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Saturday, December 3, 2022

Federal Reserve Struggles To Contain Inflation Even As State Stimulus Checks Threaten To Degrade The Situation

With federal stimulus checks long gone, the efforts by states to provide inflation relief to American consumers with various forms of support measures may go down well with residents. But this measure threatens to add to spending and make it harder for the policymakers at the Federal Reserve to cool down inflation.

But economists believe that the impact may be limited on both prices and spending. This could be in part due to the limited number of states who are going ahead with legislative measures to go either for tax rebates or direct stimulus checks.

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Another reason for the limited impact the state stimulus checks will have on inflation is that the packages are specifically targeted at individuals and families with very low incomes.

The federal administration made this exact mistake of sending out stimulus checks without researching the necessity of sending them to almost every section of the population. The stimulus checks sent money even to individuals and families who continued to get paid throughout the pandemic.

This led to excessive amounts in the hands of a section of the beneficiaries. This money was spent on non-essential items which led to a mini-boom in the economy in the second and third quarters of 2021.

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But it also led to an imbalance in the demand-supply chain and led to a shortage of goods even as people moved from services to products. This imbalance was further aggravated by the fact that the supply chain remained affected even months after the pandemic restrictions were eased, and the economy was quite normal.

The stimulus checks also had another side effect. The cash in the hands of a large section of the population made them unwilling to risk joining the workforce.

The fear surrounding the pandemic was yet to recede and workers also did not have the incentive to risk contracting the virus as it was still an unknown entity then. Also, many families were left caring for a family member at home.

stimulus check
stimulus check

California And Florida Among New States To Send Stimulus Checks

Republican California under Ron DeSantis is the latest to come up with a generous stimulus check instead of the gas and transport card that was proposed earlier. Around 23 million residents, close to 60% of the population will receive a stimulus check that could go up to $1,050 in the case of families filing jointly and earning below $150,000. They would have to declare at least one dependent to get the full amount.

The Golden State stimulus check covers even families with joint earnings of $250,000 or below. They could get up to $600 as a family.

Florida on the other hand is sticking to sending stimulus checks to a modest number of families with at least one child. Such families will get around $450 which will reach around 60,000 families. Even related and non-related caregivers will get the Florida inflation relief stimulus check. It is a wild deviation from Governor Ron DeSantis’s avowed opposition to the stimulus check which the 2024 presidential hopeful has blamed for the inflation.

Coloradans who have filed their income tax returns for 2021 will soon get a $750 tax rebate per filer. This stimulus check will arrive by mail and the money comes from taxes that are more than the cap under the state Taxpayer Bill of Rights (TABOR).

This unique provision mandates the states to refund taxes collected over a certain amount that is determined each year taking into account population and inflation among other factors. State authorities have revealed that around $1.5 billion has been collected more than the cap set for the fiscal year that ended this June. It is the largest ever in the history of the state.

Residents of Colorado who have filed their state returns by June 30 will receive the state stimulus check by August. Governor Jared Polis has said that most residents should get a check by the third week. But residents who filed their returns by the extended date on October 17 will have their stimulus check delayed and should get it in January next year.

This rebate will come to a generous $1,500 for joint filers and half that for individual filers. State administrative officials have revealed that between 1% to 2% of the amount will be held back fully or partially for pending taxes or child support dues.

Residents only need to file their state tax returns for 2021 even if they do not have taxes to declare, or if they have applied for a rebate on rent, property tax, or heat credits by June. Residents must also have stayed for a full year in the state in 2021 and must be over 18 years as of December 31, 2021.

Stimulus Check
Stimulus Check

TABOR Is A Unique Scheme For Returning Money To Residents

This automatic refund comes back automatically to residents every year one way or another. The ruling Democrats are to be commended for getting it out much earlier and in a much more equitable fashion.

Governor Polis said that the government does not want to hold onto the money for close to a year, especially at a time when residents are hurting due to record inflation. He said that the administration has decided to get it back to Coloradans immediately when they need it the most.

Gov. Polis’s initiative had the backing of 3 other Democratic lawmakers who sponsored the appropriation. They were Representatives Tony Exum of Colorado Springs, Lindsey Daugherty of Arvada, and Senator Nick Hinrichsen of Pueblo.

Delaware is giving out a one-time direct stimulus check of $300 per adult resident. This relief will enable Delawareans to face higher prices at the gas pump and the grocery store. The one-off payment was passed by the Dept. of Finance in May for individuals who have filed their state personal income tax returns for 2020 and 2021 by their due date. They must be 18 or older. They do not have to take any other action to receive the stimulus check.

The state of Illinois is issuing rebate checks to filers from July 2022 through October 17. Residents must file an Illinois 1040 form before October 17 to be eligible for the payment even if they do not have any income. The payments will be $50 for individuals and $100 for each child up to a maximum of three children. The maximum rebate allowed is $400.

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