The $1.9 Trillion Covid Relief Bill (American Rescue Plan Act) appears headed to passing the House and Senate with at least the $1,400 per person direct checks to many Americans remaining in the bill. In the House version, the full payments will go to all filers with incomes under $75,000 Single and $150,000 Joint. The payments would begin phasing out at incomes above that until reaching $100,000 Single and $200,000 Joint respectively.
The Senate version lowers the eligibility numbers to $50 – 75K Single and $100 – $150K Joint. In either case eligibility will be determined by the most recent of your 2019 and 2020 Tax Returns. It recognizes that many people have not filed their 2020 returns yet.
Here in lies a planning opportunity for some people. If your income will allow you to qualify for the payment(s) in only one of those tax years, make sure that the lower income is the latest return you have filed.
As a result of the Georgia Senate elections on January 5th, we have regime change. The Democratic Party now controls the White House and both chambers on Capitol Hill. They are free to enact almost any economic, regulatory or fiscal legislation they desire as long as they can agree amongst themselves and pass muster with the Supreme Court. None of what they do will be undone until the Republican Party regains control of all three legs of the stool. In the past 40 years one party has had complete control in only 14 of them, so it could be a while until that happens. Here is what I think we will see from the Federal Government in the coming year from a fiscal and economic perspective.
For the first few months, they will be tied up trying to implement their own Covid plan. We can expect more stimulus money being distributed to almost everyone, unemployment payments being expanded and extended and more aid of some sort being directed at small businesses. This plethora of money chasing fewer goods and services will lead to increased inflation, that’s Econ 101. Sustained inflation will lead to higher market interest rates – the Fed will not be able to stop this over any extended period.