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Will Americans Save It Or Spend It?


U.S. Senator Chuck Grassley (R.-Iowa) released the Senate Finance Committee provisions in the next Covid-19 stimulus package this afternoon. It’s significant that the Republican bill includes the stimulus payments that the Democrats want: a second economic impact payment for almost all Americans, using the same income cut-offs as the first payments that went out under the CARES Act in March. So if you got a stimulus payment in the first round, it’s looking pretty likely you’ll get another one.

Got dependents? No matter how old they are, you could get an additional $500 this go round.

The bill, which still has to be hashed out with the Democrats, also includes continued federal supplemental unemployment insurance payments, albeit down from the $600 CARES ACT extra benefit that expires this Friday, July 31. The new formula would be $200 a week through September, then a payment of up to $500 that, when combined with the state payment would replace 70% of a worker’s wages.

“This unprecedented expansion of federal assistance will help millions of workers, families, patients, businesses and governments survive this historic public health and economic crisis,” Senator Grassley said in a release that includes links to the legislative text of the finance provisions and a section-by-section summary.

Here are the details on the second stimulus as envisioned by the Senate Finance Committee:

As under the CARES Act, all U.S. citizens and U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible Social Security number, are eligible for a $1,200 ($2,400 married) rebate under this section. In addition, they are eligible for an additional $500 per dependent rebate. 

Unlike under the CARES Act where the additional $500 was limited to taxpayers with a dependent child under 17, the additional $500 will now be provided to taxpayers with dependents of any age. Even individuals who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits, are eligible for the full rebate amount. The amount of the rebate phases-out completely once the income of single filers exceed $99,000, the income of head of household filers with one child exceed $146,500, or the income of joint filers with no children exceed $198,000. 

How are Americans who get these payments likely to use them? The Census Bureau found that the majority of adults who got a check said they used it or planned to use most of it on household expenses. Yet 15.7% used their stimulus check to pay off debt, and 14.1% planned to mostly save it. That’s one reason legislators considered lowering the income limits for who would get a check: Savings doesn’t stimulate the economy.

But it’s still a good thing for those can boost their savings. If you’re in line for a second stimulus payment and have the wherewithal to save, you can boost your savings, and even help your dependents on the path to smart savings. Start with an emergency savings account, or if you have one already, open or add to an Individual Retirement Account or your workplace 401(k) retirement account. If your child has earned income, say from lifeguarding or tutoring, they can open and fund an IRA. The earlier you start on the path to saving, even if it’s just $500, the better.



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