Yellen: $1,400 stimulus payments would help people in ‘pockets of misery’

Treasury Secretary Janet Yellen on Monday defended President Biden’s proposal to send $1,400 direct payments to the vast majority of Americans, saying they will help people who are struggling but aren’t receiving more targeted forms of assistance.

“That really helps to make sure that pockets of misery that we know exist out there that aren’t touched by more targeted things, that help is provided there as well,” Yellen said at a virtual event hosted by The New York Times.

“I believe we’re going to be better off for it, and that it’s the right thing to do,” she added.

The House is expected to vote this week on a $1.9 trillion coronavirus relief package that is based on a proposal Biden unveiled last month.

The legislation would provide payments of $1,400 per person for individuals with income of up to $75,000 and married couples with income of up to $150,000. The payment amounts would then phase out above those thresholds, and individuals with income above $100,000 and married couples with income above $200,000 would not be eligible for any payment.

The income eligibility requirements are similar to those for previous rounds of direct payments. Republicans and some centrist Democrats had pushed for narrower eligibility requirements in order to focus the payments on the lowest-income households. But progressives argued against making the payments more targeted, saying broad eligibility requirements will allow people who lost income last year due to the pandemic to get their payments quickly.

Yellen said the notion of targeting money to those who need it most is an “important and valid principle,” and she noted that Biden’s plan provides targeted assistance in the form of expanded unemployment benefits, food aid and rental assistance.

But she also said there are people who are struggling who aren’t being reached by the targeted forms of assistance already out there. She gave as an example people who needed to leave the labor force to take care of their children. Many of those people have lost income but are not eligible for unemployment benefits.

Yellen was also asked about what tax increases Biden might pursue later in his presidency. She reiterated that Biden is interested in raising the corporate tax rate and closing corporate tax “loopholes” and that he has pledged to not raise taxes on people making under $400,000 a year.

Some Democratic lawmakers have renewed their interest in a tax on trades of stocks and bonds following the GameStop stock market frenzy. Yellen said there would be a need to examine how such a tax would impact retail investors.

“It could deter speculation, but it might also have negative impacts,” she said.

Yellen also noted that Biden hasn’t called for a wealth tax, as some progressives have, and said such a tax has “very difficult implementation problems.” But she said it might be worth looking at ending a capital gains tax preference, called step-up in basis, that benefits wealthy heirs.

A group of Democrats introduced a bill last week to end the “carried interest” tax break that benefits investment managers. Yellen said that issue is “something that certainly deserves to be on the list of things to look at.”