Just two weeks after Democrats won the US Senate on a promise to immediately pass $2,000 survival checks, party leaders are now proposing $1,400 checks — a lesser amount than many expected, which would save the federal government money and could address conservatives’ concerns that too much money is going to people who supposedly do not need it.
And yet, Democratic lawmakers are also considering a new tax break that could cost nearly as much or more as the savings gleaned from reducing the survival checks — and the tax break’s benefits would primarily go to the rich.
If passed, the new stimulus proposal released this week by president-elect Joe Biden would significantly boost the minimum wage and funding for unemployment benefits and rental assistance. But the Biden initiative recommends sending $1,400 checks instead of $2,000 checks — a reduction that would save the federal government somewhere between $164 billion and $200 billion, based on estimates from Congress’s Joint Committee on Taxation and the Committee for a Responsible Federal Budget.
At the same time, Democratic lawmakers are reportedly considering resurrecting their past proposal to temporary repeal a cap on state and local tax (SALT) deductions that high earners can deduct on their federal taxes. According to the Joint Committee on Taxation, temporarily repealing the current $10,000 cap on the SALT deduction would cost $136 billion over the next two years, which was the time frame proposed for such a repeal in legislation pushed by House Democrats last year.
California Republican representative Mike Garcia is touting new legislation to repeal the limits on SALT deductions. Bloomberg News reported that “Democrats have been trying to restore unlimited SALT deductions since the 2017 tax law capped the benefit at $10,000.”
If Democrats choose to permanently repeal the cap, it would cost almost $600 billion — or three times the amount it would cost to boost the $1,400 checks to $2,000.
The survival checks and the SALT tax breaks are mirror opposites when it comes to distributing benefits.
$2,000 checks would target help to the bottom 60 percent of income earners, who would see an average increase of 11 percent in their annual income, and it would be a particularly big income boost for the poorest Americans. By contrast, the SALT deduction would mostly benefit wealthy households, with the top 5 percent of households receiving over 80 percent of the benefit.
The top 1 percent of households would get roughly 60 percent of all the benefits of a SALT cap repeal, which translates to “an average tax cut of more than $33,000,” wrote Howard Gleckman of the Tax Policy Center.
“This is not a tax cut for those hit hardest by the virus,” wrote Richard V. Reeves and Christopher Pulliam of the Brookings Institution. “Democrats’ pursuit of such a deeply regressive tax cut casts serious doubt on their egalitarian claims. It is a shame to see Democrats urging a big tax break for the richest, whitest families, which is arguably the very last thing the country needs right now.”
A Semantic Debate About Whether $1,400 Is Actually $2,000
In the last two months, progressives have successfully pressed Biden to shift from first urging Democrats to support a stimulus bill with no direct aid, to now proposing a new $1,400 stimulus check. That is real progress.
There remains a debate about whether Biden and congressional Democrats’ recent promises of $2,000 checks were always taking into account the $600 checks in the COVID relief bill passed by Congress last month.
When Democratic lawmakers sought to boost those checks to $2,000, the argument goes, they were really only proposing an additional $1,400 — so Biden’s push now for $1,400 checks would bring the total relief up to $2,000 and therefore fulfill Democrats’ promises.
Publicly, however, Biden and top Democrats were unequivocal: they promised that taking back the Senate would result in a $2,000 survival check for millions of Americans. Biden, for instance, said that Democrats winning in Georgia would “put an end to the block in Washington on that $2,000 stimulus check, that money that will go out the door immediately to people who are in real trouble.”
But Thursday night, Biden made a subtle but important rhetorical shift, saying: “We will finish the job of getting a total of $2,000 in direct relief to people who need it the most.”
When seeking support from Georgia’s voters, Democrats never tried explaining to people that $2,000 checks would actually mean new $1,400 payments on top of the $600 checks already authorized by Congress. It’s easy to see why they didn’t: it’s the exact type of annoying semantic argument that Democratic politicians are often lampooned for, and it might as well be designed to enrage people and demoralize them.
“$2,000 means $2,000,” Representative Alexandria Ocasio-Cortez told the Washington Post. “$2,000 does not mean $1,400.”
It’s worth noting that the Trump administration already started sending those $600 checks out with Donald Trump’s name on them. Why would the average person who doesn’t follow the inner workings of Congress believe those $600 payments were a down payment from Democrats, even if they were?
The lack of clarity around what a $2,000 check actually means gave Biden an opportunity to decide whether to press for more or less relief to millions of American facing eviction, starvation, and bankruptcy. He chose to use the ambiguity to call for less.
Indeed, rather than pushing for a full $2,000 check, the president-elect and party leaders decided to parse their own rhetoric and offer up a legalistic justification for a smaller amount of relief — a big win for conservative Democrats such as Joe Manchin, who has said that many people don’t need the checks and argued instead for more “targeted” relief.
Biden’s choice illustrates his priorities and political reflexes — and it’s not a small matter.
The difference between $1,400 checks and $2,000 may not be significant in the scope of the federal budget, but millions of Americans are seriously behind on rent and can’t afford food. Democrats are now putting themselves in a position where they are forced to justify sending those people less money. And this could undermine perception of the rest of the stimulus bill, no matter how many important items are in it.
The truth is that Americans need more than a onetime $1,400 or $2,000 check — they need recurring help. The incoming vice president, Kamala Harris, was the lead author on a bill last May to give people monthly $2,000 survival checks until the pandemic is over.
Instead of rallying behind that legislation — which polls show is wildly popular — Democrats are debating the meaning of a $2,000 check and offering Americans $1,400, all while considering new tax breaks for the rich.