The American Rescue Plan Act: More Relief for Americans and the Economy

Nearly one year after the COVID-19 pandemic-driven shutdowns began shuttering the economy, Democrats have pushed through another $1.9 trillion stimulus package by narrow margins that has been signed by President Joe Biden. The legislation, now known as the American Rescue Plan Act of 2021, is one of Biden’s first major achievements and contains numerous provisions that impact millions of Americans. Here’s a look at what’s inside the legislation.

Stimulus Checks

$1,400 stimulus checks are the hallmark of the legislation, but not everyone is eligible. Similar to previous stimulus packages, single taxpayers making $75,000 or less are eligible for the full amount. However, the payout completely phases-out once income reaches $80,000. Married couples earning up to $150,000 will receive $2,800, but the amount phases out once they reach $160,000. These income-based eligibility phase-outs are much narrower than previous packages.

Taxpayers also receive an additional $1,400 per qualifying dependent. Unlike the previous stimulus packages, this may include college students, disabled adults and elderly parents.

Unemployment Benefit Extension

The weekly unemployment supplement of $300 is extended through Sept. 6 (the benefit was set to expire in March). House Democrats initially tried to increase the unemployment supplement to $400 per week, but this change didn’t make it into the final legislation.

Child Tax Credits

Previous stimulus packages increased the child tax credit from $2,000 to $3,000 per child (including a bonus of $600 for children six years old and younger). They also made the credit refundable, which expanded the benefit to millions of low-income families who previously didn’t earn enough to pay enough taxes to take the full credit.

The American Rescue Plan Act extended these provisions for an additional year through 2021. Some lawmakers are also looking to make the changes permanent.

Money for State and Local Governments, Schools, Vaccine Distribution, and More

Money is allocated to help fight the pandemic’s spread and impact, with $7.5 billion earmarked to fund vaccine distribution and $48 billion set aside for contact tracing and testing efforts. Meanwhile, state and local governments have a fund of $350 billion to help them cover budget shortfalls caused by the pandemic. Schools and universities received a pot of $160 billion for similar operational budget support.

Other economic assistance programs in the American Rescue Plan Act include $22 billion for rental assistance, $39 billion for child care and $29 billion for the restaurant industry.

What Didn’t Make it Into the Bill

While Democrats wanted a $15/hour minimum wage included in the bill, that provision didn’t make it into the final version. In order to pass the stimulus package, Democrats used a political process called reconciliation, which enabled them to skirt the 60-vote filibuster threshold in the Senate and pass it with a simple majority. However, this maneuver also limited what they could put in the bill—including the minimum wage provision.

Multi-Employer Pension Plans

Nearly $86 billion was put into a new program allowing the Pension Benefit Guaranty Corporation to provide assistance to beleaguered multi-employer pension plans. The aim is to ensure retirees continue receiving their pension benefits.

Economic Impact

The bill’s stimulus impact is expected to set the U.S. economy off and running at the fastest growth rate in more than 40 years. Growth is expected to hit 5.95% compared to 4.0% in the fourth quarter of last year, with increased employment and rising inflation.

We’ll know more in the coming days on how the American Rescue Plan Act of 2021 will affect various industries and individuals. Watch for more in-depth information on these topics in the coming days. In the meantime, you can contact your CPA to see what this latest stimulus effort could mean for you or your organization.

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