How Much Impact Will State Inflation Relief Payments Have in 2022?

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Economically speaking, 2020 and 2021 were wild years. After the swift onset of the coronavirus pandemic essentially sent the global economy into lockdown, U.S. officials proposed and rapidly enacted legislation to get money directly into the hands of American consumers and businesses.

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All in all, the federal government ended up spending some $6 trillion, including $804 billion in stimulus checks to Americans. Many states are now in the process of sending out their own relief payments to residents, as inflation has reached runaway levels and the economy may be heading towards a recession.

But the question remains whether state stimulus payments will continue to spike inflation, as some argue the outsized federal stimulus packages did, or simply provide relief to citizens enduring higher prices? Here’s a look at both sides of the issue.

How State Stimulus Payments Could Hurt

The general idea behind state stimulus payments is that citizens are having a hard time coping with rising prices. With a few hundred or thousand extra dollars in their pocket, the reasoning goes, Americans will be able to get by until prices eventually stop rising.

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In all likelihood, households that are struggling with higher costs will immediately spend whatever money they receive in stimulus or relief payments. In a more normal time, this could actually help the economy grow at a time when it is shrinking, which is an economic benefit. However, when inflation is rising at near double-digit rates, as it currently is, it’s traditionally a sign that too much money is chasing too few goods.

Putting additional money directly in the pockets of Americans may very well make the problem worse, as now even more money will be available for spending, potentially driving prices even higher.

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How State Stimulus Payments Could Help

Compared with the trillions of dollars spent by the federal government during the coronavirus pandemic, the amount that states are planning to dole out pales in comparison. California, for example, plans to hand out about $9.5 billion in relief payments to its residents, and that is one of the largest packages being offered. Overall, the size of state inflation relief payments may be small enough that it won’t tip the needle at all when it comes to inflation.

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In fact, the payments being offered by various states may very well accomplish their objectives. The payments the states are making in 2022 are not coronavirus pandemic stimulus payments at all. While the names of the payments vary from state to state, they are generally being billed as inflation relief payments or gas rebate checks.

The basic idea is that Americans are going to spend money on food, gas and other daily necessities anyway, and the additional money is meant to be used to cover the increase in the cost of those basic expenses. While some recipients may indeed use the payments to buy additional goods, there will also be a contingent that simply saves the money rather than spending it.

Overall, the hope is that the payments are large enough to cover the increased costs that many Americans face without being so large that they accelerate inflationary pressures.

Which States Are Handing Out Relief Payments?

Some states have already made payments to residents in 2022, while others are still taking the final legislative steps to get there. Here’s the current status of state relief payments as of mid-August, 2022:

  • California: Up to $1,050 payments for 23 million residents
  • Colorado: $750 checks for individuals, $1,500 for couples
  • Delaware: $300 for individuals, $600 for couples
  • Florida: $450 per child
  • Georgia: Payments of $250 to $500 based on filing status and tax liability
  • Hawaii: $100 to $300 depending on filing status and income
  • Idaho: Greater of $75 for each taxpayer and dependent of 12% of income tax paid
  • Illinois: Combination of income and property tax rebates along with sales tax holidays on groceries, gas and school supplies
  • Indiana: $225 tax refund, in addition to $125/$250 refunds issued in 2021
  • Maine: $850 for singles, $1,700 for couples
  • Minnesota: Based on filing status, $1,000 to $2,000 has been proposed by the governor, but still facing legislative opposition
  • New Jersey: Up to $500, based on filing status and with an income limitation of $75,000 to $150,000
  • New Mexico: $250 to $500 based on filing status, with income limitations of $75,000 and $150,000, respectively
  • Oregon: $600 payments for up to 236,000 households that claimed the Earned Income Tax Credit
  • South Carolina: Based on tax liability, with a cap of about $800
  • Virginia: Up to $250 for singles and $500 for joint filers
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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.
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