Republicans in Washington understand that in a crisis such as the one we are facing, a lot of the usual rules have to be discarded. They know that the coronavirus has made it necessary to engage in a lot of deficit spending of the kind they usually, at least rhetorically, oppose.
But they have not quite broken with old habits, which is why the emergency relief that Senate Republicans are seeking to give individuals is inadequate — especially for the low-income Americans who need it most.
Their legislation would provide "rebates" based on a household’s income in 2018.
If a single adult had little or no income-tax liability that year but at least $2,500 in qualified income, the household will get $600. A single adult who made more in 2018 will get $1,200. But not if it was too much more: The size of the rebate starts to shrink for a single adult making $75,000, and disappears completely at $99,000. These numbers double for married filers: The low-income household gets $1,200, and the rebate phases out at $198,000.
This sort of structure for a tax benefit is not uncommon.
The child tax credit, for example, has a phase-in and a phase-out. In the case of that credit, there are two rationales for the phase-in: It rewards work, and it offers tax relief instead of giving people more money than they paid in taxes. The rationale for the phase-out is that affluent households don’t need the money and so the federal government shouldn’t take the revenue hit of giving it to them.
Whatever the force of that logic as applied to the child credit, it doesn’t apply to this situation. We should not be worrying about preserving the incentive to work; in a lot of cases, we have sought to keep people from working for public-health reasons. Nor should the current goal be reducing tax burdens that we think are too onerous.
It’s offering relief for hardship, some of it caused by a virus and some of it caused by the government’s justified response to that virus — and very little of it the fault of the tax code.
The rebate cannot be structured to mitigate these harms in proportion to how large they are: No government could ever make the fine-grained judgments needed for that.
But we have no reason to think those harms are even roughly related to 2018 income in the way the rebate would be. Low-income households who may well be hurting more won’t get enough help from it. Even high-income households may not get enough: Many of them may need temporary assistance because of this unforeseen calamity.
Varying the rebate by income makes even less sense because of our time constraints.
The level of the child credit is based on current-year income.
The reason the Senate Republicans are using income from two years ago to determine the size of the rebate is that it’s the most recent information that the Internal Revenue Service has, and they want to get the money moving before it has the 2019 tax returns, let alone the 2020 ones.
The price of opting rightly for speed and wrongly for an income-based rebate is that even more Americans won’t get the needed help. According to one estimate, roughly 10% of households go through a 50% plunge in income over two years. A lot of people who were doing well in 2018 might not be today.
The right way to send checks out fast, then, is to dispense with income tests and give them to all households, at the price of some waste. (High-income households should be socially encouraged to donate the money to organizations that are meeting the needs of this crisis.)
Republicans don’t need to change their normal preferences about taxes to meet this challenge. They just need to suspend them for an emergency.
Ramesh Ponnuru is a Bloomberg View columnist. He is a senior editor of National Review and the author of "The Party of Death: The Democrats, the Media, the Courts, and the Disregard for Human Life." To read more of his reports — Click Here Now.
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