsey Graham (R-S.C.) and other Republicans, will they even happen at all?
McConnell’s proposal laid out up to $1,200 in “recovery rebates” for Americans who make up to $75,000 a year, double that for couples and extra for families with children. Payments would have phased out for those with higher incomes and cut off at those who make $99,000 annually. But there remains uncertainty about how the final bill text will shake out.
Democratic and Republican leaders have mostly favored a tiered approach, though there was disagreement over whether low-income people who have paid less in taxes should receive less.
But experts who favor the payments said a universal approach may be best to get the money out quickly.
“The issue is not so much how to stimulate employment but rather how to help people over a period where lower-than-normal employment is the right course” due to social distancing, said Greg Mankiw, a Harvard professor who chaired the Council of Economic Advisers under President George W. Bush. “Targeting means it’s probably going to delay things.”
Hong Kong last month announced it would give each of its roughly 7 million adult permanent residents the equivalent of $1,280.
Mattie Duppler, a senior fellow at the National Taxpayers Union, suggested that the government could send payments universally now — to maximize speed — and then means-test them later, clawing back the money from some people on next year’s tax returns.
Some experts warned, though, that Congress should think through unintended consequences.
Extra cash could push some people over a benefits cliff, for example, meaning the one- or two-time infusion would suddenly push their incomes just high enough to lose crucial government supports.
That could be avoided through a provision in the stimulus bill, said Amy Castro Baker, an assistant professor at the University of Pennsylvania’s School of Social Policy and Practice who saw that dynamic play out when she oversaw a pilot program in Stockton, Calif.
“Preserving that benefit structure while we’re in this policy gray space is really important,” she said.
One thing’s clear: Between the velocity Congress is trying to reach and the uncertainty of the coronavirus, some of the process will have to be worked out on the fly.
“When we think about cash transfer work that has happened since , we’ve done it many different ways,” said Stacia Martin-West, an assistant professor in the University of Tennessee’s College of Social Work who co-led the Stockton experiment. But with the pandemic ongoing, “we are kind of in the Wild, Wild West.”
Brian Faler contributed to this report.