A family can make $92,000 this year for doing nothing

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The combination of child tax credits, enhanced unemployment benefits, and stimulus payments in the newly signed Covid relief bill could create a powerful disincentive for working.

Just how much? A bit of back-of-the-envelope math suggests that a family with two parents who are not working and three minor children could make the equivalent income of more than $92,000.

Let’s start with unemployment benefits. The covid relief bill puts a $300 per week enhancement on top of regular state benefits. In New Jersey, the average state unemployment insurance payment is $419 per week. So that’s $719 per week for each parent or $1,438 per household. That is the equivalent of earning $74,776.

Actually, it’s a bit more than that once we add in taxes. Because the Biden administration’s covid relief bill makes the first $10,200 unemployment benefits untaxable.

The enhancements are not scheduled to last the full year and neither are the extensions of benefits. In New Jersey, jobless are entitled to a total of 26 weeks of unemployment benefits plus 20 additional weeks. But Congress has repeatedly extended the length of time a jobless American can collect benefits and kept federal enhancement in place long after it was set to expire. The current enhancement is set to sunset in September but only time will tell.

On top of that, each of the three kids entitles the household to $3,600 in refundable child tax credits, a total of $10,800. So family income could now be the equivalent $85,576.

Each parent and child is worth $1,400 in stimulus, or a total of $7,000. That would bring household income up to over $92,000. That is more than the 2019 median household income of $85,271 in New Jersey.

And this hypothetical household would actually be doing slightly better than a household with a job at that income because of the tax savings on the initial $10,200.

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