After Congress passed the CARES Act in late March, guaranteeing a $1,200 stimulus payment to individuals making $75,000 or less, we experienced a lot of confusion and delays. First, we realized that if the IRS didn’t have your direct deposit information based on previous tax returns, it would send a paper check. Then the IRS released a tool where you could submit deposit information or check the status of your payment, but it didn’t always work well. If the agency had an incorrect address on file, there wasn’t an easy way to fix it. Some college students discovered that they weren’t eligible to receive a stimulus payment. For some, the IRS later announced, it would send debit cards instead of a check. By mistake, it sent over $1 billion in stimulus payments to deceased people.
Now, a new study released by the Urban Institute has revealed that there are wealth and racial disparities in who received stimulus payments the fastest. Almost 70% of people overall had received their stimulus by late May, but only 58.6% of those below the federal poverty level had. On the other hand, 77.5% of people whose incomes were between 100% to 600% times the federal poverty level had gotten the stimulus by that point. 73.7% of white people had received theirs by then, compared to 68.6% of Black people and 63.7% of Latinx people. The demographic least likely to have gotten their stimulus were Latinx people with someone who isn’t a U.S. citizen in their household — if it’s a spouse, their non-citizen status might have affected their own eligibility.
The study reveals how inequality of access can disadvantage those who are low income and non-white. In April, the U.S. Treasury Department stated its intention to send stimulus payments to people with the lowest adjusted gross income first. The plan would make it a priority to send checks to people with incomes $10,000 or under first, then work up to higher incomes.
In actuality, it didn’t pan out this way for several possible reasons. For one, people with the lowest incomes are more likely to be people who don’t have to file tax returns. Among people who were likely eligible for the stimulus, 38% didn’t file a tax return in the last two years and weren’t receiving Social Security benefits, which meant that the IRS probably didn’t have information on them. But among people whose incomes were right at or below the federal poverty level, 47% didn’t file a tax return or receive Social Security. The study says that a lack of internet access could have also affected whether people in these groups could log onto the IRS portal to submit the necessary information.
As income level goes down, fewer people have bank accounts where the stimulus could have been deposited, and direct deposits were sent much more quickly than paper checks. “Less than half (45.4 percent) of nonrecipients living in poverty had bank accounts,” the study reports.
Right now, many Americans are anxiously wondering whether there might be a second direct stimulus payment coming to ease COVID-19 financial burdens — though members of Congress have said they’re working on the next proposal, we don’t know if it will be another $1,200 and whether the eligibility requirements will be the same. But the haphazard rollout of the first one shows the need for a more reliable way of quickly getting the next stimulus payments to the most vulnerable Americans first.