The lack of federal stimulus checks has made matters worse. It was the pandemic and the resulting economic downturn that dominated the lives of people in 2020 and 2021. But people had the assured support of the federal government that saw them through the peak period of the biggest national emergency since the Second World War. But the federal payments ended in 2021.
The enhanced version of the Child Tax Credit was the last of the comprehensive federal support measures that made a huge difference in the lives of Americans and prevented millions from starvation, homelessness, and financial defaults.
The two years of the pandemic were also marked by the multiple layers of stimulus checks that covered not just individuals but also brought within its old institutions like colleges and hospitals, and small businesses.
This was especially true of the third round of stimulus checks passed under the American Rescue Plan Act of March 2021. This Act was signed by President Biden immediately after he assumed power in January 2021.
Another aspect of the Rescue Plan was the elaborate economic support it afforded to states, local, and tribal bodies. In all, Congress allocated around $2.3 trillion in payments to Americans during the throes of the pandemic. This support helped families as they struggled to weather the economic fallout of the deadly pandemic. But the focus of the federal administration has changed after 2021. One of the factors that led to the change was the realisation of the Biden administration that the stimulus checks were partially responsible for the rising prices.
There was some substance to the opposition’s allegation that the stimulus checks were partially responsible for the rising prices. But it was never the sole reason as alleged by the Republicans. The excess cash in the hands of low- and moderate-income Americans had led to a spurt in the demand for goods, creating a temporary shortage. This led to a mismatch in the supply-demand equation and consequently led to a rise in prices.
But the rise in inflation was not a simplistic equation and no one factor could be blamed for the record rise in 2022. On the other hand, the presence of at least one round of stimulus checks from the federal government could have assuage some of the pressure on families across America.
The federal administration has instead refocused on priorities for 2022 and 2023 and instead concentrated on advancing the infrastructure bill and larger social spending that was also a key to President Biden’s domestic agenda.
Drop-In Federal Stimulus Checks Leads To A Simultaneous Drop In Tax Refunds In 2023
The Internal Revenue Service had warned ahead of the 2023 tax season that the tax refunds for 2023 would be smaller as compared to the previous two years. One major reason was the discontinuation of the Child Tax Credit stimulus check and filers not receiving any economic impact payment in 2022.
Further, filers who fail to itemise and take the standard deduction will be unable to deduct their charitable contributions as they did on their income tax returns last year, IRS sources said.
There was also the initial confusion created by the IRS when it advised people to hold off filing their taxes just after the start of the 2023 tax season. The reason behind this extraordinary move was the confusion within the IRS about the tax status of the state stimulus checks sent out by around 21 states across the US.
The IRS finally declared that most state residents would not have to report payments on their 2022 state tax returns.
State Stimulus Checks Continue Into 2023 Even As Inflation Remains High
While some of the 2023 state stimulus checks are a spillover from 2022, several states have gone for fresh payments to residents. California Middle-Class Tax Refund payments are among the 2022 payments that have continued into the new year. Payments ranged from $200 to $1,050 depending on income, the inclusion of dependents, and tax filing status, whether individual or joint.
Most payments were issued in 2022, but payments through pre-loaded cards were done in the first quarter of 2023. The tax board clarified that payments that require additional review are still being processed.
The resident would be eligible for the inflation relief stimulus check if they filed their income tax return for 2020 by October 15, 2021, met the adjusted gross income limits of the Golden State, and were not claimed as a dependent in the 2020 tax year. They also had to be a resident of the state for at least six months in 2020.
Other states have announced fresh measures to help residents. But the difference in the latest round is that payments are way more focused. One of the complaints against earlier rounds of federal and state stimulus checks is that the undeserving received aid while many low and moderate-income families missed out on the stimulus checks.
Residents of Georgia are set to receive a $500 property tax rebate after an amended budget was signed by Gov. Brian Kemp. The governor signed House Bill 18 on Friday which is expected to boost spending by $4 billion through to the end of the second quarter of this year. It also marks the end of the budget year of the state. Taxpayers with homestead exemptions will receive an average of around $500 from the state under the property tax rebate scheme worth $950 million.
Other states that have plans for 2023 include Maine with a $450 stimulus check for individual filers and double that for joint filers. They must have lived full-time in the state and filed their income tax returns for the state for 2021 no later than October 31 last year.
As long as the federal adjusted gross income reported in the state tax return is less than $100,000 for single, $150,000 for the head of household, and $200,000 for married couples filing jointly, they will qualify for the payment that will go out in the second quarter of 2023.
