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1 1 (March 17, 2020)

handle is hein.crs/govciyu0001 and id is 1 raw text is: Researh Sevice COVID-19 and Stimulus Payments to Individuals: Considerations on Using Advanced Refundable Credits as Economic Stimulus March 17, 2020 In response to concerns about an economic slowdowi stemming from the COVID-- 19 pandemic, policymakers have been considering a broad array of policy options. Some are targeted directly toward the individuals and industries that may be most affected. Others would more broadly seek to stimulate the economy. Among this latter category of policies, some have suggested a payroll tax cut, while others have proposed direct cash parnents recovery rebate' -to virtually all households. One mechanism to provide cash payments relatively quickly is to create a new refundable tax credit and then advance it to households before they would otherwise claim it on their income tax returns. A similar policy was enacted most recently in 2008. This Insight addresses some common questions about advanced refundable tax credits. What is a refundable tax credit? Tax credits reduce income taxes owed dollar for dollar; each dollar in tax credit is a one-dollar subtraction from income tax liability. Nonrefindable credits are limited by the taxpayer's income tax liability; while refundable credits are not. Hence, taxpayers with little to no income tax liability-including many low- income taxpayers-can benefit from refundable tax credits. Refundable tax credits targeted toward low-- income individuals and families are estimated to have relatively large stimulative effects compared to other policies-a large bang for the buck-because low-income populations tend to spend these amounts quickly. Some economists were concerned that the 2008 credit would not be effective because a lump-sum payment might be saved rather than spent. Empirical evidence based on studying a prior rebate found, however, that the rebate was largely spent. Current refundable tax credits-the earned income tax credit (EITC) and the refundable portion of the child credit-benefit low-income families that include workers and children. These tax credits are received once a year when federal income tax returns are filed. Tax credit amounts are primarily based on Congressional Research Service https://crsreports.congress.gov IN11247 CRS }NStGHT Prepaed for Membei's and Committees of Congress

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