New stimulus check proposal 'targets' next payment in almost every way. Here's how - CNET

What's the issue with a $1,400 stimulus check? We'll tell you why some think it's too high.

Angela Lang/CNET

The push among some lawmakers for "targeted" stimulus checks that go out to fewer people is nothing new, but as we saw with the $600 stimulus check, lowering the maximum amount a person could receive has so far been the chief approach to rein in costs. That changed Sunday morning when a group of 10 Republican senators sent President Joe Biden a $600 billion counterproposal (PDF) -- roughly 32% of Biden's $1.9 trillion stimulus plan -- that includes a third stimulus check that would trim back three crucial parts of the stimulus check formula to make fewer people qualify for less money overall.

Biden's proposal for the next stimulus check, on the other hand, sets a $1,400 maximum payment per person and would allow millions more more to either qualify for the first time or get more money per household. Biden has said he's open to negotiating the "moving target" of the stimulus check details, any change of could have an enormous impact on how many people would ultimately receive a payment.

We'll explain why a $1,400 stimulus check ruffles more fiscally conservative feathers and how a stimulus check could become more targeted, if this is becomes an avenue of negotiation over the final package. At this point, the GOP counterproposal remains just that. The House of Representatives will return to Washington on Monday, and House Democrats are expected to produce a stimulus bill proposal of their own. We'll continue to update this story with new information.

3 ways the $600 GOP proposal wants to change the next stimulus check

Here's the quick snapshot. Below, we'll go over exactly why they would want to target the next check, and how each change would work on its own.

Making a more "targeted" stimulus check will put additional money out of reach for some -- and that's the point.

Sarah Tew/CNET

Why do some people want to 'target' the next stimulus check?

The argument here is that a $1,400-per-person maximum would send millions of stimulus checks to people who are considered high earners -- in addition to sending the full $1,400 upper limit to many tens of millions of people who fit into the sweet spot that Congress wants to supply with stimulus money. For the sake of simplicity, that's defined as single taxpayers with an adjusted gross income (AGI) of $75,000 per year or less (and their equivalent for heads of household and married couples).

The reason that a $1,400 limit could send checks to people who make "too much money" comes down to the way that stimulus checks have been calculated so far. The formula was written into the respective stimulus bills in a way that provides a partial payment to people who make more than the $75,000 per year threshold (up to a certain limit). 

Looking at the formula for the $1,200, $600 and proposed $1,400 checks, it's immediately clear how raising or lowering the per-person maximum -- e.g. $1,400 versus $600 -- can change the total number of people over the $75,000 income limit who could be eligible for a payment.

For example, using our $1,400 stimulus calculator, a single taxpayer with an AGI below $75,000 would receive the full $1,400 check. At $85,000, this person could receive $1,150; at $90,000 a year, they could get $650; and if they make $102,900, the Treasury would send a stimulus check for $5.

In contrast, a $600 stimulus maximum allots a single taxpayer with an AGI of $80,000 a stimulus check for $350. The same person who makes $86,900 a year would get only a $5 check.

The result is that, with the current formula, more people are eligible overall to receive a stimulus check of some amount, even if it's a relatively small payment. Dependents and spouses add another layer -- here's more information, including a handy comparison chart.

When it comes to divvying up stimulus check money, there's more than one option.

Sarah Tew/CNET

A $1,000 rather than $1,400 check is one way to reach fewer people

The $600 billion GOP proposal would supply a $1,000 stimulus check instead of Biden's $1,400. Even if no other changes were made to the formula or to the income limit, lowering the amount would automatically disqualify more people simply because of the way the math works out.

For example, the drop from the first $1,200 stimulus payment to the $600 second stimulus check immediately disqualified people who had otherwise qualified for the first stimulus check. Simply using a $600 base instead of $1,200 reduced the cutoff point for receiving a partial payment. 

Said another way, the smaller the per-person maximum, the sooner people who made more than $75,000 a year hit the limit for receiving any money.

With the first check, a single taxpayer -- remember, no spouse or kids -- could get some amount of stimulus money if they made under $99,000. With the second check, that vanishing point dropped to $87,000. The only difference in that part of the equation was the maximum per-person payment. (Separately, child dependents counted for $600 in the second check instead of $500.)

As another illustration of the effects of the base payment, the first stimulus check went out to around 160 million people, while the second payment reached an estimated 147 million households, despite more groups of people qualifying for the second check. Likewise, a $1,000 would reach fewer people than a $1,400 stimulus check even if that were the sole change to Biden's proposal.

Change the stimulus check calculation

Changing the math in the stimulus check formula used for the first two checks would be one way to limit the number of people who receive a check, and a method that the GOP pitch offers in addition to other measures. Let's just look at this one on its own -- for the sake of argument, let's assume that the final bill would keep the $1,400 maximum instead of $1,000, and the income threshold at $75,000 instead of the proposed $55,000. 

Changing any part of the formula would limit the number of people to receive a stimulus check.

Sarah Tew/CNET

Adjusting the part of the formula that controls partial payments could result in people who make over $75,000 per year hitting the vanishing point to get some amount of stimulus money, even with a $1,400 maximum payment, resulting in fewer checks going out overall.

For example, with the current formula, a $1,400 check would give a person with an AGI of $80,000 a year a $1,150 stimulus check. The GOP bill suggests an adjustment to the formula that would reduce your share by 10% instead of 5% for every $1,000 in income. 

Therefore, the more you earn, the less money you could receive, at a higher rate than the current formula. That would effectively mean that people who are relatively high earners would get a much smaller check or none at all.

Lower the income limit to receive the full payment amount

The $600 billion Republican proposal would make fewer people eligible to receive the full stimulus check maximum. While the bill suggests a $1,000 per-person limit, we're going to explain what happens if this were the only thing to change in Biden's current proposal. 

Some people may have to kiss a third stimulus check goodbye.

Sarah Tew/CNET

In that case, say you have a $1,400 check, and people who make under $55,000 are the only ones who would receive the full amount. Everyone with an adjusted gross income over that amount would receive a partial payment -- which would also peter out quicker for people with relatively higher incomes. That calculation would keep the highest earners from receiving a stimulus check for any quantity.

What if there were a cutoff to the upper limit instead?

Let's say Congress wanted to send $1,400 to everyone who makes under $75,000 per year, but didn't want to send money to anyone who makes $90,000 a year or above. Another hypothetical way to achieve, which was not mentioned in the GOP proposal, would be to leave the stimulus check formula as is, but create an additional cutoff that would stop the IRS and Treasury from sending checks to single taxpayers with AGIs at $90,000 or above.

Again, this is just an example, with negotiators working out specifics for married couples filing jointly, and people with dependents.

Could qualifications once again expand to more groups?

In addition to supporting larger stimulus checks, Biden also wants to include two previously excluded groups: dependents of any age (not just children under 17) and all families with mix-status citizenship. Combined, that could potentially extend stimulus funds to nearly 20 million people who previously might not have been counted toward the family total.

If passed, the outcome would most likely be a larger stimulus check for families that previously qualified (in the case of 17-year-olds and older adult dependents), and some mixed-status families qualifying for a new check for the first time. In all cases, families would have to meet all other eligibility requirements -- like an income limit -- to receive a future stimulus check.

Until negotiations begin in earnest, we'll have to see how the stimulus bill and third stimulus check develop. For more information, here's the current timeline for a third stimulus check and here's what to know about stimulus check qualifications. Here's what to do if you're missing all or part of your stimulus check.

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