Republicans can’t decide whether their coronavirus economic response is a cash payment to families or another tax cut.

Tax cuts are great for all sorts of reasons, but they’re not the optimal means of helping people who suddenly lost their incomes in an unprecedented global economic crisis caused by a pandemic.

So the Senate bill tries to mix tax cuts and cash payments into a neat package. The bill provides for $1,200 per adult and $500 per child. If your goal was to get people cash right away, your cash-payment scheme might end there. Give people money. If you’re worried about this money going to high-income people who aren’t losing work, don’t fret — they will pay taxes on that money, while folks whose incomes go way down will pay no taxes or lower taxes on their payments.

But because Republicans insist on treating these $1,200 payments as tax “rebates,” things get janky. First, the bill would phase out the payments if your 2018 income was higher than $75,000 ($150,000 for a couple). Second, it would shrink the payments if your 2018 tax liability was less than $1,200 ($2,400 for a couple). Also, if your income in 2018 was below $2,500, you get no money at all through this bill. These last two provisions have one big perverse effect: Poorer people get smaller checks.

My American Enterprise Institute colleague Kyle Pomerleau explains the absurdity of this thinking:

"The most striking feature of the rebate is that it phases-in with income. This design is like the current law Earned Income Tax Credit and the Child Tax Credit. In general, this structure makes sense — it is designed to encourage labor force participation by increasing the return to work. However, this shouldn’t be the goal of this proposal. During the coronavirus outbreak, labor force participation will temporarily drop to make sure we don’t overwhelm the healthcare system. We want people to stay home for a while to reduce the spread of the disease. A lump sum benefit makes more sense."

And, Pomerleau explains, plenty of other people will get shrunken checks or no check at all for no good reason.

Here are some examples of folks who would see their checks eliminated or reduced under this bill.

A 2019 college graduate who loses her job this month could get $0

Kiley graduated from Michigan State University in May 2019 and had lined up a job at an insurance company. She’s been working for 10 months now, earning $40,000 per year. Yet last week, her company announced mass layoffs.

Kiley, under this bill, would not be eligible for even a penny because, in 2018, she was a college junior and senior. During the summer, she did an unpaid internship for credit in town. The side work she did tutoring in college didn’t earn her $2,200, and her resident adviser gig that paid her room and board doesn’t count.

A couple earning the median income in many states could lose some of their benefits for not being rich enough

Emily and Steve got married in 2017. They had a baby in 2018. Since then, Emily has been doing part-time writing while Steve has held down a job. They live in New Mexico, and they earn exactly that state’s median household income: $46,744.

Even with no change in their status from 2018, they could see their check reduced for having income too low.

You see, back in 2018, they took the standard deduction of $24,000. They claimed a commuter deduction of $100 per month, had $1,500 in payroll deductions for health insurance premiums, and paid $1,000 in student loan interest.

Their income tax, before the child tax credit, was $1,904. That makes them ineligible for the full $2,400 “rebate.”

A couple who both lost their jobs last week could get their payment reduced — maybe down to zero, for having a good 2018.

Dave and Lisa are both middle managers at a restaurant supply company in Massachusetts. Their salaries happen to be equal to those of the average school teacher in the state: $80,000. So in 2018, they made $160,000.

Last week, like millions of people, both Dave and Lisa lost their jobs. So they still have their mortgage payments, their utility bills, their groceries, their car insurance payments, and so on. Yet they have no income.

But because they earned $160,000 in 2018, which is above the $150,000 threshold, their “rebate” is partly phased out.

Now, as a tweak: Imagine that in 2018, Lisa got a one-time performance bonus of $20,000, and Dave published a small book for which he was paid $20,000. They used that money to pay off their student loans.

Now their 2018 income was $200,000, but their 2020 income might be $30,000. Their benefit from this Senate bill could be reduced to $0 because of their high 2018 income.

This is not a well-made bill. It should be simplified: Everyone gets a check. Parents get a check for each kid.