Stimulus

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When the United States government attempts to counteract negative economic news with fiscal policy, it is called Simulus. Stimulus involves growing the economy by having the government spend more than it takes in with increased deficit spending. Most recessions will end up with a stimulus act, often of questionable efficacy, and the primary US Government response to COVID-19 was a series of stimulus acts while the primary policing actions took place at the state and local levels.

These payments are generally classified as an advance on a special tax credit. In previous stimulus payments, it was often advanced by the IRS but “recaptured” if you no longer qualify. For most taxpayers with a steady income, this was largely academic. However, for taxpayers whose income drastically shifted, this could result in the stimulus payment being reclaimed.

In the current stimulus payments, the IRS provided them based upon your prior tax filings. If your income increased and you no longer qualified, the difference was yours to keep. However if your income decreased and you qualified for more of the stimulus, you received it on your 2020 taxes as a tax credit.

Historically, the US Government relied more heavily on government programs than direct check writing. However, as Universal Basic Income becomes more popular with the Democratic Party, and tax cuts remain universally popular with the Republican Party, these types of tax expenditures may become increasingly popular.

Direct checks to people are extremely popular, and will likely play a role in future stimulus efforts during future recessions.

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