Breaking Down the Stimulus Package
Understanding the New Stimulus Bill
Initial Update:
We’ve likely all heard reference to the $900 Billion Covid-19 relief bill that has been months in the works. The bill includes extended and enhanced benefits for those most impacted by the headwinds of the pandemic. After months of negotiations regarding the depth and contents of the bill, Congress reached an agreement on Sunday, December 20th, 2020. However, what most people did not expect was the swift Presidential veto by President Trump who requested that Congress amend the bill, specifically regarding the proposed amount for direct payments that would be made to Americans. The bill, if passed, would represent the second-largest federal stimulus package following the CARES Act which totaled $2 Trillion. With the timing entering critical territory as the government prepares to shut down, where do we stand at this moment in time? Facing congressional pressure and an impending government shutdown, President Donald Trump has now signed the coronavirus relief package as of Sunday, December 27th, 2020.
What’s Included?
So, what is currently included in the stimulus bill? Most of the bill’s contents are to be expected and are very similar to the initial legislation which came in March of 2020 under the CARES Act. Here is what is currently explicitly included in the $900 Billion relief bill.
Direct Payments: Also known as stimulus checks. Congress proposed a $600 direct payment be made to anyone eligible based on income. Politicians have reassured that anyone who received a stimulus check under the CARES Act could expect a second direct payment. Additionally, families will receive an additional payment of $600 per eligible dependent child, but not for dependent adults. While President Donald Trump has advocated for direct payments of $2,000 to adults, it is unclear at this time if this provision will be amended in the legislation in any way. Previously, a voice vote failed due to Republican opposition on higher direct payment amounts.
Based on the eligibility rules currently provided by the IRS: For single people, more than $75,000 in AGI (Adjusted Gross Income) marks the threshold for receiving a stimulus check. If you file a joint tax return, you must have under $150,000 in AGI to receive a stimulus check. If you claim Head of Household status, you must make below $112,500 in AGI to be eligible for a direct payment. If you exceed these thresholds, your payment amount will be reduced by 5% of the amount by which your AGI exceeds the limit.
If the rules remain the same from the first stimulus bill, there is no limit to the number of eligible children. However, children are qualified as those 16 or younger and must be claimed on the taxpayer’s tax return. College students and other adult dependents will not qualify for the additional $600 payment to be added to the household total.
Unemployment: Those currently receiving unemployment benefits will become eligible for an additional $300 weekly benefit for a total of eleven weeks, bringing us through mid-March. These payments will not be retroactive. The additional $600 weekly benefit determined under the CARES Act expired at the end of July. This package also extends the Pandemic Unemployment Assistance Program as well as the Pandemic Emergency Unemployment Compensation Program, both of which are set to expire in the final weeks of December.
Pandemic Unemployment Assistance Program: Provides jobless benefits to gig workers, contractors, the self-employed, freelancers, and other groups negatively impacted by the coronavirus pandemic.
Pandemic Emergency Unemployment Compensation Program: Provides additional payments for jobless claimants who have exhausted their regular benefits, an additional 13 weeks to be exact.
Small Businesses: The Paycheck Protection Program, which provides benefits for a variety of small businesses most severely impacted by the headwinds of the pandemic, is set to be extended under the bill. More than $284 Billion will be allocated specifically to the Paycheck Protection Program, much of which may be used to issue forgivable loans to small businesses.
The bill specifically dedicates $12 Billion in stimulus to small businesses and minority-owned businesses.
An additional $15 Billion is said to be designated to assist movie theaters, cultural institutions, and live venues.
Additional and enhanced protections have been instituted for nonprofits including TV, radio broadcast, and local newspapers.
Miscellaneous: The bill provides extended and enhanced benefits for a variety of groups and purposes.
Schools & Childcare Providers: Schools level K-12 and colleges will receive an approximately $82 billion infusion. An additional, $10 Billion will be dedicated to supporting childcare providers, many of whom have struggled greatly throughout the Covid-19 pandemic.
Renters: Under the bill, rental assistance would be extended through January 31st, 2021. Additionally, more than $25 Billion is assistance would be provided for those who have been laid off or suffered from loss of income because of the pandemic. The priority for funding would be households who do not exceed 50% of AMI, local area median income, and households who are currently unemployed, specifically for a period of more than ninety days.
Vaccine Distribution: The bill also addresses the prominent theme of vaccine distribution. The agreement carves out approximately $20 Billion for the productions and acquisition of vaccines based on a no-charge basis. Another $8 Billion is dedicated purely to the distribution of the vaccine and $20 Billion will be allocated to state governments to fund continued testing and tracing measures.
What is NOT included?
So, what, to our knowledge, is not explicitly included in the legislation? A few things were presumably excluded from the bill due either to time constraints, lack of funding, or lack of Congressional agreement.
Liability Protection: There will be no liability protection from Covid-19 related lawsuits in this bill. This has been a major provision supported by Republican legislators to protect businesses, schools, and other entities.
Funding for States: The provision providing further funding for state and local governments has remained contentious throughout the negotiation process and has, as a result, been dropped from the bill. The initial call was for $160 Billion in assistance for state and local governments.
Student Loans: At this point, extensions for student loan assistance and deferment mandates have yet to be mentioned in conjunction with this package specifically. It has been presumed that these and other benefits will not be included, however, officials have yet to make mention of new or continued protections for students and student loan borrowers. Currently, student loan relief is set to expire on January 31st, 2021.
If student loans are not explicitly addressed in this package, it remains likely that legislators or President-Elect Biden will address student loan relief via separate legislation or executive order at the onset of the next congressional or presidential term.
What do we expect?
With the recent approval from President Donald Trump, eligible individuals and families can expect a second round of direct payments, extended and supplemented unemployment benefits, and more economic protections as we continue to fight the headwinds of the Covid-19 pandemic. President Trump has made clear that he does not agree with several provisions in the bill and has made suggestions for Congress in the rescission process although it remains to be seen whether any suggestions will come to fruition. We will continue to monitor the progress and details of the stimulus package and the insights of industry analysts and experts. Follow us on Instagram @johndrowwealth or on LinkedIn for the latest updates and insights on the implementation of the second Covid-19 response package.
Written by Kaitlyn Keeler
Kaitlyn is an enthusiastic client service intern that assists our advisors with your accounts. She is an attentive business student with a concentration in finance.
