Stimulus Checks Prove More Effective Than Tax Rebates: Guaranteed Minimum Income Throws Up Positive Results Across America

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Stimulus Check

The stimulus check program was a resounding success during the pandemic and after and played a role in pulling the economy off the rails. Experts credit the stimulus checks for the positive and significant effect on growth, employment, and poverty alleviation. The same could not be said for a tax rebate when it had a more roundabout way of resolving things. 

The greatest advantage afforded by the stimulus check was that it covered all sections of society and also its quick delivery of cash directly into the hands of the affected. It is also advantageous as it ensures that the secondary costs of delivering money are not too high as it mostly bypasses bureaucratic red tape.

And this success was most evident with the three federal stimulus checks following the pandemic between March 2020 and March 2021. The economic impact of payments prevented starvation and payment defaults on a large scale. 

Households comprising four members received as much as $12,000 over a period of a year. And it was not limited to the stimulus checks. The extension of the weekly unemployment stimulus checks till the third quarter of 2021 and the expansion of the Child Tax Credit stimulus checks also sustained Americans through 2021 and even into the first quarter of 2022.

The federal and later the state stimulus checks in 2022 succeeded in their purpose of helping to qualify individuals during the economic downturn following the pandemic and also during the record inflation that continued through 2022.

stimulus check

While on the one hand, the stimulus checks from the federal government encouraged spending even among the low and moderate-income groups, it also increased revenue for sellers and manufacturers. It succeeded in its purpose of increasing consumer spending. And thus increasing the revenue of both retailers and manufacturers.

Not everyone qualified for a stimulus check. The government set various eligibility requirements for every direct payment that was made. Some of the basic requirements included a limit on the Adjusted Gross Income as declared by tax filers in the previous year. Such claimants must be American citizens or residents and cannot be dependents claim on anyone else’s income tax returns. 

That indicates that individual filers with an AGI of more than a certain amount did not qualify. A similar rule applied to married couples filing separately or jointly, heads of households, widows, and widowers. 

Tax Credits Fail To Have The Same Effect As Stimulus Checks

While Stimulus checks have been directed from the government to individuals and households, tax rebates are a discount on the tax burden of an individual. Stimulus check payments have an immediate effect both on the benefitting individual or family as it serves the idea of putting money directly into the hands of individuals and families. 

This helps to both support that individual or family and prop up the economy when it is going through a rough patch. So it boosts consumer confidence and also encourages people to spend more. Tax rebates, on the other hand, help to lower an individual’s annual tax burden at the end of the year. So they end up paying less than the initial figures at the end of the year.  

Consumer confidence has been hit time and again as their economic power plummeted during the pandemic as millions of jobs shut down immediately. With the economy shut down, there were no substitute jobs available for people to continue. 

People were again affected when record inflation hit the economy even as the economy was in the recovery stage in the second half of 2021. It got worse and through 2022, inflation rates remained high and above a four-decade-old record. This led to prices of basic goods from food to gasoline almost doubling from pre-pandemic levels. 

This second round of trouble that Americans faced was without the reassuring support of tax rebates and stimulus checks from the federal government, something that they had gotten used to in 2020 and 2021. This was the hardest part of 2022 as state stimulus checks were nowhere near the comprehensive cover of the federal payments.

stimulus check

While the economy had opened up to a large extent in 2022, the rise in prices negated the rise in wages when compared to pre-pandemic levels. When set against inflation, people were earning less in real terms. And only a handful of states, around twenty, give out stimulus checks and tax rebates as inflation relief. Even those payments were one-off inflation relief stimulus checks though prices remained consistently high throughout 2022 and even into the second quarter of 2023.

Stimulus Check Post The Second Quarter Of 2023

While federal and state governments have shied away from stimulus checks in 2023, local governments have moved in with the concept of a Universal Basic Income. Cities across the country keep announcing new free cash programs for residents and the latest has come as recently as last week. 

An alderman in Chicago proposed plans for a guaranteed basic income stimulus check for city residents. The plan includes diverting $30 million from the pandemic recovery money to give stimulus checks worth $500 to around five thousand residents of Chicago.

To qualify applicants would need to have an annual income of not more than 300% of the federal poverty level. That works out to $38,640 for individuals and $52,260 for couples. 

The concept of a universal basic income is old and there are plenty of historic examples of its success. The idea is simple and moots a long-term stimulus check providing a big safety net for beneficiaries. The payments have no other conditions attached and are mostly given once a month. 

The idea gained renewed vigor in 2020 following the pandemic even as millions across the US faced the consequences of the economic downturn following the pandemic. Many cities are experimenting with the concept of universal basic income programs but have offered them as test cases to a select few of their residents. The groups have been selected at random or chosen based on locations that have been hit the hardest by the economic downturn in the past three years.