March 8, 2021
Raymond James Washington Policy Analyst Ed Mills outlines the provisions for individual payments, education support, restaurant grants and more.
The Senate’s version of the $1.9 trillion American Rescue Plan has been approved and awaits a House of Representatives vote (expected Tuesday, March 9) before being signed into law by President Biden later in the week. The package is expected to pass in the House without delay, even though progressive lawmakers expressed frustration at the Senate enacting stricter income limits for individual payments and scaling back unemployment support to $300 per week.
An overview of the Senate bill’s key components:
$1,400 payments are provided for individuals, including $1,400 for children and adult dependents. Payments phase out to zero at incomes of $80,000 for individuals, $120,000 for head of household and $160,000 for joint filers. By design, an average family of four will receive $5,600 from the next round of payments.
Federal unemployment support
The federal unemployment insurance (UI) supplement is set at $300 per week through Sept. 6. This is down from $400 in the House version, but extended by one additional week. The Senate bill also makes the first $10,200 in federal UI assistance nontaxable for incomes under $150,000.
The bill includes $25 billion for a restaurant grant relief program. Grants are exempt from inclusion in recipients’ gross income for tax purposes. Maximum grants are set at $10 million. Grants may be available through the end of this year, with the authority for the Small Business Administration (SBA) to extend the program up to two years. Entities operating more than 20 locations and publicly traded companies are excluded.
Small business support
Additionally, $15 billion in new funding is provided for Economic Injury Disaster Loans (EIDL) as grants. The bill designates $7 billion for the Paycheck Protection Program (PPP) to nonprofits and news services. An additional $1 billion funds a grant program for independent live venues, theaters and cultural institutions. EIDL grants are exempt from inclusion in recipients’ gross income for tax purposes.
The bill includes a $27 billion allocation for rental assistance, $10 billion for homeowner assistance, $5 billion for Section 8 housing, and $5 billion for homelessness programs.
Expansion of earned income tax credit (EITC)
Maximum EITC raised to around $1,500 for childless workers and makes eligible 19-24-year-old workers as well as those over 65.
The bill provides $130 billion for K-12 schools and $40 billion for colleges and universities. A provision in the bill also specifies that any student loan forgiveness implemented between 2021 and 2025 is exempt from the classification of canceled debt as additional income for tax purposes, potentially a key step in expanded federal student debt relief.
Child Tax Credit (CTC) and Child and Dependent Care Tax Credit
The CTC is raised to $3,000 from $2,000 for children over 6 and $3,600 for children under 6 while expanding eligibility for the credit for 17 year olds. The credit is made fully refundable, reaching homes without reported income. The language of the bill instructs the Treasury Department to make “periodic payments to taxpayers … in equal amounts.” We expect Treasury to design these as monthly payments, starting in July. Per the bill’s language, the expanded period payments are only for the current taxable year, but we expect Democrats to push for a permanent or longer-term extension later this year/next year.
The Dependent Care Tax Credit is raised to $8,000 for a single dependent from $3,000, with a maximum of $16,000 for multiple dependents and made refundable. Payments are phased out at incomes above $400,000. The White House estimates the expanded child/child care tax credit and associated care programs will cost around $40 billion.
State and local aid
A total of $350 billion is provided for state and local government support. Of that sum, $169 billion is divided by a state’s total share of unemployed workers and $25 billion is divided evenly among states. Cities and counties will be allocated $120 billion, and $10 billion is set aside for states to expand remote work infrastructure (public health education, health monitoring services) via a Capital Projects Fund. Deposits of federal aid to pension funds are prohibited. A separate $30 billion is allocated for public transit agencies to preserve staff and service.
FEMA Disaster Relief Fund
An additional $50 billion is provided for the relief fund for pandemic response. This funding may be key for the extension of federal unemployment support if needed later this fall, as the funding for extended unemployment payments was tapped under President Trump’s executive order extending federal unemployment benefits.
Airline payroll support
Airlines are provided $14 billion and contractors $1 billion for the extension of the airline payroll support program (PSP).
The bill provides $12 billion for SNAP and Pandemic EBT nutrition benefits with an extension of the 15% SNAP increase through September 2021.
The bill includes $7 billion to expand broadband access for households and remote education.
The bill increases subsidies for those on Affordable Care Act plans, provides for 100% coverage of COBRA premiums for those who have become unemployed, and delays the removal of the Medicaid drug rebate cap for one year. The bill also provides significant levels of funding for COVID-19 testing and vaccines.