Most Americans received stimulus payments three times from the federal government during the first year of the COVID-19 pandemic. Many Americans receive a similar payment in the Spring every year after they file their taxes and claim the Earned Income Tax Credit (EITC). Some of these “many” Americans, starting last month, began receiving advance payments of their EITC every month.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was launched in April of 2020. It instituted a refundable tax credit to be applied to 2020 tax returns. The resulting “economic impact payment” was $1,200 for each adult, plus an additional rebate of $500 per qualifying child. The Tax Relief Act of 2020 was launched in December, and it gave every American adult $600, plus another $600 per qualifying child. The third COVID-19 stimulus package passed by the U.S. Congress was the American Rescue Plan Act (ARPA), launched in March of 2021. It provided American adults with a maximum “recovery rebate” of $1,400 per eligible individual, plus an additional $1,400 per qualifying child.
The EITC is a refundable tax credit. Instead of just being a dollar-for-dollar reduction of the amount of income tax owed, a refundable tax credit is treated as a payment from the taxpayer, just like federal income tax withheld or estimated tax payments. If the tax credit “payment” is more than the tax owed after the regular tax credits are applied, however, then the “taxpayer” receives a refund of money he never actually paid in. For tax year 2002, the maximum EITC payment is $6,660 for taxpayers with three or more children.
Under the ARPA, the Child Tax Credit (CTC) for tax year 2020 was increased from $2,000 per qualifying child, with $1,400 of this being refundable, to a fully refundable $3,000 per qualifying child (aged 6-17), or $3,600 per qualifying child (younger than 6). For the months of July through December of 2021, those expected to be eligible for the tax credit will receive $300 (for each child under 6) or $250 (for each child 6 to 17) in monthly payments, and then claim the rest of the credit when they file their 2021 taxes next year.
The advance payment of the CTC is the closest of the three that we have in this country to a guaranteed minimum income, popularly known as a universal basic income (UBI), but even it ceases at the end of the year.
A UBI is a no-strings-attached check sent to every American adult to ensure that they have a guaranteed minimum income. The amount of the payment, and whether it is increased depending on the number of children in the family or decreased depending on the family income level, varies according to which proponent of the UBI that you talk to.
The idea that the government should provide a UBI is gaining in popularity. Government entities around the country have been testing various forms of a UBI, but if there were ever a senseless test, it is a test to see what will happen when the government gives people free money.
A pilot program in Ulster County in upstate New York is giving 100 county residents making less than $46,900 annually a check for $500 a month for a year. More than 4,200 applicants “applied for the program in a county of 178,000 people.” Although the program is funded by private donations, it is administered by the county. Recipients of the money can spend it as they wish, but “will be asked to participate in periodic surveys about their physical health, mental health and employment status.”
For researchers, the pilot program “could give them a fuller picture of what happens when a range of people are sent payments that guarantee a basic living.” Ulster County Executive Patrick Ryan sees “cash payments as a way to help local families struggling to get ahead, or even get by, as the pandemic ebbs.”
For recipient Annette Steele, the cash is “a welcome financial boost that helped her pay for car insurance and groceries.” “It lessens my bills,” said Steele. For recipient Eric Luna, the money “will help pay the bills,” but “he also hopes to set some aside, possibly for a master’s degree.”
Does any of this come as a surprise? It is a no-brainer that anyone who is given an extra $500 a month will have more money for groceries, credit card payments, recreation, entertainment, savings, utility bills, car payments, and clothing. No pilot program was necessary to discover this. And yet, the Center for Guaranteed Income Research is evaluating more than twenty such pilot programs around the country.
In addition to the EITC, low-income Americans already have access to a vast array of welfare programs: Temporary Assistance to Needy Families (TANF), food stamps, Supplemental Security Income (SSI), Medicaid, the Low-Income Home Energy Assistance Program (LIHEAP), the Children’s Health Insurance Program (CHIP), housing vouchers, and Women, Infants, and Children (WIC). There are, in fact, about 80 means-tested welfare programs in the United States that limit benefits or payments on the basis of the beneficiary’s income or assets.
Why would anyone think that a test was needed to see what people would do with even more of other people’s money?
Support for a UBI is growing among Democrats. Representative Ilhan Omar (D-Minn.) has introduced a bill in the House that would provide Americans with monthly payments of $1,200 for adults and $600 for eligible children. A phaseout would start at adjusted gross income (AGI) above $75,000 for single taxpayers and above $150,000 for married filing jointly. This means that a family with two parents and four children could collect nearly $58,000 a year while lounging on their couch.
Omar’s bill, the Sending Unconditional Payments to People Overcoming Resistances to Triumph (SUPPORT) Act, “would be a crucial step in making guaranteed income a local and national priority.” The new Office of Guaranteed Income Programs, under the supervision of the Treasury Secretary, “would be responsible for overseeing a $2.5 billion grant program to fund local income pilots organized by local governments and community development financial institutions.” Once the tests are over and an analysis done, “the federal government would have to implement a national guaranteed income program.” Again, another senseless test. Just cancel the pilot programs. We already know the results: people will have more money to spend, and they will like it.
Former U.K. Prime Minister Margaret Thatcher once remarked that the problem with socialism is that eventually you run out of other people’s money. The United States has reached this point already. The U.S. government has no money and is in debt to the tune of $28 trillion.
