The stimulus check is nice, but it's not free money, and won't end the recession

Now that the $2 trillion stimulus/stabilization bill has been signed into law, many of us will now be waiting on our one-time check, and this article from Kiplinger's does a good explanation of what that check actually is representing.

....The way the law is written, the checks that will be sent now are actually just advanced payments of a new refundable tax credit for the 2020 tax year. So, if you don't get a stimulus payment in 2020, you can claim it next year as a refund or reduction of the tax you owe if you file a 2020 tax return by April 15, 2021.

However, don't go spend all of that money in one place. The flip side of that "refundable tax credit" indicates to me that some of that might have to be paid back in some cases. How?

Because the total of the check that you get is based on your 2019 tax return...or your 2018 tax return if you have yet to file for this tax year (and now you don't have to file until July 15). So let's say you and your spouse made a combined $140,000 in 2018, haven't filed this year, and might make $160,000 in 2020 due to a promotion along with cost of living increases (if they keep their jobs). You would get a check for the full $2,400, but then when you file, you'll find out that maybe you only get $1,900.

In this case, as I read it, you'd owe $500 extra in April 2021 ($2,400 check - $1,900 actual credit = owe $500). Might be worth keeping in mind going ahead if that is a situation you might fall into.

One other item to consider with that stimulus/stabilization check is that the Kiplinger article notes that Americans won't be seeing the money for a couple of weeks...or longer.

President Trump has said that he wants checks to be delivered within a couple of weeks. That may be a bit too ambitious, though. The law instructs the IRS to send payments "as rapidly as possible." But remember, the IRS is short-staffed right now thanks to the coronavirus pandemic (and because Republicans cut staff at the IRS throughout the 2010s). Back in 2008, when similar stimulus payments were issued, it took a couple of months for a fully-staff IRS to get checks in the mail.

One advantage the IRS has now, though, is the fact that the vast majority of taxpayers have refunds directly deposited into their bank accounts now. That means the tax agency already has bank account numbers and bank routing numbers for millions of Americans. With that information in hand, the IRS can make electronic payments to a lot of people. This method of payment takes far less time than printing and mailing a paper check. The IRS will attempt to make payments electronically for anyone who authorized the direct deposit of a refund into their bank account at any point after 2017. If a direct deposit is rejected (e.g., if the bank account information is incorrect), the IRS will receive a rejection notice. At that point, the payment will be converted to a paper check and mailed to you.

However, that last part seems a bit worrysome, as me and a whole lot of others had to write checks to the IRS in 2019 after the GOP Tax Scam got rid of a number of deductions, and some of us are having to write another check in the coming months. So according to that information, if you didn't get a refund in the past 2 years, and/or have changed their bank accounts, you'll have to wait several weeks for a paper check? That doesn't seem to be good and sure won't do much to put a floor on the economy if those people have lost wages due to this economic crisis.

Hey look, getting money is better than not getting money, and it'll especially help people who have already felt the pain from the COVID-19 related shutdown, or even if people are nervous about the future and could use more security. But much like with the 2009 stimulus checks, this seems to be overly complicated and shouldn't be taking the form of a tax credit that might result in a surprise bill this time next year.

JUST PAY PEOPLE with no strings attached and nothing extra to track. And give relief to people on paying some of their bills, because we live in an economy that relies heavily on keeping the cycle going where workers get paid, and then use those checks to pay other businesses. Once workers stop getting paid, the chain gets broken, a lot of other businesses also will get hurt, and it makes what might be a deep but short-term recession into a longer-term depression.



I don't see enough to keep that chain going, where stimulus dollars could go to get those bills paid, helping both vendor and consumer. I'd argue that would be a better use than bailing out companies who used the GOP's Tax Scam to go further into debt and buy back stock, and now face bankruptcy now that the musical chairs are being pulled away.

EDIT- I wanted to add this analysis from the Wisconsin Budget Project, which adds a few layers on how Wisconsinites will specifically be affected. It also has this useful chart.