Washington (AP) – Democrats have called President Biden’s $ 1.9 trillion COVID-19 bailout a blow to one of America’s most troubling economic problems. Huge inequality that separates the rich from the rest. Worsening of the viral epidemic.
Welcoming as the largest anti-poverty package, the program brings great benefits to low- and middle-income families. It sends a $ 1,400 check to most adults, extending $ 300 a week in unemployment benefits for six months. Most importantly, it greatly expands the child’s tax credit, making it a stable source of income for poor families. According to experts, the package will reduce child poverty by almost half.
How much longer?
As ambitious as it’s expensive, the US bailout plan Biden signed on Thursday is only going to work that far to reduce income and wealth inequality.
Its boldest measures, including massive tax cuts for the poorest families, are only temporary. In order to make a local change, these provisions need to be expanded, probably in the face of tough Republican resistance. And as an emergency response to the health and economic crisis, legislation will do little to address the huge income-wealth gains accumulated by the wealthiest Americans.
From 1979 to 2019, the richest 1% of pre-tax revenue rose from about 11% to 19%, according to the Global Inequality Database, run by Gabriel Uc ukman, an economist at the University of California, Berkeley. Inequality specialists. And the share of that group, including real estate stock portfolios, has grown from about 23% to 35% over the same period.
“In order to further reduce inequality, Congress needs to raise taxes at the top, particularly wealth and capital income taxes,” he said. “There is a real risk that the wealth concentration that has grown over the last four decades will continue to grow in the post-CODE world.”
For now, vulnerable families will receive a significant new financial cushion from the expansion of their child tax credit, or only until the end of this year ‘s extension.
Under current law, most taxpayers can reduce their federal tax bill to $ 2,000 per child. The rescue plan raises $ 3,000 for each child ages 6 to 17 to $ 3,600 for children under 6 years old. Families eligible for the full loan will receive a one-time benefit as a monthly payment from July to December for $ 250 a month for a 6-year-old. 17 և $ 300 per month for each child under 6.
Legislation makes the loan even more generous, providing it in full to families for the first time, no matter how low the taxes. For conservative critics who oppose Biden’s package, a linear approach to federal benefits will reduce the incentive to work.
According to Columbia University’s Center for Poverty and Social Policy, the rescue package reduces child poverty by 45%, including 52% for black children and 62% for Native American children.
And according to the Center for Nonpartisan Tax Policy, federal income tax law would cut the average poorest fifth of Americans by $ 2960, averaging $ 21% in their after-tax income. For those in the fifth half, the law will reduce taxes by $ 3,720 and increase house rent by 6%. But for the first 0.1% of earners, the measure will cut tax revenues by an average of about $ 970.
(In contrast, President Donald Trump’s 2017 tax cuts averaged only $ 60 a year for those earning less than $ 25,000 a year, but up to $ 193,000 on average up to 0.1%, according to Tax Policy. senior partner of the center Howard Glekman).
The inequality is still so deep in the United States that the nearly $ 2 trillion contained in the Biden package alone will not eradicate it. Inequalities have probably increased since the outbreak. Stock market և Significant gains in household wealth have enriched wealthy households, while low-income workers have been disproportionately affected by unemployment. Inequality.org, which is affiliated with the Institute for Left Policy Research, reports that the combined wealth of the world’s 657 billionaires has grown by $ 1.3 trillion over the past year.
Conservatives say the best way to help the poor is to have a stable economy, and that Biden’s plan can work. They argue that the $ 1.9 trillion package is so exaggerated that many of its benefits, such as aid to rehabilitated cities and states, are unnecessary, useless, and the cost of heating an already declining economy.
A rapidly growing inflation economy, in turn, could force the Federal Reserve to raise interest rates to fight inflation and bring about a premature end to the recovery, which will soon benefit the majority of the poor. 2007-2009 In the face of the Great Recession, after all, the wages of lower-income workers did not really rise until 2015.
However, supporters, such as Thea Lee, president of the Liberal Economic Policy Institute, say they believe the rescue package will make a significant difference in eliminating the most vulnerable families, even though many of its key provisions have expired.
“I would give it a high rating for reducing income inequality, realizing that this does not mean long-term structural change,” he said. “It’s a one-time aid package.”
Lee said he expects expanded child loans to prove “so popular” that policymakers will consider raising taxes on the richest when they find money for other Biden projects, especially large-scale public works. “They could have started, he says, by allocating more money to the non-funded Internal Revenue Service to conduct more audits, raising revenue by targeting tax fraud above the revenue scale.”
Biden’s plan originally envisioned a gradual increase in the federal minimum wage from $ 7.25 an hour to $ 15 an hour by 2025, which would mean that revenues would rise to the bottom, thus widening the revenue gap.
The increase in the minimum wage did not take place during the deliberations in the Senate. But Democrats hope to restore it.
“Raising the minimum wage was ‘fair’ and ‘economically smart’ for us,” said Lee, a former AFL-CIO official. “We hope this is not the end of the conversation.”